Upstock raises $3.4m as Woolworths signs up
Upstock has raised a further $3.4 million for its wholesale food and beverage platform — and inked a deal with Woolworths its founder says will help small suppliers navigate the cutthroat world of supermarket stocking.
In a third development, Upstock is now supporting credit card payments for its food service, hospitality and grocery sectors. It says the move is “extremely rare” for its business-tobusiness market, which has traditionally invoice-based, with the attendant hassle of credit checks and chasing bad debts.
The Wellington-based start-up was founded by two of Xero’s original crew: Philip Fierlinger and Duncan Ritchie, plus Foxton Fizz owner Matt Wilson.
The firm, founded on the eve of the pandemic, has now raised just over $13m, including the latest funds, which Fierlinger frames as a “seed extension”. The money will largely go toward a push across the Tasman.
Upstock originally helped the likes of cafes and bars automate the process of reordering stock — which it pitched as a streamlining and costsaving measure as Covid hit. Buyers could access the basic version, while suppliers and wholesalers were charged $1 an order.
It subsequently inked a deal with Foodstuffs to help suppliers get into its New World, Pak’nSave and Four Square outlets, and now has other major supermarket chains onboard, too.
The Supie effect
Upstock has no influence on which suppliers Foodstuffs or Woolworths select, or how they price products.
But Fierlinger pitches his firm’s platform as a democratising force, indirectly boosting competition by making it easier and cheaper for small suppliers to navigate the supermarket chains’ stocking systems — which he says would cost around $10,000 to set up and around $1000 a month with a bespoke system. As such he sees it as a mechanism to help pry open the supermarket sector’s wholesale market.
“The abrupt closure last year of supermarket alternative Supie definitely rattled both the food and beverage industry and the start-up world,” Fierlinger said.
“Many food and beverage suppliers had hoped Supie would provide a new channel to market, as an alternative to the duopoly. While that didn’t succeed, those same suppliers are finding great success with Upstock as a new channel to market that helps them increase sales across the hospitality, food service and grocery sectors.”
“Upstock is helping food service suppliers cut costs and increase sales, which is especially critical through this tough economic period.”
Tough times
Fierlinger can trot out some good news stories.
They include Nelson’s Aquafresh Seafood, which grew staff from 9 to 17, with Upstock helping them retain staff while increasing productivity, he said.
Owner Jonathan McPherson said, “Before Upstock, everything was manual, that was okay for when we were processing only 20 orders a day, but in the past year, we’ve grown that to hundreds a day. It would be torture without Upstock.”
Woody’s Free Range owner Daniel Todd said, “We’ve seen an increase in order value because it’s easy to see everything on offer. Upstock is very, very good at encouraging order value increases.”
And Mark Davey, founder of craft beer maker Waitoa, said: “We ship direct to hundreds of Woolworths stores each week.
“In the past, we received individual purchase orders by email, reading each one, logging into multiple platforms to generate packing slips, delivery dockets, and invoices, updating separate spreadsheets to manage orders. With Upstock, purchase orders flow into our regular daily order list, two clicks of the mouse and orders are approved, packing slips generated, invoices sent, and the orders are ready to dispatch.”
But last year wasn’t all show-pony success stories, as the recession bit.
“Some customers had to shut up shop, especially on the hospitality side,” Fierlinger said.
“Some venues we thought would be more resilient in an economy like this were not able to stay afloat. And there’s been a few suppliers who seemed to be performing well that went under.
“Trading volumes were suppressed toward the end of last year, but it’s picking up over summer.”
Strong growth
The raise was less than a $5m round last year. Fierlinger would not comment on the post-money valuation, other than that it was in the “doubledigit millions” and higher than the 2022 round.
Neither would he reveal financials, but he did offer that Upstock now has 27 staff, and had tripled growth in 2023, ending the year with more than 30,000 wholesale buyers connected to its platform, which now features 90,000 products from more than 1000 suppliers across New Zealand and Australia.
The round was led by Possible Ventures, a Melbourne and Munichbased venture capital firm, which doubled its investment from the previous round, Fierlinger said. Possible Ventures has a 13 per cent stake, according to the Companies Office, making it the largest shareholder after the founders, with their combined 52 per cent.
Other VC firms that participated in previous rounds have also increased their investment, including Icehouse Ventures, NZVC and Sir Stephen Tindall’s K1W1 and Vend founder Vaughan Fergusson’s Awesome Investments.
Possible Ventures general partners Chris Hitchen said: “We’ve doubled down on our investment in Upstock and their next-gen platform that’s set to transform operations for countless hospitality, grocery, and retail businesses across the globe. Upstock’s software eradicates inefficiencies in ordering and logistics, creating network effects that deliver unmatched benefits to businesses and their suppliers.”
Fragmented market
Upstock has two competitors in Australia, Fierlinger said, but most of its target customers were using no online platform.
“Most hospitality businesses and their suppliers still use pen, paper, email and spreadsheets to manage wholesale orders. It’s a mess, burning up time and money for both the buyers and the suppliers,” he said.
Overall, he tracked some 300 competitors worldwide. The US was the most active market, but most were either part of a much larger system, or specialised in a single product, such as alcohol.