Much of how people buy food has moved online — restaurants often replace menus with QR codes that permit you order together with your smartphones, and grocery shopping has been revolutionized with delivery services like Instacart. But until recently, the opposite side of the food supply chain — how small restaurants and neighborhood groceries procured food — depended largely on physical media, pen and paper.
Now, GrubMarket, which provides software and services that help link up and manage relationships between food suppliers and their customers, is hoping to make the distribution process more digital and efficient via a brand new acquisition.
California-based GrubMarket recently acquired Butter, a SaaS platform that goals to digitize the traditionally manual food distribution process with AI, the businesses exclusively told TechCrunch. Founded in 2020, Butter’s eight-person team will join GrubMarket, and its software suite shall be integrated with GrubMarket’s own slate of offerings.
Mike Xu, founder and CEO of GrubMarket, declined to reveal the worth of the deal, but Winston Chi, Butter’s co-founder, told TechCrunch that “most parties, including our investors and us, are creating wealth” from the exit.
Butter’s post-money valuation was $39 million when it raised a $9 million Series A in November 2022, per PitchBook (the corporate confirmed with TechCrunch the reported valuation is roughly correct). Backed by investors, including Google’s AI-focused Gradient Ventures, Unusual Capital, Notation Capital, Collide Capital, and angel investor Jack Altman, the startup has raised $12.3 million in total.
GrubMarket has been on a buying spree over the past few years and has acquired over 100 firms to this point. Most of those deals give attention to supply chain consolidation, as the corporate operates a B2B e-commerce business. On one hand, GrubMarket directly sources produce and ingredients from growers and supplies to buyers like supermarkets. On the opposite, it sells distributors the software needed to run their businesses. It’s not unlike Amazon’s positioning as each a marketplace and SaaS provider.
Butter, alongside Farmigo and IOT Pay, stays certainly one of the few venture-backed startups in GrubMarket’s portfolio which are aimed toward bolstering its tech stack.
It’s unclear whether GrubMarket used capital from its balance sheet for the acquisition. Given its profitability and funding history, it wouldn’t be surprising if the cash got here out of its pocket — Xu told TechCrunch the corporate has been profitable on an EBITDA-basis for 3 consecutive years, and its annual revenue run rate is on course to surpass $2 billion in 2024.
Xu declined to comment on GrubMarket’s fundraising plans, only saying that it has raised “tons of of thousands and thousands of dollars” to this point. GrubMarket’s last publicly announced investment happened in 2022, a $120 million round that valued it at greater than $2 billion. In late 2021, Bloomberg reported that the corporate was “interviewing banks” for a possible IPO in 2022.
Scooping up Butter
GrubMarket is effectively buying out a smaller competitor. At the peak of the coronavirus pandemic in 2020, Chi and his co-founder, Shangyan Li, launched Butter as an end-to-end vertical SaaS solution to assist small and medium-sized food wholesalers manage every little thing from inventory and customer relationships to ordering.
These aren’t necessarily unique features — GrubMarket itself provides a lot of them — but like many SaaS startups, Butter quickly jumped on the generative AI bandwagon, developing tools to enhance its users’ workflow.
The ordering process within the wholesale food industry was particularly ripe for a change. Food suppliers would often scribble orders down as they listened to voicemails from their customers — like a chef calling from a restaurant at the tip of the day after counting inventory — or scroll through text messages of orders. This haphazard process often led to mistaken orders or missing items. Analyzing sales and performance remained a dream.
Using AI, Butter built features to assist distributors turn that variety of unstructured data into information that will be viewed, tracked and analyzed easily. It uses a combination of third-party AI models and its proprietary AI to convert voice notes into lists of things that restaurants and supermarkets order. Before the AI-generated information goes into Butter’s system, users get a probability to review it for accuracy. And since the data is now digital, distributors can analyze sales and optimize their inventory and pricing.
“Every sales rep on the distributor side literally spends five hours a day transcribing text messages and voicemail orders, so it’s an enormous amount of productivity boost and manual process cut-down,” Li said.
More importantly, Butter doesn’t ask its customers to learn a very latest workflow. “Neither distributors nor restaurants want to alter how they impart. We aren’t changing their workflow, but we’re helping them centralize sales knowledge,” said Chi.
“Each step [of food distribution] will be boosted by AI. Even when we aren’t replacing humans, AI can easily help 10x sales. We start with ordering because that is clearly the most important pain point,” added Chi.
Because it turned out, Butter’s AI capability was the impetus GrubMarket needed to purchase and merge with its young rival.
Fast dealmaking is the order of the day
4 years into constructing Butter, Chi and Li had a sticky product, but they found themselves struggling to scale their customer base and not using a strong distribution channel.
Looking across the industry, they realized their most formidable competitor, GrubMarket, had the shopper reach they needed. In addition they recognized that Butter could play a complementary role to GrubMarket. Chi and Li decided to propose a merger to Xu.
“The moat shouldn’t be the tech but the info, and we thought, ‘Wow, GrubMarket has all the info,’” Chi reflected on his decision to sell the corporate.
Xu had already heard of Butter on the time since the startup had won over a customer from GrubMarket. “[Butter] works harder with the shopper … [T]hey even had a team sleeping in the shopper’s warehouse to get the job done,” said Xu. “But everyone knows constructing an ERP system needs a number of investment. Winston’s team only raised about $12 million, so it was hard to proceed to construct a classy ERP system.”
GrubMarket had plans to automate order management, but its development resources were “fully loaded” and focused on other features, like using AI to derive customer intelligence from raw data, based on Xu. So when Butter proposed the deal, the technological synergies were immediately obvious. Moreover, the startup had a stronghold in a segment that GrubMarket had coveted — seafood distributors. Butter reached out in March, and by the tip of April, GrubMarket had already accomplished the deal to amass it.
Once the businesses have been integrated, GrubMarket will leverage Butter’s products, which include AI-augmented chat commerce, to strengthen GrubAssist, its enterprise AI assistant. GrubMarket can be slated so as to add an AI-enabled prospecting and digital ordering module to its ERP system, which is able to let food wholesalers mechanically generate digital sales orders whatever the original medium the orders were taken on — be it text, paper, voicemails, or emails.
“Our style could be very direct and fast-moving,” said Xu, commenting on the speed of the dealmaking. “It’s great that [Butter] joins us so we don’t need to construct it from scratch, and that’s an ideal addition to our software product family.”
