Berlin-based Yababa only started its same-day grocery delivery business this summer, selling products geared toward the tastes of the capital's sizeable Turkish and Arabic communities shortly afterward, but in a few short months it's closed a $15.5 million seed round of funding to fuel planned rapid expansion -- both within Germany and across Europe.
"Paris, Amsterdan, Brussels, London," says co-founder Ralph Hage, reeling off the list of likely first-candidate cities for its service outside Germany.
Inside Germany, he says Cologne will be next after Berlin -- where it currently delivers to Mitte, Prenzlauer Berg, Friedrichshain, Kreuzberg, Moabit, Wedding, Neukölln, Charlottenburg, Wilmersdorf, Tiergarten, Tempelhof-Schöneberg and Lichtenberg -- either by the end of this year or early next. It also wants the service to be live in seven German cities in 2022.
Expanding Yababa's product mix to address a wider mix of multicultural communities is also on the cards. But, for now, the most popular item being ordered in the German capital is Arabic bread, followed by meat, fruit and vegetables, per the startup.
While it's starting with a focus on Turkish and Arabic foods, it nonetheless sells a wide range of groceries -- from fresh lemons to luncheon meats, through frozen pizza and cleaning products, to name a few of its current ~1,500 SKUs. And a much more expansive inventory is on the way.
Yababa's seed round is led by Creandum and Project A, with existing investor FoodLabs also participating along with a number of business angels.
While quick-commerce (or instant grocery) has been growing like a weed across Europe in recent months -- driven by the shock of the pandemic switch of Europeans' food buying habits away from in-person trips to stores to (socially distant) app-based shopping. This is, in turn, exciting regional investors who are salivating at the prospect of disrupting traditional brick-and-mortar supermarkets, hence funds falling over themselves to pour big bucks into speed-focused digital platforms like Turkey's Getir, Spain's Glovo, Germany's Gorillas and the U.S.-owned Gopuff (to name a few). The convenience play is starting to give way to more interesting market slices -- catering to specific communities' grocery needs and niches.
See, for example, the ethnic product-focused London-based Oja -- whose seed round we covered last month -- or the local food producer platform Membo, an Estonian startup that has bagged funding from Y Combinator to spin up a marketplace model connecting shoppers with quality local producers, to name two.
Yababa suggests such developments are a sign of market "validation" -- while also arguing there's a massive opportunity to build a leading pan-European grocery-buying platform catering to underserved multicultural communities, given what's still a relative lack of competition. (And, btw, "Yababa" is a casual greeting you're likely to hear if you go to an Arabic supermarket in person.)
Just in case you think "niche" means a market that's too small to be significant, in Germany itself Hage points out that over a fifth of the population have a migrant background (the majority being Middle Eastern). And there are plenty of other sizeable diasporas living in countries across Western Europe -- communities Yababa is gearing up to scale and serve.
"For our investors, our stakeholders, our customers today, we're clearly filling a massive gap," he tells TechCrunch. "From the investors side there's a huge opportunity -- we're one of the first players in the market today. It's been validated in the U.S. with companies focusing on the Asian segment."
"As we continue expanding throughout Europe -- because we see the same issue in France, in Benelux, in the U.K., etc -- we expand into other ethnic groups," he adds. "This is how the business model will evolve."
As on-demand grocery delivery startups become more novel/specialist, the need for blistering speed as a differentiator is naturally dialed back. Here, convenience comes from providing the sought-for products (and quality) that's simply harder for your customers to come by through more traditional retail (or less specialist) grocery buying channels.
This in turn means platforms like Yababa can manage with maybe just one centralized warehouse per city, rather than having to pepper a location with scores of mini dark stores -- because the delivery promise is typically "next day" (rather than within minutes).
This means the logistics element looks easier to streamline (and sustain) versus the likes of q-commerce platforms like Gorillas et al. (meaning potentially burning less investor cash). Albeit, in Yababa's case, it's clearly in a rush to scale in order to steal a march on other multicultural-focused newcomers and doing that requires enough resource, hence the chunky seed raise.
A slower delivery model may also mean reduced risks in relation to delivery worker conditions -- i.e., because you're not mandating inhumanly fast turnaround times. And conditions for platform workers is an area of active legislative attention in Europe; and one where q-commerce platforms like Gorillas and Glovo continue to face a smorgasbord of challenges.
"We don't focus on speed," confirms Hage of the grocery delivery service itself. "Basically our USP does not revolve around how fast we deliver a product. Of course we think same day is very important and we think convenience to the customer is equally important but we want to offer a service that is affordable, rather than charging customers a few euros for delivery -- because we think this creates a bit of friction around the market."
"Our model is closer -- I would say -- to AmazonFresh and Picnic. Where we basically allow a customer to choose a delivery slot and decide the time of delivery -- and we deliver within a two-hour window today," he goes on. "Over time this will potentially decrease -- into [a more] faster [service] -- or we'll offer the ability for customers who want to get their products faster to pay a delivery fee. But for now the model is closer to AmazonFresh and Picnic."
"All the customers that we've spoken with -- all the customers that are buying from us today -- value assortment and value the quality of the products over the speed of the delivery," he adds.
"We do own our stores, basically -- it's a dark warehouse model -- nonetheless it's larger in size than the quick commerce warehouses because we will expand our SKUs today from 1,500 to 5,000. And we don't need as many warehouses in the city as the quick commerce player."
Despite having the relative luxury of (pretty) relaxed delivery times (versus instant grocery/q-commerce), Yababa still aims to maintain control over the delivery experience. So, while it's sourcing delivery staff via third-party companies, it takes care of their training and Hage also says it aims to hire from the same communities it's targeting in order to provide the best fit between deliverer and customer.
Yababa's founding team, meanwhile, brings plenty of seasoned experience to the table via past roles in on-demand food and logistics businesses.
Hage, for example, has previously worked in management positions at food delivery firm Delivery Hero and digital insurer, Wefox -- including co-founding NokNok, a 10-minute grocery delivery company operating in the Middle East.
He also notes that he has a migrant and Middle Eastern background himself, having been born in Beirut.
Yababa co-founder Ralph Hage. Image Credits: Yababa
Yababa's other co-founders are also seasoned in logistics: There's Hadi Zaklouta (also ex-Delivery Hero); Javier Gimenez (previously at e-scooter startup, Tier Mobility); and Kamel Semakieh (whose career history includes co-founding a delivery logistics platform in Lebanon).
"One of the most important things today is that no one has time to learn," says Hage when asked what experiences the founding team is bringing with them from their prior workplaces. "You need to have people on your team that already have context. People that have done this before in the areas where they are focused today.
"So if you look at the founding team today it's people that I've known and I've worked with in the past. So I understand exactly what their skills are, their skill sets, how they operate and we can work very closely today -- we have an element of trust and we solve problems really well together."
With Europe's online grocery space positively sizzlingly with investor cash and frenzied competition (not to mention a lot of consolidation), there is the question of whether Yababa is building a business for the long term -- with the aim of an eventual IPO -- or hoping for a quick exit to one of the convenience-focused food app giants who will likely be casting around for fresh segments to bolt on as/when the convenience growth slows?
After all, on-demand hot meals platform Delivery Hero already took a slice of Gorillas -- leading its Series C round last month.
"Look, if there's anything we know about this market -- whether it's food or groceries -- is that it will lead to consolidation," says Hage. "It's been consolidated over the years, and this is one of the things that I did for Delivery Hero in the Middle East -- I did M&A integrations for them as part of my role -- and this is something that I definitely understand. And it's part of how I position the business. But my goal in building this company is not to sell it in a year.
"This is not -- from a business perspective -- the most profitable or strategic decision for either our stakeholders or us as a team. [It is] a lot of hard work to build a business today and we want a brand that becomes a household name and lasts over the next 10 years.
"Whoever invests in us or whoever is interested in acquiring us -- I think this is only a vote a confidence and is something that we appreciate and admire if we get to that stage. But we're not building a company with a goal of selling it in a year. And this is not the reason why our investors want to work with us."
The meaty size of the seed raise is a measure of Yababa's ambition to scale first -- and scale fast, per Hage.
"There's a few things we want to achieve with the next round. Expansion is one of them. With the fresh capital we plan to basically go beyond Germany fairly quickly -- we strongly believe there is a land-grab opportunity in this business today and we want to make sure we are well positioned in the cities that make sense for us, based on where our customers and the communities we want to target are," he says.
"We will build a network of warehouses. We want to broaden our assortment. And make sure that we not only serve the customers with products that they know and find in Germany today -- but also more exciting products that they know from home that are not available in Germany. So we want to focus on making sure that we're bringing more and more relevant products over time -- identify gaps in the offering and figure out where to get them from. Because this is one of the most compelling and important parts of what we do -- offering people products that they really want and they miss from home.
"And obviously scale our supply chain -- from a technical perspective, operational perspective -- and continue growing the team. We want to hire some of the best people in Europe today and we're building a fantastic culture so far. And something that's important for us to do is to make sure that we continue to have this culture of excellence that we've started with."
While Yababa is obviously differentiating via the mix of products it stocks, Hage says it will also be doing more to distinguish its app experience from more vanilla/Western food shopping services -- such as by localizing language content.
"There's a few different phases for the app itself," he says. "Today we operate similar to other food delivery or grocery delivery apps -- so the experience is quite familiar. Nonetheless the plan is to localize the experience so we're now in the process of translating to the local languages of the audiences that we're serving. And I think this is an extremely important element in what we're trying to build -- not only on the app itself but customer service and drivers as well."
More differentiating flavor will be incoming for the app experience too -- but Hage is keeping Yababa's plans on that front under wraps for now, saying only: "Over time we'll build more exciting features that customers would love."
"From a personal level I have a big connection to the product that I'm building today," he adds. "I personally come from the Middle East -- I was born in Beirut during a very difficult time, I left home super early -- started working at a very young age and ever since have been moving countries over and over again. Lived in many different places and have been chasing this idea of home. So for me food has been the closest thing that I have to home -- and I've always wanted to build a product where I can show how special the food [is] and the groceries and the different variety of cuisines in the region where I come from to the Western market. So matching those two ideas together basically, today we have Yababa."
Update: Commenting on the funding in a statement, Peter Specht, partner at Creandum, said:
We’ve seen a range of fast-rising generalist and convenience grocery players recently, however the segment for multicultural groceries is still overlooked in Europe. Just as it’s a differentiated market in the offline world with verticalized retailers, suppliers and customer needs, we foresee the same trend on the digital side.
The Yababa founders impressed us with their vision, know-how and close ties to the communities -- as well as their track record from high-growth startups in the food and grocery delivery space. We’re proud to back Ralph, Hadi, Javier and Kamel to build the European market leader.
In another supporting statement, Anton Waitz, general partner at Project A Ventures, added: “Multicultural grocery shopping is an underserved and very fragmented market, widely differing from city to city and district to district. The amazing and experienced Yababa team is on a mission to enrich the everyday lives of millions of people in Europe -- not only with the best possible shopping convenience but also by offering a truly unique food supply."