20VC: The GoPuff Memo: Why 10-15 Minute Delivery is an Unsustainable Model, The Plan to Make GoPuff Profitable by 2024, Mistakes Made in Europe and What the Europe Plan Should Have Been and What Does Quick Commerce Look Like in 5 Years with Rafael Illisha
Rafael Illishayev, Co-founder and CEO of GoPuff, discusses his journey from student to leading a billion-dollar enterprise delivering essentials. He shares insights on the challenges of quick commerce, arguing that 10-15 minute delivery is unsustainable. Rafael outlines GoPuff's strategic shift towards profitability by 2024 and reflects on past mistakes in expanding to Europe. He also predicts the future of quick commerce, emphasizing the need for operational efficiency and solid customer retention strategies to thrive in a competitive market.
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GoPuff's Bootstrapped Beginnings
GoPuff started as a student-run delivery service for snacks and drinks, bootstrapped for three years and expanding to five cities.
It later evolved to include broader categories like alcohol, ice cream, and household items, and it continued to scale and raise funding.
insights INSIGHT
Why Quick Commerce Startups Failed
Many quick commerce companies prioritized rapid scaling over building a strong business foundation, leading to unsustainable unit economics.
GoPuff's early focus on operational excellence and technology set it apart from the “scale first” strategy of others.
insights INSIGHT
Profitability in Quick Commerce
Quick commerce can be profitable if done right, focusing on efficient buying, effective ads, and a strong margin structure.
GoPuff boasts gross margins in the high 30s and low 40s, comparable to top retail businesses.
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Raf Illishayev is the Co-Founder and CEO @ GoPuff, one of the market leaders delivering daily essentials in minutes. GoPuff’s latest funding round priced the company at a reported $8.9Bn in March 2021 and to date, Rafael has raised over $2.4Bn for the company from the likes of Accel, Softbank, Fidelity, Baillie Gifford, D1 Capital and more. Rafael has scaled the company to over 1/3 of the US with over 12,000 employees nationwide.
In Today’s Episode with GoPuff's Rafael Ilishayev You Will Learn:
1.) From Student to Global CEO:
How Raf came up with the idea for GoPuff and started the company as a student with no funding?
What were the early signs of product-market fit that Raf observed in the early days?
In hindsight, does Raf wish they had raised external funding sooner than they did? What would raising external funding sooner have changed about the way they run the business?
2.) The Rise and Fall of Quick Commerce:
What are the core drivers that have led to capital drying up for players in the quick commerce space?
With the changing environment, is it a race to profitability for all providers in the space?
Is this the perfect time for GoPuff to acquire? What are the characteristics of businesses in the space that GoPuff would vs would not like to acquire?
How does Raf see the quick commerce space looking in 5 years time?
3.) Getting to Profitability: The Levers That Matter:
Customer Service: Why does Raf believe that all players pulling back on investing in customer service are making a massive mistake? What can be done instead?
Delivery Time: Why does Raf believe the 10-minute delivery model is fundamentally unprofitable? How do GoPuff approach it as a result?
Inventory: With a changing macro-environment, why does Raf believe it is prudent to focus more attention on alcohol and convenience goods? What do prior recessions show us about consumer spending patterns changing?
Metrics: What are the single most important metrics which dictate the speed of getting to profitability? Why is the amount of orders a driver can deliver per hour the most important metric?
4.) Business Expansion Opportunities:
How does Raf analyze the opportunity for GoPuff in Europe?
Why does Raf believe they should have pulled out of Spain much sooner? Why are they so focused on the UK now?
Why does Raf believe it is the right decision to stop investing in GoPuff pharmacy?
Why is Raf so bullish on GoPuff kitchens? How does the unit economics of the kitchens compare to the core business for GoPuff? What are the positive effects of kitchens on GoPuff core product?
What was the most recent disagreement the board has had when it comes to determining what to prioritize vs what not to?
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