DeepSummary
The interview begins with Rafael Ilishayev, co-founder and CEO of GoPuff, explaining how the idea for the company originated when he and his co-founder were college students looking for a convenient way to purchase everyday essentials. They started the business in Philadelphia without any external funding for the first three years, focusing on profitability from day one.
The conversation then shifts to discussing the recent drying up of capital in the quick commerce space, with Ilishayev attributing it to companies prioritizing rapid expansion over building a strong financial foundation. He believes it is now a race to profitability for all players in the industry, and this challenging environment presents an opportunity for GoPuff to potentially acquire struggling competitors.
Ilishayev also shares insights into GoPuff's strategy for achieving profitability by 2024, which includes optimizing delivery times, inventory management, and focusing on high-margin categories like alcohol and convenience goods. He emphasizes the importance of balancing innovation with fiscal responsibility and avoiding distractions that do not directly benefit the customer experience.
Key Episodes Takeaways
- GoPuff's strategy for achieving profitability by 2024 involves optimizing operations, strategic inventory management, and focusing on high-margin product categories.
- The quick commerce industry's previous emphasis on rapid expansion without building a strong financial foundation has led to a drying up of capital, creating an opportunity for well-managed companies like GoPuff.
- Ilishayev believes the expectation of 10-15 minute deliveries in the industry is not a sustainable business model, and GoPuff prioritizes consistent delivery times over speed.
- GoPuff's diversification into businesses like advertising and kitchens is seen as a potential growth area and opportunity to improve profitability.
- Ilishayev emphasizes the importance of hiring individuals with deep subject matter expertise as a key factor in building a successful and sustainable business.
- The company's decision to pull out of certain markets, such as Spain, and focus on its core strengths, like the UK market, is a part of its strategy to achieve profitability.
- Ilishayev believes that profitability should be the primary focus for businesses in all industries, including the quick commerce space.
- GoPuff's approach to the changing macro-environment involves focusing more attention on alcohol and convenience goods, based on insights from previous recessions.
Top Episodes Quotes
- “The consumer was almost taught ten or 15 minutes delivery is a norm. That's not a sustainable business model.“ by Rafael Ilishayev
- “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.“ by Rafael Ilishayev
- “Any business across any industry that's not focused on profitability is cooked. Instant needs is no, is no exception.“ by Rafael Ilishayev
- “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.“ by Rafael Ilishayev
- “I think our ads business has done tremendously well and has grown under the last couple of quarters. Personally, the kitchen's business is my favorite business.“ by Rafael Ilishayev
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Episode Information
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Harry Stebbings
11/2/22
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