Last mile delivery biz Drive Yello, ordering app Hey You ink merger, raise next
Last mile delivery business Drive Yello and café ordering app Hey You have merged in a bid for a bigger slice of the market and will look to raise up to $15 million for the combined business early next year.
Drive Yello co-CEOs Asheesh Chacko and Steve Fanale will head the merged business.
Both companies’ existing shareholders have rolled in to a new top entity, 4YOU Innovation. That includes Drive Yello’s investors Tidal Ventures, beverage business Lion and founder Steve Fanale, and Hey You’s investors Alium Capital, Exto Partners and Reinventure in a 60-40 split.
The combined business is expecting to handle $100 million in transactions for the 2023 financial year, with 5000 active vendors, 100,000 customers and 10 million orders. That’s expected to boil down to $13 million revenue.
Drive Yello runs a technology platform connecting retailers like Woolworths and Coles with about 6000 gig economy workers, who are tasked with making same-day deliveries. It makes 10,000 deliveries daily on average in most major metro areas including Wollongong and Sunshine Coast, and charges the retailer a service fee.
Its merger partner, Hey You offers an advance ordering app for café pickups that’s popular in Sydney and just getting started in Melbourne and Brisbane. It takes a cut of the order value.
Fanale, who would lead the merged business alongside his co-CEO Asheesh Chacko expects the merger to help both businesses expand. For example, Hey You’s expertise could be extrapolated to click-and-collect or delivery orders for non-hospitality segments that Drive Yello already knows well, such as pharmacy, clothing and electronics.
It pitched itself as being different from grocery start-ups like Milkrun and Voly, saying it was a pure-tech business that could avoid the cash burn as it didn’t keep inventory or promise quicker deliveries.
Hey You is EBITDA positive (that would change as it rolls out in new industries and expands geographic footprint), while Drive Yello has a cash burn to the tune of less than $100,000 a month but has grown revenue 150 per cent year-on-year for the past two years.
Blackpeak Capital’s Scott Colvin advised on the merger and would also run the $15 million odd capital raise in the new year. It was early days for valuation, but similar businesses fetch about six-times revenue.
The ownership is 18 per cent with the founder, while the majority of the rest is with external investors.
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