GrubMarket Pre-IPO: Exclusive Highlights

Are you enjoying the growth in late-stage private equity with me? Which example do you like the most?

• Klarna: +112% YoY
• Kraken: +260% YoY
• Neuralink: +211% YoY
• Revolut: +177% YoY
• SpaceX: +119% YoY
• Stripe: +58% YoY
• xAI: +108% YoY

Rubrik went public in April and gained 38%.

Some private companies have never declined in value, like SpaceX, xAI, and Neuralink. It was interesting to observe them climbing even during the market downturn. Remember our newsletter "Trading with Premium" in May 2023? In it, we shared the opinion that there are two approaches: either buy companies with attractive discounts or invest in companies that remain strong even during crises.

Now, 18 months later, we have proof that you can profit using both strategies. 😎 In our newsletters, we discuss companies that could gain momentum soon. Today, we took a straightforward approach and sorted companies on the Sky Cliff Portal by their valuation-to-revenue multiple. Two companies caught our attention: Flexport and GrubMarket. We dedicated our previous newsletter to Flexport, so now let's discuss GrubMarket.

GrubMarket — Here to Grab Your Attention

In short, GrubMarket is an online marketplace for local foods and a same-day delivery service for fresh farm produce. It facilitates the direct sale of farm produce to consumers.

In a broader sense, GrubMarket is a food technology company with a mission to digitally transform the American food supply chain industry. Founded in 2014, it operates in the U.S. and Canadian food supply chain, serving both business customers and end consumers. It also provides software-as-a-service solutions to digitally transform businesses throughout the food supply chain.

We noticed that brokers used to promote GrubMarket pre-IPO, but now they are silent. GrubMarket's valuation has decreased. Employees are ready to sell their shares at valuations ranging from $1.4 billion to $3.2 billion—a wide range. That's why I like the late-stage market: so colourful and full of opportunities!

The last deal we observed closed at a $1.4 billion valuation.

Here's why we find it interesting:

1. Revenue Growth: Revenue doubled in four years. As of May 2024, the annual revenue run rate was on track to surpass $2 billion, giving a valuation-to-revenue multiple of 0.7. None of its trading or well-known private competitors has such a high growth rate!
2. Recent Funding: In February 2024, GrubMarket raised a fresh funding round, valuing the company at $3.6 billion—64% higher than during the round in September 2022. GrubMarket attracted $50 million—not a huge amount, but it shows that investors believe in the startup.
3. Acquisition Strategy: GrubMarket has a proven and successful acquisition strategy, having acquired over 100 companies so far. While much of GrubMarket's growth has been organic—like a lot of its produce—its profitability has also helped it grow inorganically.
4. Stability and Profitability: GrubMarket has been profitable on an EBITDA basis for three consecutive years.
5. IPO Preparation: GrubMarket is preparing for an IPO. To get ready, it has made independent board appointments, conducted regular audits, and put financial reporting systems in place.

There should be a list of negative factors, but I haven't found anything serious. Please share your ideas if you have any. Trump has committed to supporting domestic businesses, which will hopefully aid the growth of GrubMarket and its network of farmers. Oh, yes, there is one negative point: there aren't many seller offers at the $1.4 billion valuation. The range is $1.4 billion to $3.2 billion.

I'm always glad when my findings help you. But keep in mind that this is not an investment recommendation; you should make your own decisions. Here at the Sky Cliff Portal, we help you find comprehensive information about private companies: financials, investment rounds, IPO plans, secondary market prices, private and trading peers, and more.

Here are some examples of information you can find on the Sky Cliff Portal:

GrubMarket's opportunity comes from disrupting a gap in the market. Food production is similar to shipping and other older, non-tech industries, with many transactions relying on legacy processes. GrubMarket has built software that connects different segments of the food supply chain more quickly and efficiently, and it provides the logistics to help it run smoothly.

"I am focused on the food supply chain," said Mike Xu, GrubMarket's CEO. "Operators in the food supply chain business often don't have access to software and e-commerce technology. But we are not just a lightweight online ordering system. We do a lot of heavy lifting around inventory management, pricing, customer relations, and even HR management for wholesalers and distributors." This also means that, in the longer term, GrubMarket will likely explore connected hardware to help those customers. Robotics for picking and moving items are on that agenda, Xu said.

Key Features

• Fast-growing network of wholesalers and distributors
• Aggressive acquisition strategy: GrubMarket has made over 100 acquisitions
• No physical retail network, which reduces costs and keeps prices up to 50% lower than grocery stores
• The company reached breakeven in late 2016
• Own logistics network to address supply chain challenges introduced by recent trucking shortages
• Own payments infrastructure with omnichannel payment solutions
• Proprietary multi-functional software, WholesaleWare, for all food industry wholesalers, farmers, distributors, suppliers, etc.
• Three reasons for growth: organic market growth, capital-efficient marketing strategy, aggressive acquisition strategy (both vertical and horizontal expansion)

"The only success criterion of my startup career is whether GrubMarket can eventually make $100 billion in annual sales," said Xu. "To achieve this goal, I am willing to stay focused and work hard every day until it is done, and it does not matter whether it will take me 15 years or 50 years."

Other Products

• GrubPay: A payment platform that facilitates safe and secure payments for food wholesalers and distributors, making GrubMarket the first and only e-commerce platform to offer a fully integrated payment solution designed for the fresh industry.
• GrubMarket Mobile Game: The GrubMarket FarmBox Game blends farm education with real e-commerce. In the game, players manage a virtual farm and earn points in the process. These points can be spent within the game to purchase virtual goods and farm tools, or they can be used at grubmarket.com to buy real fruits, vegetables, and other healthy goods delivered right to your door.
• GrubAssist (AI): An enterprise AI software solution built specifically for the food supply chain.
• Custom AI-Powered Chatbots: An advanced AI-powered tool designed to revolutionize customer, vendor, and employee support for companies in the food supply chain industry.

"Traditional payment acceptance methods for the fresh industry are cumbersome, expensive, and unreliable," said Genevieve Wang, Chief Product Officer at GrubMarket Inc. "Third-party payment providers lack an understanding of the nuanced needs of food distributors and wholesalers, and their fee structures squeeze the already thin margins of these businesses. This is why GrubPay is such a big step forward for the fresh industry."

Customers

GrubMarket supplies almost all the major U.S. grocery chains, including Costco Wholesale Corp., Walmart Inc., Albertsons Cos., Kroger Co., and Amazon.com Inc.’s Whole Foods. GrubMarket's customers include tens of thousands of grocery stores, restaurants, offices, online food delivery companies, farms, and individual consumers.

Financial Indicators

• In 2024, the annual revenue run rate surpassed $2 billion. In 2022, it was $1.5 billion.
• GrubMarket has been profitable on an EBITDA basis from 2021 to 2024.
• Xu aims to grow GrubMarket's annual revenue to $100 billion.
• GrubMarket operates in 44 countries, including all 50 U.S. states.
• GrubMarket has acquired over 100 companies, mainly in the U.S.

Investment Rounds

• GrubMarket has raised over $570 million since 2015. In February 2024, during its Series G round, the valuation rose 64% to $3.6 billion.
• The company is supported by Tiger Global Management, BlackRock, Liberty Street Funds, GGV Capital, and others.
• GrubMarket is said to be preparing for an IPO in the fourth quarter of 2025 or in 2026. The valuation for the IPO is not yet known.
• The average growth rate per investment round is 2.87 times (valuation step-up).
• Growth index by investment over time is 0.64.
• Secondary Market Valuation to Investment ratio is 2.5. Last-Round Valuation to Investment ratio is 6.3.
• Secondary Market Valuation to Revenue ratio: 0.7. Last-Round Valuation to Revenue ratio: 1.8.

Recent News

• Mike Xu, GrubMarket CEO and founder, has been recognised by Goldman Sachs as one of the Most Exceptional Entrepreneurs of 2024. Xu received this prestigious recognition at Goldman Sachs' annual Builders and Innovators Summit in Healdsburg, California, which honors visionary entrepreneurs making a significant impact on their industries.
• GrubMarket completed the acquisition of Vernon, CA-based Best Oriental Produce, a widely respected company in the fresh produce industry that owns a 700-hectare farming operation across California and Mexico, producing high-quality vegetables year-round.
• GrubMarket acquired Good Eggs, a once-feted fresh food delivery startup that had fallen on hard times. The financial terms of the deal were not disclosed, but sources told TechCrunch that it was an all-stock transaction that valued Good Eggs slightly higher than its previous valuation of $22 million.
• GrubMarket acquired FreshGoGo, a New York-based B2C platform selling Asian groceries and ready-made dishes. Terms of the deal were not disclosed, but it is understood that the deal involves a mix of cash and shares in GrubMarket. FreshGoGo had raised around $15 million from individual investors.
• GrubMarket launched custom AI-powered chatbots, an advanced AI-powered tool designed to revolutionise customer, vendor, and employee support for companies in the food supply chain industry.

Market Peers

Yes, you can find them also on the Sky Cliff Portal.

• Grab: Trading at a $21.4 billion valuation with $2.7 billion in revenue. Valuation-to-revenue ratio: 7.9
• DoorDash: $73.5 billion valuation, $10.2 billion in revenue. Valuation-to-revenue ratio: 7.2
• Maplebear (Instacart): $11.7 billion valuation, $3.3 billion in revenue. Valuation-to-revenue ratio: 3.5

Should GrubMarket be valued at least at $7 billion, taking into account its profitability and $2 billion revenue run rate? We'll see soon!

What private companies do you think are undervalued? Take this free access to our database and share your ideas with us: https://skycliff.pro/invite/15afbb55-23ef-45b8-955f-19c7861c8044

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The Sky Cliff Platform serves as a comprehensive portfolio monitoring solution for the Late-Stage Private Equity Market (pre-IPO), offering independent informational services. Please note that Sky Cliff Professionals does not provide investment or tax advice. Potential investors are advised to seek specialized independent tax and financial advice before investing in any alternative investment. Past performance does not guarantee future returns, and investments involve risks to your capital.