Israeli grocery delivery start-up Avo lays off two-thirds of its employees
(Globes) – The Israeli grocery-deliveries platform Avo is laying off 500 of its 750 employees worldwide including 350 in Israel. At its peak, Avo had more than 800 employees.
Avo was founded in 2018 by CEO Dekel Valtzer, Idan Hershko, Nir Smadar and Neri Bluman. The company developed a platform for delivering groceries from the store to the consumer. It has raised $84 million from Insight Partners, IBI Tech, Kleiner Perkins, F2 Capital and others.
Valtzer told Globes that the company originally focused on deliveries of grocery products to workers in large office buildings through signed agreements with the building management. However, following the outbreak of the COVID pandemic and the shift to working from home, Avo extended its business model. It started delivering groceries to large apartment buildings, university campuses and other large institutions and expanded its workforce.
After finding that its operations in New York were not profitable, though, Avo in consultation with its investors, decided to return to its original model of delivering to office buildings. As a result, it is reducing its workforce.
According to Valtzer, delivery operations to apartments in Israel are approaching profitability. Nonetheless, the company decided to discontinue this activity to focus on the business sector. Avo is now seeking a buyer for this activity who will also take on the employees.
Valtzer said the company had planned to raise $70m.-100m. from investors. It has been unable to do so due to the change in market sentiment after last year’s record start-up fundraising. Consequently, the company embarked on a smaller internal financing round from existing investors. Valtzer
declined to disclose the amount raised.
The current layoffs will hit employees in operations management (pickup, drivers and customer service) as well as head office staff.
Valtzer said, “COVID and working from home forced us to move quickly from our original vertical of offices. When the offices returned to work, we did not know how to swallow both areas together. I think that there is a lot of potential in the field of home deliveries, but I couldn’t bury my head in the sand regarding the change in market conditions and endanger hundreds of employees.”
To some extent what is happening at Avo is part of the overall shrinking of the deliveries market in the postCOVID era after it peaked during lockdowns. Take for example US food delivery company GoPuff, which last month fired 35% of its workforce.
Valtzer insists that there is a difference between Avo and many other companies in the sector.
“I live in New York where there are at least six apps that will deliver a can of coke to your home within 10 minutes,” he said. “It is clear that these models cannot continue working, and this market in which companies like Instacart, DoorDash and others operate is shrinking. But our model is different and can be efficient and profitable. It just takes time to get there.”