The co-founders of Gopuff have an eerily similar story; perhaps this is exactly the reason why they work as such perfect complements as business partners. Both experienced the same Middle Eastern immigrant-entrepreneurial upbringing, learning how to lead a successful business as children. Yakir Gola, born and raised in Cherry Hill, NJ, was raised by Israeli immigrants with the classic “$20 in the bank” story who grew up under the poverty line. He worked alongside his dad’s cash-for-gold stores known as Joe the Jeweler, eventually expanding operations in high school by installing sales-tracking software to modernize the business. Similarly, Russian-born New York City resident Rafael Illishaev worked at his father’s sandwich shop, starting at the young age of 11. Eventually, the business expanded and acquired a banquet hall that Rafael managed.

As a result of their upbringings, the pair already had clear entrepreneurial aspirations. They wanted to make a name for themselves and their family, all they needed was an idea.

Yakir and Rafael met at the age of 19 at Drexel University in Philadelphia, where they were both enrolled as business students. They met in Business 101, connecting immediately because of their nearly similar upbringings. In fact, the friendship blossomed to the point they decided to become roommates.

As is the case with most college students at some point in time, the pair found themselves needing constant and convenient access to products. Particularly, late one night, the duo was celebrating a birthday within their friend group and needed to acquire hookah, pizza, and groceries. However, Yakir was the only one with a car. He was happy to be the one driving to 7/11 and other stores to pick up snacks, drinks, or heck even a pizza at midnight. However, it was nearly impossible for Yakir to be able to acquire all the supplies — each coming from a different store — within any semblance of a reasonable timeframe. There was clearly a need for a true on-demand delivery platform for these convenience store-based items.

Their beginning was as bootstrapped as possible; with the pair actively working in every aspect of the business. To begin advertising, they would convince their professors to let them pitch Gopuff during class. Handing out free bottle openers and lighters, they were able to build a loyal fanbase based on products that college students actually wanted. While hookah is an important part of Gopuff’s origin story and name, the company decided that tobacco was the only convenience product it wouldn’t deliver.

The first major decision Gopuff made was that of vertical integration. Being poor, 3rd-year college students, this was an incredibly bold choice at the time. Finding it a necessity in maintaining the user experience, the founders wanted Gopuff to have complete control of their entire supply chain. This meant the need for warehouses, inventory stock, delivery drivers, vehicles, etc., all of which meant high operating costs for a fledgling start-up. However, if there was ever a pair of founders with the correct blend of determinism, capability, and business acumen to attempt this novel approach, Yakir and Rafael were clearly the first picks.

Beginning with a small warehouse with only 100 items, operations were done manually. Yakir even continued his delivery duties, as the pair would routinely be caught leaving classes early to be delivering across campus from midday to 4 am. This cost-mindful approach created the underlying unit economics that Gopuff still follows, which allowed for profitability from day one. They continued to find innovative ways to work around their difficulties, slowly expanding while continuing vertical integration. For example, when an office space became needed as sales took off, the pair ended up taking a vacated yet fully furnished office space that was offered to them by a family friend. They ended up with four floors of office space, selling the furniture for a 60K profit. In fact, they used this cash to hire Ukrainian software developers which led to the app we know today in December 2013.

Gopuff was profitable from day one as it quickly discovered a loyal customer base, and didn’t require external funding for three years. Moving from Philly to Boston, DC, and Austin, Gopuff went where “intent-to-purchase” customers resided (downloaders of the app who are unserviced). In order to quickly broaden their sphere of influence, the founders convinced local distributors not to require upfront payments, which the company could simply not afford at the time. Instead, they negotiated 30-day credit terms by greatly exaggerating the size of their customer base and selling Gopuff’s grander vision, a miracle considering neither founder had a credit history. It’s vertical integration went so far as to develop its own proprietary pick-and-pack WMS system from scratch.

Gopuff’s ambition continued as it maintained growth and expansion as its highest priorities. In 2015, Gopuff launched Gobeer, which allowed delivery of alcohol and a year later, launched Gobooze to complete its adult-beverage delivery services. In fact, unlike many companies that struggled during the pandemic, COVID served as a tipping point. With the acquisition of products for individuals becoming increasingly more difficult, Gopuff expanded its convenience offerings to broader essentials. This opened the door to serve several key demographics such as millennials, families, elderly people, and even pet owners.

It’s this ambition that propels Gopuff’s strategy: the published mission statement of Gopuff is “to make daily life effortless”. In essence, Gopuff believes that done is better than perfect, it’s a necessity to simply get the ball rolling. An early motto to scale that galvanized Gopuff was “Making Moves” which has now been changed to “Make Strategic Moves”. There has always been a bias to action and, first and foremost, nailing the business model and unit economics. With this bias, Gopuff believes in moving faster and out-executing everyone in its way. It’s this operational excellence that elevates Gopuff to an industry leader.

Prior to Gopuff, the last-mile delivery of convenience products was almost nonexistent. Local convenience stores were the primary method of accessing these kinds of products. While nationwide chains such as 7-Eleven made convenience items easily accessible in urban areas, hungry consumers in residential areas were stuck without easy access. Last-mile delivery itself was hard to come by as third-party delivery models were unable to create profitable margins on convenience items. End-to-end ownership was also unpopular as it was difficult to maintain profitability while being in charge of inventory, warehouse management, and delivery. Perhaps just as important, companies also maintained a stigma against 21+ products such as alcohol and hookah products, scared to portray “morally loose” business values or character.

In an interview conducted by Emily Chang of Bloomberg Technologies, Yakir stated that the market in which Gopuff exists is “the instant needs market, a market they created upon Gopuff’s founding.” Loosely defined, the instant needs market is a combination of the last mile delivery market, the quick eComm and convenience goods market, and micro-fufillment.

The last mile delivery market itself is immense, at an estimated $51.7B globally in 2022, growing from $31.3B in 2018. Healthy growth is also projected, at a growth rate of 15.3% in 2022 up from 4.3% in 2014. Growth should continue over time as well, with a projected CAGR of 13.21% over the forecast period from 2022 to 2030. In fact, the market is expected to reach an incredible $200B, just within the next 5 years.

Additionally, as Gopuff continues to expand its product line and incorporate fresh produce and groceries, it will also enter the quick eComm market. Already 36% of online shoppers currently use quick commerce purchases to acquire their groceries, generating sizeable revenues of $73.6B globally as well.

As micro-fulfillment becomes a more popular method of holding inventory, its market size also continues to grow. Experts estimate the market will reach $36.4B by 2030 which increases the current of amount of micro-fulfillment centers by 20-fold. Nearly 80% of these centers are expected to be installed within North America with at least 500 belonging to Gopuff.

Gopuff looks increasingly capable of keeping its promise to maintain 10-15 minute delivery times if these market projections ring true and come to fruition. Expanding its micro-fufillment center network, entering new avenues of quick eComm, as well as continuing to dominate the last-mile delivery market, provide Gopuff with the correct breadth of knowledge and market share to continue its dominance in the industry today.

By being one of the first to market, Gopuff has faced little competition so far, particularly when it comes to the US. Postmates, founded in 2011, is perhaps the most significant American competition Gopuff has faced. But with Uber’s acquisition of the company, it looks like the path forward is to sway away from convenience products.

Several competitors did attempt to follow Gopuff’s model in its own markets, with few having found somewhat significant success.

Gorillas is a Berlin-based delivery startup that also works in the last mile delivery of groceries and household items. Gorillas does so via bike couriers, reducing delivery times to an average of 10 minutes. Using dark stores, which are specific distribution centers maintained exclusively for online commerce, Gorillas has been able to take over the European market and is now even offered in the United States.

Getir is a Turkish startup that functions very similarly to Gopuff by maintaining its own real time inventory. Operating in Turkey, the UK, and other prominent European nations Getir has begun operations in the US as well. Earlier this year, Getir raised $768M which values the company at $11.8B.

Flink also out of Berlin is very similar to its German counterpart as it also utilizes bike couriers exclusively. However, the startup is far smaller and operates exclusively in Germany, France, Austria, and the Netherlands. Rumors of a potential merger with Gorillas have persisted since its founding in 2020.

Retail giants such as Walmart and Amazon have also begun launching their own platforms similar to Gopuff. Both companies are able to offer far more competitive prices to Gopuff, with their massive warehouses and ability to hold larger amounts of inventory. However, with the lack of focus on convenience products and the brand loyalty Gopuff has been able to display, it looks like there should be space in the market for both models to thrive. In fact, the two behemoths have been battling for market share amongst each other, with Walmart teaming with both InstaCart and GrubHub as Amazon continues to excel in the grocery market.

The instant needs market’s exigence has perhaps never been clearer. With eComm taking off, customers want a fast and consistent experience with as many products available as possible. Particularly as the case with Gopuff, a fixed pricing model helps maintain customer satisfaction, as it provides complete payment transparency. Now more than ever, customers require a consistent experience that is able to provide products whenever required. The effects of COVID are still being felt, as many people realized the ultimate convenience of letting their own grocery fulfillment be automated, it is becoming apparent that we may never revert back to traditional shopping methods.

Gopuff is an online platform that provides quick, consistent delivery of a variety of convenience products and essentials at a fixed rate. With over 4K products in over 1K cities, Gopuff has established itself as an industry-mover, providing the best customer experience available.

To use Gopuff, simply download the app from the Apple or Google Play app store, and sign up with Facebook or your phone number. Confirm your location to ensure Gopuff is available in your area (it most likely already is) and browse through an assortment of categories including groceries, drinks, home cleaning essentials, snacks, and healthcare products. Alcohol is also available for 21+ customers with craft beer, spiked seltzers, wine, and more offered. The order minimum is set at only $12.95 and a fixed delivery fee of $2.95 with no surges or hiked prices, allowing for driver tips from presets of $1-$3. Earn puff points as you continue to use the app on each purchase, redeemable for rewards such as free or discounted products. Gopuff also creates several themed recommendation packages for your convenience, such as the “Party at your Place” package which includes cups, plates, and other party essentials. For its most loyal customers, Gopuff Fam unlocks free shipping on all orders, extra discounts, and other perks for a monthly subscription fee of only $5.95.

The app is very particularly structured and geared to maximize the user experience. When you open the app, the first screen is a direct immersion into the shopping experience, which removes the need for a classic navigation page. This creates a simple, straightforward, and altogether frictionless onboarding process. It is a wholly data-driven experience, catered to each individual user’s buying patterns. For instance, a “buy it again” section is populated based on frequent user purchases. Gopuff also utilizes carousel navigation, displaying a slideshow-like list of available products to create quick access to all products and cart addition. The entire navigation structure follows the Hicks-Hyman Law, which in essence states that the time required to make a decision increases with the number and complexity of choices available. The header navigation itself also switches to new categories instantly, making the home page a landing page. This method puts efficiency first and was selected after trying multiple A/B-tested designs and was the most effective in improving product discovery and reducing check-out time. Gopuff also upsells right before checkout, in order to bet on impulsive purchases considering much of its sales occur late night.

Gopuff’s founders have outlined several key factors that have made Gopuff’s business model specifically successful:

Gopuff’s vertical integration is perhaps the most significant factor in the success of its business model and its ability to dominate the last-mile delivery market for convenience goods. By owning its own products, Gopuff is able to make money on every sale, unlike competitors who serve as more of a distributor rather than a stand-alone platform. It was crucial for the founders to build out their business model completely before even attempting to fundraise. It definitely helped that Yakir and Rafael personally delivered goods in the early days of the company, as both a method of cutting costs and maintaining customer satisfaction.

Throughout the years, Gopuff has developed a variety of revenue models beyond expanding its product line:

This has also resulted in pushing the construction of micro fulfillment centers to nearly 50 per month.

The amount of growth Gopuff has seen, particularly in the past 3 years, has been astonishing. With an estimated ARR of $1.4B per year, Gopuff has grown from an ARR of $200M in 2019, $340M in 2020, and $1B in 2021 respectively. Its estimated valuation has grown from $4B in 2019, already considered a unicorn by this point, to a staggering $15B currently. Similar growth has been seen in its total employees of 3919 up 43% since last year. User and download growth has also been consistent, with users rising from 0.3M in 2019 to 1.8M in 2020 to 2.6M in 2021, and downloads rising from 0.4M in 2018 to 1.8M in 2019 to 4.4M in 2020 to 7.1M in 2021 to 11.3M in 2022.

Significant acquisitions also occurred partially due to the high growth of nearly 400% Gopuff had during the COVID pandemic (first half of 2022) as the need for deliveries increased. Its first acquisition was an alcoholic beverage chain BevMo which added 161 stores across California, Arizona, and Washington. The first European expansion was done also through the acquisition of UK-based Fancy. It has since also acquired RideOS, Liquor Barn, Bandit, and Dija.

Expansion has not been limited to just geographic development. As Gopuff grows, there has also been significant importance placed upon hyperlocal offerings. For instance, in Philly you can get cookies from a famous local deli. As it expands into more cafe-esque products such as coffee, pizza, etc. Gopuff must now be wary of food preparation and refrigeration. Experts in the industry believe that we are reaching a point of critical mass in the market. The market advantage for Gopuff has always been convenience, but at this point, newer avenues of growth need to be explored. Considering its decision automation and its operations to be its competitive advantage, Gopuff will continue to balance going multi-vertical or dominating its delivery platform completely. From the beginning, speed of delivery and efficiency have been priority number one by trying to utilize as few drivers and consolidate orders to maintain a sub-15 minute delivery goal. This makes its limiting factor the amount and placement of fulfillment centers. This has led to Gopuff walking an interesting line between attempting to grab market share and enhance its operations to navigate the complex logistics networks with low margins.

For the first three years, Gopuff was completely bootstrapped and grew by reinvesting its revenue. Once they needed an influx to expand quicker they realized that investors were initially wary of their model. With the market’s landscape at the time, investors did not feel that vertical integration could be successful long term. Yet, Gopuff built up a brand with enough traction in 2015 to raise a Series A round led by Anthos Capital for $8.3M. A Series B was raised in 2016 led by Headline for $13M and another round in January of 2019 of $750M by the Softbank Vision Fund. They have since raised a total of $3.4B, with the latest funding round of $1.2B from D1 Capital Partners and Fidelity with additional funding from Accel and Valor Equity Partners.

Gopuff’s founders believe in the generational opportunity that they have developed at Gopuff. Its ability to develop a business model not reliant on outside capital within an exponentially growing total addressable market of $10 T is an opportunity the founders realize can truly change the world.

There are 3 main goals that have been outlined.

As founder Yakir Gola has stated, “I really believe we are in a category of one” and Gopuff seems to have no plans to halt its steady growth in dominating said category.

Dynamo takes an active interest in surface transportation and last-mile delivery. If you’re a founder with a great idea for how to solve a problem in Supply Chain, reach out to us at hello@dynamo.vc.

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