Grocery delivery startup Voly slashes operations as tech sector slumps

Instant grocery delivery startup Voly has slashed the number of staff in its head office, jettisoned its promise of 15-minute deliveries and closed half its warehouse sites as similar companies abroad struggle, prompting questions about the viability of their business model.

The company hoping to upend the $100 billion annual supermarket sector by having the riders it employed swiftly bring items from a network of mini-warehouses in inner-city suburbs to customers at retail prices.

But the technology sector has been battered by rising interest rates and inflation, which have caused share prices in global markets to plummet, startup investors to become more cautious and founders to scale back expenditure to conserve cash.

Several other Australian technology companies such as solar financier Brighte and digital design library firm Envato have disclosed redundancies in recent weeks, but none as severe as Voly, which is exposed to the .

Even some investment firms have not been immune. Flash Ventures, a global firm that invests in early-stage companies and has an Australian office, recently laid off several people. Its local head, Darryn Rabec, declined to comment.

Sequoia Capital, one of the best-known venture capital firms in the world, told its founders in May that the sector was going through a crucible moment in which growth at all costs would no longer be rewarded. In particular, it said companies that relied on cheap capital had gone from being the best performing to the worst. Grocery delivery firms like Voly need huge amounts of capital to grow as they buy supplies, lease stores and pay workers, with some far larger overseas peers burning as much as $US80 million ($115 million) a month.

Sequoia’s Indian office led an $18 million investment round into Voly announced late last year.

Voly co-founder Thibault Henry declined to comment for this story.

A former employee, who spoke on condition of anonymity to protect their future prospects, said Voly had laid off more than half of its office staff, in a wave of job cuts at the start of the month.

[Co-founders] Mark and Thibault had been really open with us the Friday before, the staffer said. They said: ‘the changing startup landscape is making it difficult to raise funds, we’re meeting with investors on Tuesday, we’ll let you know how it goes. ’ And then on Wednesday we were all let go.

The staff member said they were aware startups could rapidly turn south, but was disappointed because the two Voly founders had previously said the company had enough cash to last until next February. The pair were good people, super inspirational and had assembled a talented and collegiate team but needed mentoring, the source said.

Store managers were not given as much notice, the staff member said, with one leaving scathing comments on an online review site.

The company’s Crows Nest, Manly, Maroubra and Alexandria warehouses have closed, the former staff member said, leaving only three or four stores in the city and surrounding suburbs while a planned expansion to Melbourne appears to have been shelved. Delivery times have been extended to up to 20 minutes, but Voly is still operating.

Its larger and better-funded rival, Milkrun, is headed by serial entrepreneur Dany Milham, who did not return requests for comment. In an published last month that branded Milkrun an overnight success, Milham insisted his company would be bigger than Coles in a decade and said it had better margins than people assumed because of its efficient staffing and product range.

Elsewhere, Milham has rejected comparisons to other firms in the sector, and there are those in the industry who think Milkrun could benefit from the thinning out of its competition. Send, the third startup that entered the market last year, . It had tried to sell itself to Milkrun and Voly before it failed, sources said.

It is not unusual for startups to collapse. The sector sees it as a worthwhile price to pay for ambitious people trying to create value for investors, new jobs and fresh customer experiences. Numerous venture capitalists have previously told The Sydney Morning Herald and The Age they still have funds to invest in good companies.

But industry insiders have long been sceptical that any local player would become long-term profitable in the instant grocery delivery sector, which woos customers with cheap prices and super-fast service.

That is because the startups faced high leasing costs from placing stores in dense urban areas, guarantee staff full industry minimum wages unlike competing delivery services , and lack the economies of scale that supermarket giants such as Coles, Woolworths and Aldi enjoy.

A European company called Gorillas, which served as a template for the local startups, has been slashing staff and scaling back expansion plans as it holds secret talks with rivals about a sale or merger, according to a recent Bloomberg report. Last year the company raised nearly $US1 billion at a valuation of about $US3 billion but is now struggling to raise money as investors start to doubt the sector’s profitability. US rival Gopuff also laid off hundreds of employees earlier this year.

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