South Korea’s leading last-mile delivery startups have put their shares or management rights up for sale, riding on the surging demand for delivery of food and daily necessities. But they have been forced to cut valuations to lure investors.
In the absence of service differentiation, the high turnover rate of freelance motorcycle drivers for last-mile delivery companies – Barogo, Logiall and Vroong – overshadows their business outlook in a market with low entry barriers, said private equity industry sources.
Managing delivery drivers also runs the risk of labor disputes, under the current pro-labor government.
“Their business is all about gathering drivers” an investment banker told the Korean Investors. “But those drivers do not belong exclusively to one platform, thus the platforms are meaningless by themselves.”
Software developer Insung Data Co. Ltd., the operator of Logiall, has offered its management rights in the delivery platform this year. Founded in 2016, Logiall controls about 70% of South Korea’s last-mile delivery service market.
Insung recently slashed its valuation on Logiall by one-third to 200 billion won ($169 million) to attract investors.
Mesh Korea, which runs delivery app Vroong, had been in talks with retailer E-Mart Inc. and other potential investors earlier this year. But they walked away in the wake of the coronavirus outbreak. Mesh Korea reported operating losses in both 2018 and 2019.
E-Mart reportedly valued Vroong at between 250 billion and 350 billion won, below Mesh Korea’s initial valuation of 400 billion won for the platform.
Barogo received 7 billion won in investment from Korean venture capital firms, which valued the startup at 170 billion won, late last year. It is now looking for new investors.