Swedish startup Budbee has had a few good years. Thanks to the Covid-induced boom in online spending, the last-mile delivery company has more than doubled its turnover to 80 million euros in 2021.
But now, with rising inflation, as well as electricity and gas costs, consumer spending is falling.
According to the Swedish trade association, e-commerce in Sweden was down 15% in April compared to the same month last year. However, comparing it to pre-Covid in January and February 2020, e-commerce was still up 70% in April this year.
CEO and co-founder Fredrik Hamilton isn’t worried. “We haven’t seen a decline but we’re actually growing, which means we’re taking market share [from other delivery firms]. And while e-commerce is down in the Nordics, it’s actually up in the Benelux,” he says – Budbee is live in Sweden, Denmark, Norway, Belgium and the Netherlands. “By being in five different markets, we can take advantage of their differences.”
It has also just raised a new round of funding – SEK 400 million ($40 million) from existing investors Kinnevik, H&M and CNI Nordics and others, as well as its employees, at a valuation of SEK 7.3 billion. (700 million euros).
It helps that Budbee is close to achieving profitability at the group level, he adds. The startup aims to be profitable by the end of next year.
“If we hadn’t always had profitability at the heart of our business, I would be worried. There will be quite a significant correction in the market and valuations may have been a bit high lately. Today, the risk appetite of venture capitalists is completely changing and much of the previous talk of the vast amounts of capital available has disappeared.
Invest in bank loans
However, venture capital financing is not Hamilton’s first choice. Budbee’s strategy has been to fund as many of its nearly 5,000 smart lockers as possible through traditional bank loans. But this means that if she wants to increase the amount of her existing loans, the banks require Budbee to have more cash as a safety measure.
“We want to have as little dilution as possible, and by funding all of our smart lockers with loans instead of venture capital, we can manage that. But by extending our loans, we needed to increase our equity as a liability to the bank and that’s why we lifted this round,” Hamilton said.
It’s not the only startup to offer smart lockers – Instabox successfully introduced the idea to Sweden several years earlier.
“I think dilution is one of the key aspects for startups. I’m building the business for the long term and I don’t want to give away all my ownership to investors,” he says.
Hamilton believes that it’s fairly rare for startups to use loans as a funding option, as it’s usually difficult for unprofitable startups to get loans from traditional banks. For most startups, similar investments in equipment are usually funded by venture capital.
“I’ve always put profitability at the top of our agenda and that made us a bit different from other startups. Now we’re really glad we did that.
Budbee approaches Albert Heijn
A big win for Budbee earlier this year was win a procurement process in the Netherlands to become the sole delivery partner of the Albert Heijn sites (Albert Heijn is the largest supermarket chain in the Netherlands). This means that Budbee will have smart lockers in 700 of the region’s largest Albert Heijn stores.
“It was a huge success for us. We only started with smart lockers a few years ago, but we managed to beat all the established players in this procurement process that took nearly a year and a half,” says Hamilton.
That Sweden, a long and fairly sparsely populated country, managed to produce two successful last-mile delivery startups is perhaps not as strange as it sounds, says Hamilton.
“When we managed to define the model for deliveries in Sweden [with home deliveries and smart lockers], we realized that this could be extended to other countries – and all other countries are easier to succeed than Sweden. In the Netherlands, it takes you two hours to cross the whole country, the same time it takes to go from the southern suburbs to the northern suburbs of Stockholm during rush hour.
Mimi Billing is Sifted’s Nordic correspondent. She also covers health tech and tweets from @MimiBilling