Once-struggling grocery delivery upstart raises $50m to take on Amazon

Good Eggs, a San Francisco-based online grocer, has raised $50 million in fresh funding just two years after coming close to folding its entire operations.

The milestone marks a remarkable turnaround for a business founded in 2011 that expanded at breakneck speed in its early years before rushing to downscale in 2015, when it announced 140 layoffs and the closing of its bases in Los Angeles, New York and New Orleans.

“The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain,” said its co-founder and then-chief executive Rob Spiro in a blog post published on the eve of the decision. “The best of intentions were not enough to overcome the complexity.”

Retreating to its Californian home market served the company well: Bill Gurley of Benchmark, the venture capital firm that led the latest fundraising round, said there was now a “massive opportunity” for the business, which has grown fourfold since 2016. Other investors this time around include Index Ventures, Obvious Ventures, S2G Ventures, DNS Capital, Uprising and Collaborative Fund. The round follows the firm’s $15 million Series C raise in July 2016.

To get back on its feet, Good Eggs, which started as a kind of online farmers’ market, drastically expanded its offering beyond “specialty food” to include more than 4,000 items. Its emphasis is on local produce delivered “absurdly fresh” (usually within 24-48 hours of harvest, the company says) – though 30 percent of its fruit and veg, such as bananas, come from further afield.

It now wishes to expand quickly again, starting in the San Francisco Bay area, where it plans to add more than 1,000 staff. Good Eggs is well aware this will pit it against giants of the sector, starting with Whole Foods-Amazon, prime members of which qualify for free grocery delivery.

“The grocery industry is striving to catch up to how people live and has spurred a ‘grocery war’ amongst online and brick-and-mortar grocery, and meal-kit companies,” the company said.

A Food Marketing Institute / Nielsen report estimates that by 2022, US consumers could be spending $100 billion a year in the online grocery space. More than two-thirds of households, its authors predict, will shop for food online within five to seven years. Good Eggs argues its commitment to delivering super-fresh produce will allow it to crack that market.