It's another big day for Austin's grocery and tech scene. Grocery giant H-E-B is buying Favor, an Austin-based on-demand delivery startup.
Terms of the deal weren't disclosed. But the mashup gives H-E-B a new set of data and logistics technologies. And the deal allows Favor to continue operating independently and keep its brand. H-E-B also said it will keep all of Favor’s employees and its 50,000 runners, who operate as contract delivery drivers, as well as its CEO, Jag Bath.
The acquisition marks a potentially lucrative end for Favor's founders and investors. The startup had raised $34 million since its founding in 2013. It most recently closed a $22 million round led by Austin's S3 Ventures in September 2017. Other investors include Draper Associates, Silverton Partners and Corsa Ventures.
“We could not be more excited to be part of H-E-B,” Bath said in a news release. “I am incredibly proud of our team’s success and the business we have built at Favor. H-E-B’s extensive resources, capital and retail food industry experience will enable us to further build on our momentum and significantly accelerate our growth throughout Texas."
A little over a year ago, it looked like Favor was struggling to scale as it launched new markets across the nation. Then, in January, Favor shut down its operations in Toronto, Boston, Denver and several other cities it had expanded to the year before.
Instead, it opted to focus solely on Texas, where San Antonio-based H-E-B is easily the biggest grocery chain with more than 400 stores. H-E-B Chief Operating Officer Martin Otto said he's excited to team up with another Texas company.
“We share similar values, including a commitment to excellence in customer service and to our greatest resource – our people," he said in a news release. "Over the past two years, we have established a strong working relationship with Favor that has proven to be immensely successful for both companies. We see a unique opportunity with this partnership to support and accelerate each other’s growth through the sharing of experience, insight and resources.”
H-E-B's acquisition of Favor comes as traditional grocery stores continue to find new ways to serve customers. H-E-B, for example, recently added online ordering and curbside pickup. Meanwhile, Amazon acquired Whole Foods in June 2017 for $13.7 billion in a move that gave the Austin-based grocer access to new technologies and new ways to deliver groceries to customers.
