Fast-growing food delivery startup Gopuff is raising a $1.5 billion investment only months after announcing its previous $1 billion funding round, Axios and Reuters reported today.

The investment is described as a convertible note led by Guggenheim Partners. The notes could reportedly turn into shares at a maximum valuation of $40 billion. Overall, Gopuff has raised about $3.4 billion in funding to date. 

Philadelphia-based Gopuff, incorporated as goBrands Inc., operates a food delivery app that is available in more than 1,000 cities throughout the U.S. and U.K. That’s up from about 450 cities at the time of Gopuff’s previous $1 billion funding round in July. The app’s main selling point is that it offers delivery times of 30 minutes or less.

Gopuff provides competitive shipping times by setting up logistics hubs dubbed microfulfillment centers in the cities where it operates. The startup’s microfulfillment centers are located close enough to customers for 30-minute delivery to become practical.

Gopuff stocks its logistics hubs with about 3,000 items. Consumers can order not only groceries but also other products such as over-the-counter medicine and electronics. Gopuff sources much of its merchandise directly from manufacturers instead of going through retailers, which allows the startup to improve profit margins. Another benefit of managing procurement in-house: the startup says that it can rapidly adjust its product catalog as customer demand changes.

To support revenue growth, Gopuff is expanding to more market segments. The startup earlier this year announced plans to set up kitchen facilities within or next to its microfulfillment centers as part of a plan to offer freshly made food to users. Separately, Gopuff reportedly intends to move into the digital ad business by enabling brands to promote their products via its app.

Gopuff’s reported $1.5 billion funding round indicates that investors are optimistic about its ability to take on more established players in the food delivery market. The startup competes with Uber Technologies Inc., DoorDash Inc. and several other players. The new capital will enable Gopuff to continue expanding its network of microfulfillment centers to take on rivals such as Uber in more markets.

It’s also possible Gopuff will make more acquisitions. Gopuff has bought several startups since the start of 2020 to support growth initiatives. As part of the acquisition spree, the startup reportedly paid $115 million to purchase rideOS, a maker of software for optimizing delivery routes and managing logistics networks.

The up to $40 billion valuation Gopuff is said to have received in its latest funding round values the startup significantly higher than a few months ago. Gopuff was worth $15 billion in July, after its previous raise. That sum itself represented an increase over the $9 billion valuation the startup had received in March, when it received $1.15 billion from investors.

Photo: Gopuff