Deliveries startup Avo shuts down Israel operations

Avo founders  credit: Stefan Klapko
Avo founders credit: Stefan Klapko

Most of the company's employees in Israel are being laid off, while US operations are being cut back.

After announcing that it was laying off two thirds of its employees in the US and Israel last month, groceries delivery startup Avo is laying off all operations employees in Israel and shutting down its activity here. Avo says that a few development employees will remain in Israel, and that its US activity will also be significantly cut back.

Avo CEO Dekel Valtzer wrote on his LinkedIn account: "Unfortunately we have been forced to respond immediately to changes taking place in the market and to the complex reality which it is impossible, irresponsible, and wrong to ignore, and we have decided to close our business activity in Israel while adapting the company’s activity in the US to the new market situation (details to follow)."

Avo was founded in 2018 by Valtzer , Idan Hershko, Nir Smadar and Neri Bluman. The company developed a platform for delivering groceries from the store to residential buildings and offices. Delivery of orders to a single address was meant to lower logistics costs and the costs of acquiring customers. Avo has raised over $90 million from Insight Partners, IBI Tech, Kleiner Perkins, F2 Capital and others. Insight Partners led the company’s last investment round last year.

Last month, Avo announced that it was laying off 500 of its 750 employees in the US and Israel. In Israel, 350 of a total of 500 local employees were dismissed. At its peak, Avo employed more than 800 people.

Talking to "Globes", Valtzer explained at the time Valtzer told "Globes" that the company originally focused on deliveries of grocery products to workers in large office buildings through signed agreements with office managers or welfare managers in the companies. But following the outbreak of the Covid pandemic and the shift to working from home, Avo realized that it had to broaden its business model quickly in order to generate revenue. It therefore started to make deliveries to large apartment buildings, university campuses and other large institutions, and expanded its workforce. This, however, turned out not to be profitable in the US, and it was therefore decided to close it in both the US and Israel.

Valtzer said that the company had planned to raise $70-100 million from investors but had been unable to do so on the terms that it had sought due to the change in market sentiment after last year's record startup fund raising. Consequently the company embarked on a smaller internal financing round from existing investors although Valtzer declined to disclose the amount raised.

The closure of Avo reflects the caution on the part of venture capital funds in injecting cash into startups at present, following the collapse in the share prices of technology companies on Wall Street. Money is flowing to startups with excellent performance numbers, but those whose business results do not meet the new standards, which emphasize profitability, at least at the level of the individual sale, and positive cash flow, are finding it very hard to obtain finance.

Delivery, which is known as a field that requires substantial investment and where gross margins are low, is suffering badly from the cooling off of investment, and several US companies offering super-fast delivery, such as 1520 and Buyk, have shut down in the past few months.

After the downsizing, Valtzer claimed that Avo’s model, whereby the company provided deliveries once or twice a day, was superior to that of the companies offering super-fast delivery. "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. It is clear that these models cannot continue working. But our model is different and can be efficient and profitable, it just takes time to get there."

Avo founders  credit: Stefan Klapko
Avo founders credit: Stefan Klapko
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