Personal blog of Yzmir Ramirez

Companies that have leveraged technology to make the procurement and delivery of food more accessible to more people have been seeing a big surge of business this year, as millions of consumers are encouraged (or outright mandated, due to COVID-19) to socially distance or want to avoid the crowds of physical shopping and eating excursions.

Today, one of the companies that is supplying produce and other items both to consumers and other services that are in turn selling food and groceries to them, is announcing a new round of funding as it gears up to take its next step, an IPO.

GrubMarket, which provides a B2C platform for consumers to order produce and other food and home items for delivery, and a B2B service where it supplies grocery stores, meal-kit companies and other food tech startups with products that they resell, is today announcing that it has raised $60 million in a Series D round of funding.

Sources close to the company confirmed to TechCrunch that GrubMarket — which is profitable, and originally hadn’t planned to raise more than $20 million — has now doubled its valuation compared to its last round — sources tell us it is now between $400 million and $500 million.

The funding is coming from funds and accounts managed by BlackRock, Reimagined Ventures, Trinity Capital Investment, Celtic House Venture Partners, Marubeni Ventures, Sixty Degree Capital and Mojo Partners, alongside previous investors GGV Capital, WI Harper Group, Digital Garage, CentreGold Capital, Scrum Ventures and other unnamed participants. Past investors also included Y Combinator, where GrubMarket was part of the Winter 2015 cohort. For some context, GrubMarket last raised money in April 2019 — $28 million at a $228 million valuation, a source says.

Mike Xu, the founder and CEO, said that the plan remains for the company to go public (he’s talked about it before), but given that it’s not having trouble raising from private markets and is currently growing at 100% over last year, and the IPO market is less certain at the moment, he declined to put an exact timeline on when this might actually happen, although he was clear that this is where his focus is in the near future.

“The only success criteria of my startup career is whether GrubMarket can eventually make $100 billion of annual sales,” he said to me over both email and in a phone conversation. “To achieve this goal, I am willing to stay heads-down and hardworking every day until it is done, and it does not matter whether it will take me 15 years or 50 years.”

I don’t doubt that he means it. I’ll note that we had this call in the middle of the night his time in California, even after I asked multiple times if there wasn’t a more reasonable hour in the daytime for him to talk. (He insisted that he got his best work done at 4:30 a.m., a result of how a lot of the grocery business works.) Xu on the one hand is very gentle with a calm demeanor, but don’t let his quiet manner fool you. He also is focused and relentless in his work ethic.

When people talk today about buying food, alongside traditional grocery stores and other physical food markets, they increasingly talk about grocery delivery companies, restaurant delivery platforms, meal kit services and more that make or provide food to people by way of apps. GrubMarket has built itself as a profitable but quiet giant that underpins the fuel that helps companies in all of these categories by becoming one of the critical companies building bridges between food producers and those that interact with customers.

Its opportunity comes in the form of disruption and a gap in the market. Food production is not unlike shipping and other older, non-tech industries, with a lot of transactions couched in legacy processes: GrubMarket has built software that connects the different segments of the food supply chain in a faster and more efficient way, and then provides the logistics to help it run.

To be sure, it’s an area that would have evolved regardless of the world health situation, but the rise and growth of the coronavirus has definitely “helped” GrubMarket not just by creating more demand for delivered food, but by providing a way for those in the food supply chain to interact with less contact and more tech-fueled efficiency.

Sales of WholesaleWare, as the platform is called, Xu said, have seen more than 800% growth over the last year, now managing “several hundreds of millions of dollars of food wholesale activities” annually.

Underpinning its tech is the sheer size of the operation: economies of scale in action. The company is active in the San Francisco Bay Area, Los Angeles, San Diego, Seattle, Texas, Michigan, Boston and New York (and many places in between) and says that it currently operates some 21 warehouses nationwide. Xu describes GrubMarket as a “major food provider” in the Bay Area and the rest of California, with (as one example) more than 5 million pounds of frozen meat in its east San Francisco Bay warehouse.

Its customers include more than 500 grocery stores, 8,000 restaurants and 2,000 corporate offices, with familiar names like Whole Foods, Kroger, Albertson, Safeway, Sprouts Farmers Market, Raley’s Market, 99 Ranch Market, Blue Apron, Hello Fresh, Fresh Direct, Imperfect Foods, Misfit Market, Sun Basket and GoodEggs all on the list, with GrubMarket supplying them items that they resell directly, or use in creating their own products (like meal kits).

While much of GrubMarket’s growth has been — like a lot of its produce — organic, its profitability has helped it also grow inorganically. It has made some 15 acquisitions in the last two years, including Boston Organics and EJ Food Distributor this year.

It’s not to say that GrubMarket has not had growing pains. The company, Xu said, was like many others in the food delivery business — “overwhelmed” at the start of the pandemic in March and April of this year. “We had to limit our daily delivery volume in some regions, and put new customers on waiting lists.” Even so, the B2C business grew between 300% and 500% depending on the market. Xu said things calmed down by May and even as some B2B customers never came back after cities were locked down, as a category, B2B has largely recovered, he said.

Interestingly, the startup itself has taken a very proactive approach in order to limit its own workers’ and customers’ exposure to COVID-19, doing as much testing as it could — tests have been, as we all know, in very short supply — as well as a lot of social distancing and cleaning operations.

“There have been no mandates about masks, but we supplied them extensively,” he said.

So far it seems to have worked. Xu said the company has only found “a couple of employees” that were positive this year. In one case in April, a case was found not through a test (which it didn’t have, this happened in Michigan) but through a routine check and finding an employee showing symptoms, and its response was swift: the facilities were locked down for two weeks and sanitized, despite this happening in one of the busiest months in the history of the company (and the food supply sector overall).

That’s notable leadership at a time when it feels like a lot of leaders have failed us, which only helps to bolster the company’s strong growth.

As Amazon looks to increasingly expand its cashier-less grocery stories — called Amazon Go – across different regions, there’s at least one startup hoping to end up everywhere else beyond Amazon’s empire.

Standard Cognition aims to help businesses create that kind of checkout experience based on machine vision, using image recognition to figure out that a specific person is picking up and walking out the door with a bag of Cheetos. The company said it’s raised an additional $5.5 million in a round in what the company is calling a seed round extension from CRV. The play here is, like many startups, to create something that a massive company is going after — like image recognition for cashier-less checkouts — for the long tail businesses rather than locking them into a single ecosystem.

Standard Cognition works with security cameras that have a bit more power than typical cameras to identify people that walk into a store. Those customers use an app, and the camera identifies everything they are carrying and bills them as they exit the store. The company has said it works to anonymize that data, so there isn’t any kind of product tracking that might chase you around the Internet that you might find on other platforms.

“The platform is built at this point – we are now focused on releasing the platform to each retail partner that signs on with us,” Michael Suswal, Co-founder and COO said. “Most of the surprises coming our way come from learning about how each retailer prefers to run their operations and store experiences. They are all a little different and require us to be flexible with how we deploy.”

It’s a toolkit that makes sense for both larger and smaller retailers, especially as the actual technology to install cameras or other devices that can get high-quality video or have more processing power goes down over time. Baking that into smaller retailers or mom-and-pop stores could help them get more foot traffic or make it easier to keep tabs on what kind of inventory is most popular or selling out more quickly. It offers an opportunity to have an added layer of data about how their store works, which could be increasingly important over time as something like Amazon looks to start taking over the grocery experience with stores like Amazon Go or its massive acquisition of Whole Foods.

“While we save no personal data in the cloud, and the system is built for privacy (no facial recognition among other safety features that come with being a non-cloud solution), we do use the internet for a couple of things,” Suswal said. “One of those things is to update our models and push them fleet wide. This is not a data push. It is light and allows us to make updates to models and add new features. We refer to it as the Tesla model, inspired by the way a driver can have a new feature when they wake up in the morning. We are also able to offer cross-store analytics to the retailer using the cloud, but no personal data is ever stored there.”

It’s thanks to advances in machine learning — and the frameworks and hardware that support it — that have made this kind of technology easier to build for smaller companies. Already there are other companies that look to be third-party providers for popular applications like voice recognition (think SoundHound) or machine vision (think Clarifai). All of those aim to be an option outside of whatever options larger companies might have like Alexa. It also means there is probably going to be a land grab and that there will be other interpretations of what the cashier-less checkout experience looks like, but Standard Cognition is hoping it’ll be able to get into enough stores to be an actual challenger to Amazon Go.