Startups Prioritize Profitability Over Global Expansion as Investors Seek Returns

Startups Prioritize Profitability Over Global Expansion as Investors Seek Returns

In a shift from the rapid global expansion seen in recent years, many startups are now prioritizing profitability over international growth. Swedish online discount grocery store Matsmart, known internationally as Motatos, is a recent example. After raising €38 million in a Series D funding round just a year ago to expand to the UK, Motatos has now pulled out of the UK market. The move reflects a broader trend among investors who are increasingly focused on profitability rather than costly expansions. This shift is driven by a push for profitability and a focus on the bottom line. As a result, startups are reevaluating their growth strategies.

Motatos, which experienced a loss of SEK 422 million (€35 million) in 2022 due to expansion costs, is now looking to raise another significant funding round. The company has shifted its strategy from “growth at all costs” to demonstrating profitability and more efficient capital use. They have recently automated their warehouses in Sweden, with plans to do the same in Germany, aiming to reduce costs substantially.

This trend is not unique to Motatos. Other Scandinavian startups, like pet and home insurer Hedvig and Norwegian grocery delivery company Oda, have also scaled back their international operations to focus on profitability in their home markets. This shift reflects the challenging economic environment and the need for startups to prove their business models before pursuing further international expansion.

While global expansion remains on the agenda for many startups, it’s clear that investors are currently prioritizing returns and profitability. The future will likely see a return to investor willingness to fund growth, but for now, profitability is taking precedence.

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