SoftBank’s Secret $750 Million Investment in GoPuff

SoftBank backs one of those competitors, DoorDash. The goPuff investment raised eyebrows inside SoftBank’s Vision Fund because of the fund’s existing relationship with DoorDash, which mostly focuses on ferrying hot food from restaurants, people familiar with the matter said. Jeff Housenbold, a SoftBank general partner who sits on DoorDash’s board, unsuccessfully tried to dissuade his firm from investing in goPuff because the two companies might go head-to-head in the future, the people said. 

The Vision Fund’s biggest limited partner, Saudi Arabia, also had to approve the goPuff deal because goPuff delivers products such as alcohol that aren’t permitted in the kingdom, one of the people said.

Leading the goPuff deal was another SoftBank general partner, Michael Ronen, said two people with knowledge of the matter. Ronen also was involved in SoftBank’s bets on car-rental startup Getaround and freight forwarder Flexport, as well as leading big investments in General Motors robo taxi arm Cruise and in Nuro, which is trying to develop self-driving vehicles that deliver goods.

Spokespeople for SoftBank’s Vision Fund and Accel declined to comment. 

The Information reported in July that SoftBank was debating the investment. The Information also reported last year that goPuff’s valuation exceeded $1 billion as of November 2018. It couldn’t be learned whether the valuation has since changed.

SoftBank has slowed its pace of investing in recent months as it wraps up some $100 billion of investments from its first Vision Fund and tries to raise a second fund. Some of the major companies in the fund’s portfolio, including Uber, Slack and WeWork, have run into trouble as public market investors have scrutinized the businesses’ ability to earn a profit. Other SoftBank-backed companies such as Getaround, Katerra and Oyo have slashed their workforces in recent months.

GoPuff, run by two Drexel University graduates in their mid-20s, hasn’t announced previous funding rounds and has revealed relatively little about its operations or strategy. That might change. GoPuff has been working with a marketing consultancy run by former Airbnb chief marketing officer Jonathan Mildenhall to try to transform the brand from one that is associated with college-student munchies to a service that might appeal to business travelers or families. It has paid celebrities like Neil Patrick Harris to post on Instagram alongside goPuff-delivered snacks. 

The company takes a different approach to delivery than the likes of DoorDash and Postmates. Instead of relying on gig workers who travel around to restaurants in cities, goPuff signs up dozens of drivers a week to pick up items from goPuff-operated warehouses, often in college towns. GoPuff workers collect and sort orders, and then hand them to drivers for delivery. Top-selling items include Doritos chips, Gushers candies, Gatorade, Flamin’ Hot Cheetos and Juul pods, a former employee said. GoPuff charges a $1.95 delivery fee. Its fastest-growing categories include over-the-counter medicine and dog food, a person close to the company said.

The capital infusion appears to have gone toward rapid expansion; goPuff’s website says it is in more than 150 markets, up from about 70 in May. It has more than 1,500 employees, according to the website, likely including warehouse workers paid hourly who work late into the night.  

Executives told employees it expected to be in the billions of dollars of revenue by 2022, the former employee said. But a challenge for goPuff, run by founders Yakir Gola and Rafael Ilishayev, is the high cost of the delivery business. Delivery firms like DoorDash and Postmates have racked up big losses. Rappi, a SoftBank-backed Colombian delivery firm, recently laid off 6% of its workforce. Other concerns include overstocking warehouses and employee attrition, the former employee said.

Funding from SoftBank gives the firm room to grow, for now. In August, the month it closed the SoftBank investment, goPuff gathered more than 200 operations employees from around the country at the Fillmore theater in Philadelphia for a three-day training. Gola and Ilishayev told employees that one of the firm’s advantages was that the founders had remained such close friends. 

According to a promotional video of the event, goPuff aimed to be “the world’s most convenient retailer,” Ilishayev said.