Let’s Unpack the Possible DoorDash + Gorillas Deal

Last week the Financial Times reported that third-party delivery giant DoorDash was in talks to buy a stake in German speedy grocery delivery startup Gorillas. While there weren’t a ton of details, such as how big any such stake would be, a follow-up story from Axios said the deal could give DoorDash the option to acquire a controlling interest in Gorillas eventually.

This could actually be a good deal for DoorDash for a number of reasons.

The sudden rise of speedy grocery delivery has been one of the big food tech stories of 2021. These fast delivery services operate a network of smaller dark stores that carry a small inventory and deliver goods to a limited radius in as short a time span as 10 minutes.

Europe in particular has been a hotbed of activity in the speedy delivery space, with startups such as Getir, Glovo and Gorillas each raising hundreds of millions of dollars a piece to expand their operations. Here in the U.S., speedy delivery is currently centered in New York City where Fridge No More, 1520, JOKR and Buyk operate, though we are seeing services like Food Rocket in San Francisco.

In terms of fundraising, Gopuff has left players on both sides of the pond in the dust, having raised $2.5 billion in just this past six months and $3.4 billion in total. Gopuff is a little different from other players in that it does not promise super fast delivery, opting instead for the comparatively sluggish half-hour delivery times (though the service delivers around the clock). But it’s enough of a comp to be included among the new wave of startups shaking up grocery delivery.

Gopuff’s now-sizable warchest has probably spurred DoorDash to get moving on speedy delivery. DoorDash has been steadily moving beyond just restaurant delivery and into the convenience store and grocery categories, and last year DoorDash launched DashMart, the company’s own chain of delivery-only c-stores. But Gopuff is aggressively expanding its operations across the U.S. and now operates 450 delivery facilities in 850 U.S. cities. Additionally, Gopuff is starting to encroach on DoorDash’s core restaurant turf with the addition of Gopuff ghost kitchens that offer hot meals like pizza, pasta and more for delivery. In other words, DoorDash can probably feel Gopuff nipping at its heels.

This brings us back to Gorillas. The Financial Times speculated that DoorDash investing in Gorillas was a play for European expansion. But there seems to be plenty of value right here in the U.S. Though it’s based in Germany, Gorillas expanded into the U.S. with its launch in New York City in May of this year. Since then, it’s been the first speedy delivery service to set up operations on both coasts as it hires out teams in San Francisco and Los Angeles. (It’s also moving into Chicago.)

An investment and potential controlling stake in Gorillas does a few things for DoorDash. First, there is probably some FOMO for DoorDash. While speedy grocery delivery services are new, they have the potential to upend the way we shop for groceries, as they turns the act of grocery shopping into something more like a utility — always there when you need it. Ten-minute delivery could become the new standard, and DoorDash doesn’t want to miss out.

But this is what makes the reported two-step investment structure of the Gorillas investment interesting. DoorDash, which is flush with its own IPO cash, can pony up some money right now and learn from Gorillas as it scales up both here and abroad. Speedy delivery startups have yet to prove if they can economically scale, and right now, they need to be in areas that are densely populated to make money. There’s still a good chance that Gorillas and the like could become the next Kozmo.com. If speedy delivery catches on, then DoorDash can swoop in, gobble up the rest of Gorillas and re-brand the entire operation as DoorDash. If Gorillas flames out, well, that’s a bummer, but DoorDash still has all of its other delivery businesses.

A smaller side story to watch with all this is whether any DoorDash investment in Gorillas would also translate into Gorillas getting Chowbotics food robots. DoorDash acquired Chowbotics earlier this year and is reportedly using the robots to create ready-to-eat salads and microwaveable meals for its DashMart stores. As I wrote last week, food robots could be a killer app for speedy grocery delivery because they create customized meals in a very small footprint.

Should DoorDash invest in Gorillas and wind up with a controlling stake, such a union would set up a bit of an existential question for DoorDash. For good and ill, DoorDash was built on the backs of contract labor. Part of the pitch from Gorillas and other speedy delivery services is that their delivery drivers are employees that receive a salary and benefits. Speedy grocers have explained to me over the past few months that having their own drivers means they can ensure faster delivery. Speedy delivery services know how many people to staff, when they are out on deliveries, when they will return, etc. DoorDash, on the other hand, has to send out delivery jobs to a network of contractors each time to find a delivery person. If speedy delivery is a game of minutes, then every second counts.

The Financial Times said that the deal is being finalized and could close at the end of this month. If the deal goes through, DoorDash could quickly become an 800 lbs gorilla in the speedy delivery space.

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