Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 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 About this episode 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? Mentioned in Today's GoPuff Episode: Raf's Mentor and Advisor: Emil Michael, Former Chief Business Officer @ Uber
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 The consumer was almost taught ten or fifteen minute delivery is a norm. That's not a sustainable business model. We built a new financial model that's completely self-funded. One that doesn't require any more outside capital, one that only looks at our balance sheet.
0:14 Harry Stebbings? Wow, this is such a good show. This is 20 VC, the Go Puff Memo, the monthly show where we deep dive on the business model of one company and really go deep. And today, as I mentioned, we're going deep on the Go Puff business model with Raf Ilisheev, co-founder and CEO at Go Puff, one of the market leaders delivering daily essentials in minutes. Go Puff's latest funding round priced the company around a reported eight point nine billion dollars in March twenty twenty one. And to date, Raf has raised over two point four billion dollars for the company from the likes of Excel, SoftBank, Fidelity, Bailey Gifford and more. And Raf has scaled the company to over one-third of the US with over twelve thousand employees nationwide. But before we dive into the show today, we will hope we never need life insurance.
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2:23 Harry Stebbings? And best of all, Essentials starts at just $20,000 per year and you can be live in as little as two weeks. In fact, Essentials has been leveraged by companies like Callanly, Chewy, Dialpad and nearly a hundred others since its launch in March. Now you can start and scale with Gainsight. Go to essentials.gainsight.com to learn more and mention 20VC for special pricing. When you schedule a demo or sign up, tell them I sent you and get that durable growth engine going. But now it's time for this incredible episode. Raf was fantastic, so I'm going to hand over to Raf Ilisheev, co-founder and CEO at GoPuff.
3:03 Speaker 02 You have now arrived at your destination.
3:06 Harry Stebbings? Raf, this is such a joy to do. As we just said, if we were in the same city, we would be enjoying a tequila together. Sadly, we are not, and so we're doing a podcast instead. Second best, but thank you so much for joining me today.
3:17 Speaker 00 Harry, thanks for having me. Second time around, I guess I did something right the first time to get invited the second time.
3:22 Harry Stebbings? Clearly did something brilliantly right the first time. I want to start for those who maybe missed the first show, two to three minutes. How did you come to start GoPuff? What was that founding moment?
3:31 Speaker 00 It's kind of crazy. It's been almost 10 years, right? We've been at this for a decade. But GoPuff started by solving our own use case. Here and I were college students, realised there's a pretty big need in the market. Everyone was going to the convenience store, the drugstore to pick up everything they needed. That experience wasn't always very safe and it wasn't always great and everyone was always busy. So we said, why doesn't anyone stock and deliver all these goods to students kind of across the country? And we could start this in Philadelphia and we had a little bit of an unorthodox start. As you know, Harry, we didn't raise money for our first three years, profitable from day one. Used the profits from Philadelphia, right? Back then, GoPuff was a different service, right? And today we're 5,000 items. Back then, we were 100 to 200 items, snacks, drinks.
4:12 Speaker 00 And we used the profits that we had from early GoPuff 1.0 to expand to five cities until we raised our first round and then GoPuff. Have really started changing, right? Alcohol, ice cream, verticater medication, baby, pets, this kitchens business that we have, all these new verticals to now where we are today. Over a thousand cities on a global scale, 12,000 employees globally, much more to more drivers, obviously.
4:35 Harry Stebbings? So there's so many ways I want to take this. When we spoke last time bluntly, capital was cheap. Money was pouring into the space and it's a very different landscape today. Capital's dried up across the board, but especially in this space. We've seen businesses go bust in the space, many. I wanted to start with a little bit of why. Why do you think that capital has dried up specifically for this space and what are the core drivers?
4:58 Speaker 00 Capital markets have not been friendly for any growth companies over the last, I would say, two to three quarters. But we're talking about instant need specifically. When you're starting a business as complicated as our business, right? Where you have so much technological needs, supply chain needs, logistical needs, where you really need to nail it before you scale it. You have to really focus on the inner crux of your business, the infrastructure of your business, before really expanding in a very big way. And that's what we did for our first couple of years. We spent a lot of time building that technology inside of the four walls of the building, building operational excellence and then really scaling the business by, you know, proving that we can deliver really strong unit economics. Pretty much everyone else in the instant need space from across the globe had the opposite strategy.
5:43 Speaker 00 All we need to do is open up a whole host of buildings. We'll figure out the tech later, we'll figure out the operational excellence later. The supply chain setup, it's fine, we'll figure it out later. So it was scale it, then nail it strategy. And when the capital markets started getting more constricted, they realized their underlying business isn't all that strong. They're not producing really strong unit economics. As a byproduct, a lot of people started really struggling. Really, it's just the beginning. I think it's going to continue. That trend is going to continue to accelerate because the initial strategy was grow at all costs, not really nail our business, really nail our unit economics and then scale the business.
6:21 Harry Stebbings? My take was bluntly that as the cost of capital went up, capital intense, low margin businesses became more and more of a challenge.
6:30 Harry Stebbings? Challenge for investors to finance. Would you agree with that summarization? Or would you say that's not fair to categorize our spaces capital intense and low margin?
6:38 Speaker 00 If this business is done right, it's actually not a low margin business. If you set up your your structure correctly and you're buying correctly and your ads business is working correctly. And now we're launching a whole new host of businesses that think are going to improve our margin structure more. Our gross margin structure is actually among the best in if you categorize like a retail peers instead of our tech peers. It's among the best, right? We have gross margin in the high thirties, low forties, depending on the region that you're in. It's actually really, really healthy margins to operate a profitable business, especially on a unit level. What I'll say though is a lot of people, I don't want to beat a dead horse here, but a lot of people when they were expanding to city to city, they just weren't focused on how do we build really, really strong margin profile in the business, right?
7:23 Speaker 00 It's no question, right? Infrastructure is expensive, right? You have to build buildings, to set up racks, you need equipment, the whole nine yards. But the return on capital on this business and how fast these markets pay back is really, really incredible. Once you start humming correctly, right? In the beginning, right? It took maybe a year, a year and a half for a building to recoup its investment. And now it's some buildings you open up and three months later, you recoup all your fixed costs. So it really just boils down to, did you set the right amount of time, energy on nailing the fiscal responsibility portion of this business? Being really strong on fiscal side and then scale the business? Or you said, hey, I want to grow at all costs. I want to expense as many cities as I can. And we'll figure out our distributors later. We'll figure out our vendor relations later.
8:07 Speaker 00 We'll figure out our technology inside of the four walls and routing, bidding and batching later. That was your strategy. The capital markets are going to crush you the next two, three quarters.
8:15 Harry Stebbings? You mentioned the margin element there. So how do the margin levels vary when comparing your most mature markets? Your Philadelphias, your strongest markets in the U S to your incredibly new markets, say in Europe or any that you expand to? What is that margin? You said high thirties, low forties. Is it like negative on the margin side in new? What does that variance look like?
8:36 Speaker 00 Margin is not the only element to profitability, right? You need a healthy back. Basket size because you take dollars to the bank right now percentage points. As an example, alcohol is our lowest gross margin percentage category. But our highest gross margin dollar category is baskets are much higher with alcohol baskets than non-alcohol baskets. So you rather lose a few percentage points on the gross margin percentage side and gain ten or fifteen dollars on the basket size. The dollars you bring home are much higher. So across the U S today, right? I'm going to exclude Europe. All the new markets that we expand into generally look very similar. They start with a slightly slower basket size because there's kind of direct correlation between tenure and AOV. The longer you stay on the platform, the more you start ordering on GoPod.
9:21 Speaker 00 In Europe, I'm kind of focused on the UK for a second. Basket has grown a lot over the last two quarters, but it's still double digits lower than what we see in the U S when we're starting the market. So it's growing fast. I think the number one focus we have in the UK specifically today is continuing to drive a higher basket. Now we're in the twenties from a basket size perspective. I think that that business is continually going to grow and I think it's possible in the next couple of quarters. We're in the high twenties, low thirties from an AOV perspective.
9:52 Harry Stebbings? Given what we said about kind of the capital availability for the space itself. Is this a race to profitability now for everyone surviving in the space?
10:01 Speaker 00 Any company in any space that's not thinking about profitability right now and is not focused on profitability. There is a higher chance than not that these companies will probably not exist in the next year or year and a half. And no matter how strong your balance sheet is, because no one has a crystal ball. No one knows how long this is going to last. No one knows how how long the capital markets are going to continue to stay depressed. And the reality is, I can speak for us, we built a new financial model that's completely self-funded. One that doesn't require any more outside capital, one that only looks at our balance sheet. It's not one where we said, hey, we're going to cut all costs completely. We're going to stop innovation completely.
10:40 Speaker 00 We could be profitable a bit faster, but it's still somewhat of a balance of being able to continue to grow, continue to innovate, right? Like our kitchens business, for example, is crushing every week. Week is a record from the week prior. We want to continue to invest into that business because it's doing well. But we're not going to invest how we used to invest, right? We're not going to be opening up two or three dozen buildings a month that have kitchens. So it's a balance between driving really strong EBITDA and still innovating for the customer. So that balance for us at least meant that we're profitable in 2024.
11:09 Harry Stebbings? What's the core differences between the old financial plan and the new financial plan you mentioned? What are the big changes?
11:16 Speaker 00 It's less buildings. So if you look at on a metro basis, all of our existing metros are producing cash flow. So you have your, calling your cash cows, right? In Philadelphia, Chicago's, Boston's, all of our Texas markets of the world that are, are producing cash flow. But you have a lot of new markets that need time to get first to unit economic profitability, then EBITDA profitability. So if you continue to open up markets, you're going to continue to have an existing business that produces free cash flow. But this emerging business that's still requiring investment and causing the overall picture to be negative, EBITDA picture. So for us, that meant opening up significantly less buildings, less kind of fixed costs out the door.
11:57 Speaker 00 Not focusing on initiatives that are, might be good for tomorrow, but not so good for today. Like I'll, I'll give you one that hits kind of close to home. We launched a pharmacy business. We're actually delivering prescription drugs to folks and I love that business. And it's one that I think we'll come back to one day, but we just said, hey, man, it's a great idea, just not for 2022. Sometimes saying no to these really shiny objects that customers might really love. But it just like, given the environment of today, we can't afford to invest eight figures in this net new business. That's going to take multiple years to pay back, right? Because it takes a while for these businesses to incubate and then reach a terminal velocity and everything else. So being really, really strict from a prioritization perspective and then also controlling your fixed costs, right?
12:42 Speaker 00 So we're not going to add a fleet of hundreds of more buildings in the next 18 months. We're not going to be opening up buildings like we were opening up buildings in the last 18 months.
12:51 Harry Stebbings? From a prioritization perspective, I spoke to Emil Michael before the show. Wonderful conversation I had with him, but he told me about all the different avenues and products that you can build. I'm fascinated. When you think about that and the question that we just had there, in this new, more capital constrained, newer financial plan world, how do you fundamentally prioritize between the initiatives you do do versus those that you don't do?
13:12 Speaker 00 So a lot of products that you build in the product roadmap are things that are good for you or things that are good for the customer. And sometimes there's an overlap on things that are good for you, you meaning the team or the company and the customer meaning the customer. So sometimes there's an overlap, being relentlessly focused on things that are only going to drive better consumer behavior. And I'll tell you, like a feature that we're launching, we've talked to a lot of customers and the feedback they get is you know, place an order on GoFundUp and right after I place an order, I'm like, God, I forgot toothpaste, a light bulb or batteries, right? Immediately after I click the place order button. So we'll give people a chance, two minutes post their order to continue to build their basket for anything that they want. Remind people, hey, these are the items that you most frequently, most people most frequently forget.
13:53 Speaker 00 So a lot of those kind of features where we're really listening to the customers that we're really doubling and tripling down on. The driver side, the first week of October, we're having a global rollout of a new routing software. So we've integrated almost entirely the RiteOS business. That's improved routing, binning and batching tremendously. It's all under the GoFundUp umbrella now. The first week of October, we have V2 of that launching, which I think will keep P90 delivery time stable, but will improve our ability to bin and batch by, I think, pretty close to double digits. That's not a really huge effect on the consumer side. Consumers actually won't see a massive difference from a delivery time perspective, but it'll save us a good bit of money on our CPO side.
14:36 Harry Stebbings? It's interesting because what worries me and what I've seen as a consumer, I will never lie to you, dear Raf, I have a propensity to switch between different providers. And what I've seen with certain providers is with the cutting of costs, you see two things really happen, well, three things. One is customer service is the first to go, live chat goes and that sucks. Two, you see increased delivery times. It was 10 minutes, now it's 40, 45 or not at all in some cases. And then three is inventory is just depleted to shit and unavailable. Unlike SaaS businesses where if you Cut cost, core NetSuite product or Salesforce stays the same. You might not have the same cadence of innovation of product. But when you cut cost here in our businesses, you really feel it.
15:21 Harry Stebbings? And then it creates this negative flywheel effect where in most of those other services, I don't use them anymore. Because it's so shit across those three dimensions. Do you see what I mean? And does that concern you?
15:32 Speaker 00 Yep, it absolutely concerns us, looking back and being a little critical on ourselves. Gobbo was never built to be a ten or fifteen minute delivery service. Because the consumer on a global scale, outside the US, right, we're focusing the UK for a second. In the UK, the consumer was almost taught ten or fifteen minute delivery is a norm. In New York, that was the case too. That's not a sustainable business model, right? Any stretch of the imagination. The reason why it's not sustainable is because you can't batch orders, right? What makes a group of orders really, really profitable is if a driver can leave with two, three, four orders at once and still deliver it quickly. So what we learned from on the consumer side, I'm talking about the US business, and I think it translates really well on a global scale too.
16:16 Speaker 00 Is people don't necessarily want a really fast delivery, they want a really consistent delivery. So they really have like a thirty minute average with a seven, eight minute deviation. Then a twenty minute average with a fifteen minute deviation where there's an inconsistency in delivery. And that's kind of been our go to for five, six, seven years. And I think we got a little carried away in the UK with trying to match what the local players were doing. Instead of going back to our roots, which is like, hey, this is what consumers generally want is a consistent delivery. And two, by the way, that's the profitable business, right? Because you can bin and batch a lot better.
16:57 Speaker 00 Your tech can predict orders coming in a lot better. And then in turn, you could deliver a really great experience.
17:02 Harry Stebbings? How does batching actually change the economics? To me, listening from the outside, I go, I see it, that makes sense. Maybe a five, ten percent difference, but it doesn't like make an inherently unsustainable business suddenly sustainable. How does batching actually change the economics? Just to help me understand that.
17:20 Speaker 00 A lot less drivers when you batch to fulfill a lot more deliveries. So your cost on a per order basis, it's actually not a ten or fifteen percent swing. You know, in a market that has a high O D H, the amount of orders a driver could fulfill an hour versus a market that has a weak O D H, the cost difference on the variable cost stack could be as high as fifty percent. It's a massive difference of like metro that look good or a metro that doesn't look good. And generally speaking, in our business, a metro that doesn't look good is a new metro. Right? Because it doesn't have enough orders yet on a per day basis where you can effectively batch. Because batching only works well is if enough orders are coming in or the system could predict enough orders are gonna about to come in
17:59 Speaker 00 in the same two or three square block radius of a given city or neighborhood or wherever that M F C is placed. So if you're gonna able to with a high degree of confidence predict that hey, an order came in, the next two, three minutes, wait to send that order out. Next two to three minutes, another order is gonna come in within that same block. Or in a really good city, orders are just flying in. They're doing five, six, seven, eight hundred orders a day. Right? You don't even have that problem anymore, right? The system is just kind of working in the back end, batching orders together and sending it out. And the key to that, right, the on the end side, why it's a lot cheaper is you just need a lot less driver partners. You have fewer driver partners doing a lot more deliveries. And by the way, your driver partners love this, right? Because they're making a lot more money. They're getting paid on the per delivery side. So they're making a lot more money.
18:43 Speaker 00 You need less driver partners to fulfill this amount of orders. As a byproduct, your C P O starts decreasing tremendously.
18:50 Harry Stebbings? Oh, sorry. What's C P O?
18:51 Speaker 00 Cost per order. You get used to these acronyms internally and then you forget that that's not part of common vernacular.
18:57 Harry Stebbings? No, no, listen, this is totally fine. I will just clarify. In the old days, I'd be like, oh, yeah, C P O. Now I'm like, what the fuck is that?
19:05 Harry Stebbings? Uh, tell me, is O D H, which is the orders per driver per hour?
19:09 Speaker 00 Yeah, it's the amount of orders your driver fulfills per hour.
19:12 Harry Stebbings? Is that the governing metric of success in your business, do you think? Or is it A O V? Or is it, what is the governing metric of success in your mind?
19:21 Speaker 00 So the first thing is none of it matters if you're not producing positive unit economics. So a market is not producing, if you're. Economics are negative. It really doesn't matter on what you want to do or you don't want to like today. Our focus is a little different than maybe the way that you want me to answer that question like when you're growing. You want to do everything, right? You want to increase basket or you want to reduce costs. That's right. The only way to to deliver positive unit economics. Once a market is achieved, right? It's target unit economics where there's $4 positive on a per order basis. Or we have markets that are doing $8 or $9 positive on a per order basis. After that, the only thing that matters is volume. You need to produce enough volume then in that city to cover your fixed costs. And so you're not positive on a gross margin basis.
20:03 Speaker 00 You're positive on an EBITDA basis. So first step, right? In this business is deliver positive unit economics. Starting with a healthy gross margin. So that means underlying right built business, right? You have good vendor relations. You have the right distribution centers. You have the right contracts. There's a whole host of things that lead to building the right assortment and having the right gross margin associated with it. And then two, after you've built your your target AOV, because like our AOV has improved hundreds of percentages since we've launched the business. Right? And we had an AOV in the teens, then in the twenties, now in the thirties, right? On the on average basis, as the basket size continue to improve and as we continue to build more technology to be able to bin and batch better.
20:46 Speaker 00 The next layer that is just more orders because now every order that's leaving the door is very profitable. So to get profitable on aggregate basis, right? On a total EBITDA basis, you just need enough orders. Does that make sense?
20:58 Harry Stebbings? It totally makes sense in terms of the orders. The thing that I think to straight away is actually Facebook, which sounds terribly weird, but I'm going to explain. Facebook obviously had the metric that once you added, I think it was five friends, you were like a retained or an engaged user. Thinking about kind of order frequency and cohorts, how do you determine a retained GoPuff user? What is the frequency which shows you that you have a retained user with a behavioral change towards GoPuff?
21:24 Speaker 00 Actually, two ways to look at it. A customer that orders across three categories in their first order will spend $600 more that year than a customer that orders from one or two categories. So it's not just how, it's not just how frequent they order, it's what is the first time, the very first time they get them to go up. What is their shopping behavior? So are they coming into the, with the intent of, I heard this place has really great ice cream, I'm gonna buy a pint of ice cream? That customer, their first year, will spend less money than a customer that comes and buys their ice cream and also buys a snack and also buys some household items and maybe some medicine. Three or more categories means significantly more spend that first year.
22:05 Speaker 00 So what we try to do is breed better discovery on the first experience, right? Give a broader kind of category discovery, right, when you launch Go Up, especially on a new time customer. And also, we try to drive behavior to get to two orders in the first 14 days. That's really, really important. What you're seeing is that you have your biggest drop off from order one to order two, then you have a smaller drop off from order two to order three. And once they get to the third order, they're our customer. They're not leaving Go Up. If you look at order three, customers that made it over three and you look at the retention cohorts over the next 12 months, we're losing like low single digit percent of our customers, like two, three percent. So once they get to order three, they're ours. The struggle is not just getting them to order three, but getting them to order three quickly.
22:49 Speaker 00 Us, like many other e-commerce players, used to do an incentive only off one order, right? All of our incentives now are value over time, right? We built gamification into our platform where daily you could come in, you could spin the wheel, get free puff points, which can be then used for prizes. You can win things in Spin the Wheel, like a White Claw sponsor at a Tesla. So one customer is gonna get a free Tesla or Live Nation tickets on a global scale to see their favorite artists. So like, we give people a reason to keep coming back, even not to purchase, to just keep coming back in the app and utilize it. And one of the single largest driving factors is we improved FAM tremendously. So we started the year with 11% of our subscribers being FAM customers. So FAM is our subscription program. Two quarters later, 11% has now become 30%.
23:34 Speaker 00 Thirty percent now of our ordering customers are fam customers and their behavior, especially if we get them on the first order, is wildly different than customers that don't sign up to fam, whether it's the first, second or third order. We believe we're just getting started there. We believe the steady state number is north of fifty five or sixty percent.
23:52 Harry Stebbings? Couple of things I just want to touch on. Can I push you on the fam side? Have you done testing and how much does it cost to be a fam member? I am in the UK, but I can't remember how much it costs, which is a lot of my point, but how much is it?
24:04 Speaker 00 Six dollars a month.
24:05 Harry Stebbings? Have you done price elasticity testing on that six dollars a month? Because if you increased it to ten, I wouldn't know.
24:12 Speaker 00 As we speak, we have a test running right now, so it's out in the wild.
24:15 Harry Stebbings? Because I think on that, it's one of those ones where you can unbelievably increase revenues without changing a thing.
24:22 Speaker 00 So we haven't seen a big drop on conversion on price. The question is, is what the behavior looks like two, three, four months out? Does that customer continue staying a customer at a higher price point? Where we think consumer spending is going to get affected over the next couple of quarters? So where I believe the world is going to head is that the next two or three quarters, the customer is going to get more price conscious, they're going to have less disposable income, and they're going to start making decisions on what are the most important things in their life. And the way that we've structured Go Pop is it's like fam specifically, it's like a no brainer to be a part of fam. It's very, very affordable. In general, Go Pop is very, very affordable. It's in line to what people see in traditional retail from a pricing perspective.
25:04 Speaker 00 And the last thing that we wanted to do is start increasing fees and pricing in a way where today it doesn't matter, but two or three quarters where consumer spending starts getting affected, they're like, wow, Go Pop is too expensive for me to continue to be their subscription customer or such an active customer.
25:21 Harry Stebbings? Does it change your inventory? Do you think about, hey, how do we introduce more? We have Poundland in the UK, I guess it would be Dollar General in the US, but like very much, very dollar centric products, which shine on that, it's a dollar each. Do you think about changing inventory in that way or not?
25:39 Speaker 00 Yeah, I've been studying a lot, the past two recessions that have been happening in the US and what are Industries that grew through recessions. Alcohol is particularly resistant to any effects of an economic downturn. I think people drink when they're happier, they drink when they're sad. I think the the type of alcohol that's purchased during a recession is different, right? People are not going to be buying your two, three hundred dollar price tag item, but they're going to be buying more of your fifteen, twenty dollar price point items. So I actually don't think baskets are going to change from a dollar amount perspective, but the assortment inside of the basket is going to change, right? More of the budget bottles, but more quantity versus one high ticket, high end item. So we've been leaning into alcohol in a really big way.
26:22 Speaker 00 Convenience also grew during the last recession, especially a few categories within convenience. Vices do very well. So we've been focused on studying the trends of the two previous. It's the best data we have. I've never lived through a recession. The closest thing I've had to economic downturn was on a micro basis because we didn't raise any money in the beginning. So we had to behave like we were in recession, but we actually never lived as CEOs through a recession. So we've been studying the last two times it happened and how did people behave? And we've been building, continuing to build an assortment that kind of matches those kind of behaviors.
26:55 Harry Stebbings? Before we touch on kind of leadership through more macro challenging times, we said we're friendlies and so we can do this, but I'm just, I was interested. Why did you pull out of Spain?
27:03 Speaker 00 I don't think we should ever relaunch Spain. This is like me being very, very honest with you. We got into Spain via the Dijon acquisition. We probably should have pulled out immediately. I think as founder, when you're in the midst of a bull market and everything is going great and your core US business is rocking, things are just piling on top of each other, good things I'm talking about, piling on top of each other. Everyone is telling you to do more because you've shown a massive track record of operational excellence. You kind of get this idea that you could take on more than you should take on. And we've always had a nail it, then scale it mentality. And Spain was a scale it, then nail it strategy.
27:46 Speaker 00 What we really should have done in Europe is we should have owned the UK. We're now like, I think, 25% market share in the UK in instant needs. Now that in the next two months will be in the low to mid 30s. We're going to continue to grow and kind of dominate, dominate there. We should have become the number one player in the UK, own the UK, then expand it to our next country. You know, that's what we did in the US as we continued to kind of expand throughout states. We used to own a market, entirely own a market, kill everybody in there and then continue to expand. That strategy put it out to be super fruitful because we opened up New York, for example, last. A lot of people thought that like, you guys are way too late. There's so many players, right? We own 70% of the instant needs market in New York right now. That's not even close to the number two player, but know we're the last player to come in.
28:28 Speaker 00 Because we really, pardon my language, we had our shit together in a very, very deep way. That's the way we should have handled Europe, right? In hindsight, right? But no one has a crystal ball, right? No one a year ago could have told you in the midst of a bull market that we'd be going through this kind of economic downturn. And maybe it wouldn't have mattered if we continued to stay through a bull market and people continue to value kind of growth over consolidated EBITDA. But here we are.
28:50 Harry Stebbings? Had you known that it was coming, what else would you have done differently? Like closing Spain straight away would have been one. Is there anything else that you would have done differently?
28:58 Speaker 00 Probably wouldn't have tested as many things that we've tested, right? I mentioned pharmacy to you. It's not even the money aspect that a distraction factor for the team. Not focusing on the things that matter most. I mentioned kitchens earlier. We probably opened up too many kitchens too fast. Like right now, we're, we're ready to open up a lot more kitchens because the business is so well oiled. In general, we were moving very, very fast because the market was rewarding us for moving fast. Because we continue to deliver in a really big way. Kieran and I continue to over deliver in the things that we do. And the market is like, you know, wires. If we did everything, even our investors, we'd be doing even more, right? You're saying no so much. What about Southeast Asia? What about Japan? What about, you know, the rest of Europe?
29:41 Speaker 00 We said no so much of things, but in hindsight, we probably should have said no even more. And just really focused on the things that we're exceptional at. Innovation is good, but innovation just for the sake of innovation is not good. You know what I mean? Innovate where it's important for the customer and where the customer really wants. And it's a funny thing, right? You get rewarded as a byproduct.
29:59 Harry Stebbings? My one question though, actually, when I look at it is, is this time, and you know, listen, a recession is always horrible. People lose jobs. It's not a nice thing, obviously, but is this time actually secretly good for you? And what I mean by that, and I say this as your friend, but if I analyze the last two years bluntly, the competition I don't think served you well. I think the likes of local players in the UK made you go to the 10 minute delivery when, or try and do the 10 minute delivery when it wasn't optimal. It obviously increased cats for everyone. Do you actually think that this period will cause a lot of people to not be in business anymore? And only the strong survive?
30:33 Speaker 00 Any business across any industry that's not focused on profitability is cooked. Instant needs is no, is no exception. As it relates to instant needs, a lot more people are going to find it really hard to stay in business. Especially the people that are today, which is a good majority that are thinking that this is not so bad, right? We're going to come out the other side of this really strong, or this is going to be over in a quarter or two. And Harry, my experience, I've seen that paranoid founders are usually the founders that win. The ultra paranoid, right? That are prepared for anything, right? Are usually the ones that win. And that's how we're treating it. We're, we're ready for anything that the macro throws at us. And we're building towards a business that's completely self-funded.
31:15 Harry Stebbings? Is this an acquisition opportunity for you with many of these players really looking for access? We've seen them looking for access. We're, we're both in the business. We've seen them shopping around and their brokers shopping around. Is this one where you're like, actually, we have a real opportunity to buy something at a good price here that wouldn't be around without us buying them?
31:32 Speaker 00 You know, yes and no. It's such a massive distraction to integrate a shitty business. Some of these businesses have a decent amount of customers and it just makes sense to, to think about acquiring them for the user base. Which is very different than on our business, the logistical, tech logistical business. To acquire a business that doesn't have really good infrastructure, doesn't have really good tech. You have to scrap everything. You have to integrate your systems. You go into their buildings, their buildings. Are they're trash, right? The distraction of having to do this, the juice is just not worth the squeeze nine out of 10 times. But at one out of 10, where you had a really strong founder that really focused on building the right kind of business,
32:12 Speaker 00 it's worth looking at. We saw that in D J, we saw that in fancy where not even necessarily the businesses were very big or strong, but the founders were so good and they matched our values so well that it just made sense to integrate. Now, today, in today's environment, we're being very, very picky, right? Bringing on businesses that have not set up that same correct infrastructure that we want them to. And two, frankly, like we don't want to inherit the losses that this business has. And sometimes those losses are massive, very small business from a revenue perspective with very, very large losses. It's got to be right, is the long and short way of answering that.
32:47 Harry Stebbings? Two to three years out, what does the the space look like?
32:50 Speaker 00 I'm obviously biased.
32:53 Harry Stebbings? Really? No.
32:55 Speaker 00 I'm I I obviously have a bias. The instant needs world is very, very complicated. And I think all kind of a chip on our shoulder. A lot of people say, you know, this business can't be profitable. Two decades ago, Webvan and Cosmo couldn't make it. So today, two decades later, all these players plus GoPro who started this thing, it remains to be seen whether this could be an even a profitable business. That puts a massive chip on our shoulder on you, Kieran, I. First of all, because we built a profitable business, we were profitable for three years. And second of all, a near hundred percent degree of confidence that we're going to do it again in the next 18 months. We have a massive chip on our shoulder, delivering that and proving to everyone that this is not just an amazing consumer business, not just something that consumers really love, but a very profitable business and sustainable business.
33:40 Speaker 00 To answer your question, folks that are thinking that way will be here to stay. On top of all of that, we're going to continue to be the number one global player. But anyone else that positions themselves to build really strong economics and profitability will have a right to compete in this space.
33:55 Harry Stebbings? Final one for a quick fire. If you were to choose one competitor that you most admire, who would it be?
34:01 Speaker 00 Since day one, when we launched GoPro, we have looked almost in awe at Amazon. I'm talking about not the instant need space, but. From a global e-commerce perspective, everything that we saw from Amazon and Bezos, why we hired so many people from Amazon, is because we have an immense amount of respect for what they built, right? Specifically in the US, getting into any industry they see fit. And then for many years dominating in that industry was something that we drew a lot of inspiration from. Not even in our industry, I think it's probably the most complicated and amazing business in the world. And I think what they built from logistical perspective and then expanding to new business units, right?
34:41 Speaker 00 Whether it's FBA or AWS is something that we take a lot of inspiration from as we launch our new businesses, right? Whether it's GoPro ads or some of the new businesses we have brewing, they're launching in the next two quarters, so.
34:52 Harry Stebbings? If you were to place a bet on new business growth for your new business lines, it could be ads, it could be kitchens, it could be any of the others. What in the next two to three years do you think will be the biggest from where it is today?
35:02 Speaker 00 I have one that I can't mention that I think will be the biggest because we haven't launched it yet. I think that business one day can be as large as our retail business, as large as GoPro as it exists today, right? The GoPro app. I think we're talking about existing business units that exist today. I think our ads business has done tremendously well and has grown under the last couple of quarters. Personally, the kitchens business is my favorite business. I order our cauliflower pizza every day. My wife thinks I'm insane, but I enjoy it. And I really do think that we built an amazing consumer product. What I love about the kitchens business even more is that on a standalone, the kitchens business doesn't make sense. So we just launched kind of GoPro kitchens as a standalone business without core GoPro, right?
35:44 Speaker 00 All of our general merchandise, alcohol, everything else as a byproduct. You just don't have enough basket size to deliver a profitable business. But GoPro kitchens married with the core GoPro assortment together, it really is something special, right? You're seeing in markets where we have GoPro kitchens, attachment rates of 20%. So 20% of consolidated orders adding a kitchens item in there. So I think that business shows a lot of promise and a lot of growth and something that consumers obviously really love. I'm going to continue to place a really massive bet on that business, even though it is capital intensive, right? Physically build and open up kitchens, but the ROI on those kitchens is becoming better and better. As we're we're continuing to refine the assortment and the quality.
36:27 Speaker 00 And then two, it's very rare that you introduce a category that improves retention, improves frequency and improves the basket. Alcohol was one of those categories. The go up of kitchens business is another one of those categories. That improves all and moves all three KPIs in the right direction.
36:42 Harry Stebbings? What one investment have you disagreed with the board on making? And it doesn't mean there's like a board disagreement, but like, you know, board members have, I think we should focus on ads. I think we should focus on kitchens. I think we should focus on, has there been one where you've disagreed?
36:55 Speaker 00 Midpoint last year, there was a lot of conversation, that's just what our board, but investors on how fast we should be moving in Europe. And a lot of folks were really pushing us to expand to Germany faster, expand to other areas in Europe faster. And I'm really glad that we did it. It wasn't very much a, it was more of a conversation than anything else on like, how fast should we be moving in Europe and how many countries can we open up? Because like, yeah, it's funny, right? You do well and you start producing results. People are just like, you know, just keep replicating that, right? You get some pattern recognition, just keep replicating what you've been doing. But it's not always that simple, right? On just kind of continuing to layer. Again, it it doesn't match our core cat ton of nail it and scale it. So I think that's probably been the only one in the last year.
37:40 Speaker 00 We've had conversations about how fast we should be moving in Europe, how much we're expanding. And obviously today, everyone's looking back and saying, good that we did it. Again, in hindsight, probably should have had it a little bit more focused if we knew this was going to happen on the bill market basis.
37:54 Harry Stebbings? Raf, I could talk to you all day, as you know, really should do this with, every question I ask, you have to do a Don Julio forty two and every question I answer, I can do one. There we go. This will be a much more open interview. Your team are going to be going, oh no, oh no.
38:10 Speaker 00 I think fifteen minutes in, we're going to have a hard time talking to one another.
38:13 Harry Stebbings? Listen, I'm going to do a quick fire round, which means you're screwed if we do a tequila shop. So I say a short statement, you give me your immediate thoughts. What gets harder and what gets easier with scale?
38:22 Speaker 00 What gets harder is managing people and culture. You have to be even more transparent and you have To spend and even bigger time with your team to make sure that everyone has the same vision and understanding what you're going through. It gets easier, right? It's a different kind of hard work. Kieran and I still spend a day in the week inside of the MFC every single week. We travel to a new MFC and visit it. So I think it's a core and important part of who we are. But the physical labor gets easier, the mental labor gets a lot harder.
38:51 Harry Stebbings? Tell me, what do you know now that you wish you'd known at the start of GoPuff?
38:54 Speaker 00 Hire taller faster. And taller doesn't mean a person that comes from a pedigree of a background, but a person that has deep subject matter expertise in a given topic. So all the advancements that we made on the routing side, for example, we hired routing side, we hired our expertise. Seven years ago, instead of five years ago or four years ago, we would probably be even more advanced today. So kind of given the state we were in our first three years of being bootstrapped, we had to be very, very careful on the talent we bring on board because of how much it costs. If we hired some of that talent earlier, especially on the engineering and product side, we would have been even further, I mean, like we're the furthest ahead of any instant need player by a massive margin. But that war margin would be even wider if we were able to hire even earlier.
39:38 Harry Stebbings? Penultimate one, who's your closest mentor and what have you learnt from them?
39:41 Speaker 00 So Kieran and I have been really, really fortunate. We're cognizant of the fact that we're 29. And the way that we've gotten to the place where we got into is by surrounding ourselves by the best people. I'm going to mention someone because you spoke to them, which is Emile. Emile Michael has been a close friend and advisor to Kieran and I for five years, six years now. And he's probably the best dealmaker in the world. I firmly believe that. He's been nothing besides being an ally and a close advisor and everything. He's been an amazing friend. He's been, he's been really, really awesome.
40:12 Harry Stebbings? Final one for you, my friend. Where is GoPuff in five years' time? Very simple.
40:16 Speaker 00 In the US. We are the undisputed leader in instant needs, right? We cover a third of the US. Hopefully that number is much higher in five years. And we've broken into and become the dominant player in a lot more categories. Again, I had never thought that I'd be an authority in the baby and pet category. I think I'm going to be saying in five years, a lot more categories than I ever thought that I'd be an authority. But we're an authority on a global scale. We're continuing to dominate expansion. But I think this time around, we're going to own a market entirely and open up other markets that we're going to own entirely before expanding to new markets. I don't know how many markets that includes, but we're excited to see.
40:54 Harry Stebbings? Raf, I could chat to you all day. Next time, third time lucky comes the tequila. But thank you so much, and this has been fantastic.
41:01 Speaker 00 Harry, you're the best man.
41:04 Harry Stebbings? I just love doing the 20 VC Memo episodes. Let me know what you think of the Memo episodes on Twitter, at Harry Stebbings. Likewise, you can see more from us behind the scenes on 20vc.com. But before we leave you today, we will hope we never need life insurance. But for me, nothing is more important than my family and knowing they will be protected and looked after. If you follow my Twitter, you know how close I am to my mother. And mortgage payments and other expenses, they don't disappear when you're gone. And life insurance just gets more expensive as you age. And so now is always the best time to buy. PolicyGenius was built to modernize the life insurance industry. Their technology makes it easy to compare life insurance quotes from top companies like AIG and Prudential in just a few clicks to find your lowest price.
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42:32 Harry Stebbings? And did you know that Gainsight launched a new offering, Gainsight Essentials, in early March this year? Essentials makes it easier and more affordable for companies at any stage to reduce churn, drive more expansion and cross-sell dollars, and improve usage and adoption. And best of all, Essential starts at just $20. $20,000 per year and you can be live in as little as two weeks. In fact, Essentials has been leveraged by companies like Callan Lee, Chewy, Dialpad and nearly 100 others since its launch in March. Now you can start and scale with Gainsight. Go to essentials.gainsight.com to learn more and mention 20VC for special pricing. When you schedule a demo or sign up, tell them I sent you and get that durable growth engine going. As always, I so appreciate all your support and on Friday we have the wonderful Michael Mabousin,
43:17 Harry Stebbings? one of my favourite writers, economic thinkers on the show. He is fantastic. Stay tuned. Incredible episode to come.
Previous 20VC: Founders Fund's Brian Singerman on The Price Mismatch Between Public vs Private, Why Now Is Not The Best Time To Be Investing, Why Brian Never Thinks About Reserves and Believes in Cross-Fund Investing & Writing a $400M Check Into Anduril Across Rou Next 20VC: Michael Mauboussin on Good vs Bad Investment Decision-Making Processes, How To Improve Your Process, How To Know When it Needs Improving and The Single Biggest Mistakes People Make In Their Decision-Making Process Page updated October 26, 2026 · transcript and summary are machine-generated
