Seeing massive growth in delivery demand, investors rewarded software provider Onfleet with $14 million in a Series A funding round, the company announced Friday.
Onfleet helps restaurants and other businesses manage delivery with software that automatically dispatches and routes orders and updates customers in real time. The company has roughly doubled its delivery volumes this year, said CEO and co-founder Khaled Naim, as the service has boomed amid the pandemic.
The funding round was led by Kennet Partners, a tech-focused private-equity firm. Kennet views Onfleet as a leader in the growing delivery market, and was particularly impressed by the software’s customer experience management and its ease of use for clients.
“We talked to parties that said up to a quarter of gross margins were going to delivery, so the ability to optimize routes has a dramatic impact on the bottom line,” said Javier Rojas, Kennet’s managing director. “So to us, the question really isn’t just the software, but how easy is it to use, how effective it is.”
Both Rojas and Naim said they think the current delivery surge represents a permanent behavior change.
“There might be some pullback immediately afterwards. I mean, we all like to go out,” Rojas said. “But I think that this is a behavior change that’s being accelerated.”
While customers’ appetite for delivery does not seem to have slowed much, some restaurants are cooling on it. Chipotle and Noodles & Co. said delivery fees hurt their margins in the third quarter, and both are working to get customers to order other ways.
But most of Onfleet’s customers are using the product to manage their own drivers, while partnering with third-party delivery companies as a backup. This hybrid approach is becoming more common, Naim said.
“Generally, restaurants are becoming more wary of the third-party aggregators like DoorDash. … They want to control their own destiny and have their own channels,” he said. “I think that’s kind of the model that we’ll see play out more and more over the coming years.”
San Francisco-based Onfleet said it would use the funding to continue developing its product and expand into new markets. It currently works with thousands of companies in 90 countries. Restaurant partners include Sweetgreen and Firehouse Subs; it also works with grocery giant Kroger.