The company says the recession has had a “dramatic impact” on its fast-paced local trade delivery business.
Almost a year after closing a major seed round, based in Toronto Well well has ceased operations after failing to secure additional capital. The local commerce express delivery startup announced the news on November 21 in a statement on your website.
goodgood closed 6.5 million Canadian dollars in seed funding in November 2021 at a valuation of approximately $30 million, amid clearer economic skies and a much warmer venture funding environment. Over the past 18 months, the company has built five cafes and a delivery network that covers most of downtown Toronto.
“Although we were confident that our business would be able to overcome many of these challenges, we were unable to secure the capital necessary to continue to bring our vision to life.”
But this year, market conditions have deteriorated significantly, and GoodGood has been forced to deal with high interest rates, inflation and the prospect of what could be a prolonged economic downturn. According to GoodGood, while these conditions have had “a dramatic impact” on the company, GoodGood’s inability to raise more funds in the midst of a much more challenging Venture capital environment ultimately led to the undoing of the rapid trading company.
“The economic realities of rising interest rates, inflation and a looming recession – economic factors that were not a reality when we began this journey – have had a dramatic impact on our business,” GoodGood wrote in the statement. “Although we were confident that our business would be able to overcome many of these challenges, we were unable to secure the capital necessary to continue to bring our vision to life.”
GoodGood had 60 employees (mostly retail staff) as of this week. The startup told BetaKit that it is currently working to help place them at other local businesses.
Express delivery startups in particular have been hit hard by the economic recession. The biggest companies in the space like gopuff Y get have laid off staff en masse and scaled back operations, while other Canadian upstarts like Vancouver-based grocery delivery company Tiggy, which closed $6.3 million last year around the same time as GoodGood, discontinued their services in Toronto and Vancouver this summer.
GoodGood was founded in April 2021 by a pair of former employees of Toronto’s social ordering app Ritual, co-founder Robert Kim and senior director of partnerships Kris Linney. Kim and Linney launched the fast local trade company after seeing that despite increased demand for local trade during COVID-19, there was a gap in the market in terms of access and discovery for craft items like beer and snacks. specials.
“By nature, the [craft] the industry is quite fragmented, and it’s actually hard, relatively hard, to get all of these products easily,” Kim told BetaKit last year.
RELATED: Ritual Alumni Launch GoodGood with $6.5M to Scale Commerce for Local Food and Beverage Manufacturers
Backed by a list of prominent investors that includes BKCM, Golden Ventures, Maple VC, Tet Ventures, Shopify’s Farhan Thawar and Digital Main Street’s Chris Rickett, GoodGood’s vision was to help communities “access the products of local artisans easier and faster,” operating brick-and-mortar cafes around Toronto and delivering products from them to customers in 30 to 60 minutes.
Internal documents obtained by BetaKit articulating the company’s decision to liquidate note that while GoodGood’s business was progressing, it was not reaching the scale desired by investors and founders.
According to those documents, GoodGood achieved an annualized revenue run rate of $5 million through the first eight months of 2022, amassing more than 30,000 users, and stores were cash flow positive within six months of opening. But as GoodGood described, the company faced two problems: It still needed to improve its operating margins (to the point of considering private labeling of best-selling items), and the startup hadn’t figured out delivery.
GoodGood had opened locations in St. Lawrence, St. Clair, King West, Queen West, and Davisville. The focus of these stores was to break even so that GoodGood could make money on delivery, using their physical locations as a “high-frequency procurement channel” for its delivery network. According to the company, “the main driver of sales was to increase our delivery volume, which we were unable to do in this period of time.”
In an interview with BetaKit, GoodGood CEO Robert Kim noted that the startup was “a capital-intensive business,” adding that the core problem was that it was not yet profitable.
“The business was trending toward profitability, but it still had a ways to go,” Kim said. “With the drastic change in the macro environment, there was a significant gap in the amount of capital we could have raised and what was required to take the business to the next stage. As a result, we looked for alternative and strategic acquisitions, and ultimately had to cease operations.”
According to documents obtained by BetaKit, GoodGood initially set out to raise $10 million in equity and debt during the summer of 2022, amid a challenging fundraising landscape and a looming recession. As the company noted: “investors’ priorities have changed.”
GoodGood reassessed its approach, returning in the fall with reduced demand less focused on growth than expanding its runway. After failing to ink a term sheet once again, GoodGood explored what it could achieve with $3 million in fresh capital before settling on that route.
“While we had strong belief in our ability to execute, the way forward would be focused on survival and there were too many uncertainties given the economic situation,” GoodGood’s founders stated in the documents. “We pride ourselves on doing what is best for our investment partners and we do not feel it would be responsible to receive additional capital based on our path forward.”
GoodGood noted that “to demonstrate to investors our ability to achieve returns, we simply needed more time,” indicating how much market conditions, falling valuations and changing investor priorities have narrowed the time horizons for investments. companies that raised significant funding in 2021.
Eigenspace co-founder Jesse Rodgers, who has written extensively on early-stage Canadian startups, he told BetaKit that it will be difficult for companies that generated a large seed round in 2021 to generate comparable Series A rounds in the near future.
Kim said valuation “absolutely” played a role in the company’s struggles.
While not personally familiar with GoodGood’s circumstances, the early-stage VC told BetaKit that “high ratings can be a curse” because they come with high expectations. “If the market changes, which it has, those metrics you have to touch change again,” he added.
For his part, Kim said valuation “absolutely” played a role in the company’s struggles. GoodGood claimed in the documents obtained by BetaKit that it “never pushed for a specific valuation, but highlighted our seed round.”
“We got to significant revenue and run rate numbers fairly quickly, but in the end [the business] I was still losing money,” Kim said.
As for why GoodGood chose not to extend its run for another 12 months, Kim acknowledged that the prospect that the company would still face challenging economic conditions next year, combined with the fact that the startup would not have been able to “grow significantly in that time” played a role in their decision to close their doors.
“I think a lot of companies will face similar challenges, and that valuation pressure, downward equity, all of that becomes a difficult discussion,” Kim said.
UPDATE (11/24/22): This story has been updated to include additional information from GoodGood CEO Robert Kim and documents obtained by BetaKit, along with context on the impact of the broader fundraising landscape on startups in initial stage.
With archives of Douglas Soltys. Featured image courtesy of GoodGood.
