6 ms·

Munchery Stiffs Early Backers and Cuts Staff in a Bid for Survival

50 points by frgtpsswrdlame 10y ago

palakchokshi 10y ago
"The startup has been trying to muster a turnaround effort under the helm of new Chief Executive Officer James Beriker, the former head of recruiting company Simply Hired. He has cut jobs across the company this year to stop the bleeding." Ironic that the former head of a recruiting company has cut jobs at Munchery
- HillaryBriss 10y ago
  i wonder if he sent their resumes over to SimplyHired
jtchang 10y ago
What exactly is a recapitalization? It says the round doesn't value them but doesn't the $5MM note have a cap of $80MM?
- arikr 10y ago
  I think it means doesn't value because convertible notes set an upper cap on a valuation, but don't actually set the valuation. e.g. the next round could be at $40mm, and if it's priced, then this $5mm note would be at $40mm (minus any discount on the note). or if the next round is at $100mm, then this note would be at $80mm.
- clairity 10y ago
  a recap is when the company issues new shares to change the capital structure of the company (i.e., the ownership percentages). the early investors aren't getting any new shares, so their stake in the company gets "crammed down". it might be to make room for a new shareholder to get a larger stake of the company for a given dollar amount than might otherwise be implied by the current capital structure (a down round).
  - lawnchair_larry 10y ago
    Why is it legally easy for them to do this, but in other high profile examples it was difficult for companies to dilute a now-unwanted partner? For example, Gates and Ballmer pushing out Allen, or Zuckerberg pushing out Saverin.
    - joshjkim 10y ago
      it's not quite apples/apples, and the law tries to protect minority shareholders from unfair actions by majority holders, but if the major stakeholders can say "it's in the best interest of the company" with a straight face and not just so the major stakeholders can enrich themselves at the expense of others, it's usually passable. in general, you'd ask lawyers a lot of questions about this, and you definitely take into account the risk of a shareholder lawsuit. so, it's a lot easier to do this kind of thing when there's a downround and the alternative to these terms is the company shutting down - basically, the new folks diluting old folks can say this is ultimately in the best interest of the company because the alternative is a shutdown. in the context of MS or FB, both companies were on the up and increasing in value, so harder for the big stakeholders to say pushing out another SH was just about "serving the best interest of the company" with a straight face.
    - mvpu 10y ago
      Legally very easy because it's a down road (read up on "VC cram down"). They'd raised $120million prior, and now they're doing a $5-$15million convertible at a $80million valuation (significantly down round). All existing investors will either "play" (invest more at this valuation) or "pay" (suffer significant dilution). When valuation takes a down turn, all rules are off - the board has the fiduciary duty to do whatever it thinks is right for the company, even if it means getting rid of all previous shareholders who are not pitching in to help. VC backed companies are like drugs - feels great as long as you're high but could die in a second.
    - rhino369 10y ago
      It's been a long time since I took business associations, but you aren't allowed to discriminate against any of the shareholders. You can dilute everyone, but you can't dilute just some people. IIRC Zuckerberg and Thiel created a new entity and gave Saverin a difference class of shares/equity then diluted that class. They must have known they'd never get away with it, it was likely just a move to be able to fire him quickly and just cut a check at a later date.
- joshjkim 10y ago
  a recap is a pretty general term used to describe any time capital structure is meaningfully changed, but in this case (and oftentimes in the realm of VC-backed co's) it usually refers to a situation where in connection with a new round of fundraising, existing stakeholders have their (preferred stock) rights meaningfully altered, and usually for the worse. this usually occurs in the context of a downround, where the new investor has a lot of leverage and the existing investors are effectively asked to give up some meaningful portion of their rights in order to sweeten the deal for the new investors, either by literally giving those rights up (usually by converting to common stock), or else by granting the new investors some very superior terms that diminish the existing investors rights (like a discount on IPO shares for new investors that existing investors do not get, or a higher-than-usual liquidation preference that supersede existing investors'. in contrast, the "cleanest" fundraising terms would be something like: new investors get the same rights as older investors, just with the price-per-share-based rights adjusted for the higher valuation the new investors bought at. (for reference, here's a good example of a widely read VC post where the term is used with that general framework: http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/) in some cases, a recap is also formulated to incentivize existing investors to put in more money by setting up a deal where existing investors who don't put in more money will end up with their shares converting to common stock (thereby losing their liquidation preferences and anti-dilution provisions), but those who put in their share (usually pro rata) will maintain comparable preferences to the new investors (or whoever is leading the round). (this is sometimes called pay to play, and it's one of the more common recaps i saw when i was an attorney) In this case, could be a novel spin on the same dynamics using a convertible note valuation cap: they are raising a down round (their last reported valuation was $300m, so a major down round here), and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." it does not go exactly into the mechanism for how the value would be reduced, it might just be through straight up dilution (see note below), but in any case it seems like the ultimate objective is the same: using a new structure to reward new (or returning) investors who are willing to save the company in these (arguably self-imposed!) hard times, and push/punish existing investors who may have lost faith in the company. one thing I'd note: honestly, they seem to be implying a significant recap, but there's nothing specific in the article that points directly to any particularly unusual mechanisms. In fact, it's possible that this is just be a down round using a relatively straightforward convertible note with a cap, and even in that case the following statements that seem to imply a recap could still be true: "The value of shares that may be doled out to backers later will change depending on the company's subsequent valuation." (that can be true in a regular convertible note deal) and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." (weirdly worded, but this could be true for any new infusion of capital). also, for relatively small investments ($5m) on mid/late stage companies, convertible notes are used just because they are fast/easy to negotiate and execute on, so i would not be surprised if this is just something like that - still, a major downround in any case!
RyJones 10y ago
650,000 prepared but unsold meals? I hope they were able to direct them somewhere worthwhile.
- Someone 10y ago
  That is not the number to be worried about; that it is "an average of 16 percent of the food the kitchen was producing" is, because "Wasting an average of 16 percent of food produced is above the typical 4 percent to 10 percent that most restaurants waste" (both quotes from https://www.bloomberg.com/news/articles/2016-11-21/munchery-s-struggles-show-how-hard-the-food-delivery-business-is https://www.bloomberg.com/news/articles/2016-11-21/munchery-...) Also, that was over a period of almost two years, so 'only' about 1000 a day, and the company claims most of it was donated to charities. From those two Bloomberg articles, I don't think that's the main reason they need more money.
- jmcgough 10y ago
  I see homeless people eating them all the time in the mission (and the plaid-colored boxes littering the streets). My guess is they're being given to shelters and food kitchens.
ilamont 10y ago
The other Bloomberg article gets into the details of why this company has burnt so much cash (1). Shaking my head after reading this: In August of 2015, Munchery held a party at the Line Hotel in Los Angeles to celebrate a new partnership with chef Roy Choi. He's known for his Korean taco fusion food truck, Kogi, and for his L.A. restaurants, including two in the Line Hotel. Choi's new contract promised him more than $100,000 a month to design his own line of meals. He was also consulting on branding. At the party, people lined up around the block for free kimchi pork fried rice served in Munchery's cardboard containers. Pishevar, Munchery's chief hype man and a major investor, arrived wearing a black cowboy hat. Hollywood filmmaker Jon Favreau attended. By the end of the year, the startup ended Choi's contract. It cost the company more than $500,000, according to people familiar with the matter. Choi had provided Munchery with just two recipes. An agent for Choi declined to comment. Around the same time, Munchery also terminated a contract with marketing agency West, according to former employees. The firm had helped Munchery offer free meals to attract new customers and to strategize about its branding. Munchery spent heavily on direct to consumer marketing ahead of fundraising rounds, former employees said. In a month, the company could easily spend hundreds of thousands of dollars putting flyers on people's doors offering discounts on Munchery, they said. 1. https://www.bloomberg.com/news/articles/2016-11-21/munchery-s-struggles-show-how-hard-the-food-delivery-business-is https://www.bloomberg.com/news/articles/2016-11-21/munchery-...
- pvg 10y ago
  A party and half a mil on Roy Choi recipes doesn't seem like a significant factor compared to a peak burn rate of $5mil/mo or millions in prepared but unsold meals.
  - zdean 10y ago
    Well, that gives you two solid data points...a few more and you've got a pretty reliable trend to explain that burn rate and wasted meals.
    - pvg 10y ago
      A data point and wishing for a few more does not give you a 'pretty reliable trend'. It does the opposite of giving you that.
metaphorm 10y ago
personal anecdote: I signed up for munchery after receiving some discount codes via marketing email, and a few more discounts from referral incentives. I found the food to be high quality and the delivery service to be adequate. However, once my discount codes were used up I stopped using the service because they could not provide competitive pricing even in my very expensive zipcode (a nice neighborhood in Brooklyn). I really wonder what was going on. At a fundamental level, when competing in an ultra-competitive market (food delivery), you have to take price seriously, and they just didn't. Everything they were offering was 25% more expensive than similar delivery options from neighborhood restaurants.
- vkou 10y ago
  The problem with competing in an ultra-competitive market, like food delivery is that you don't have the margins to pay multiple software engineers ~$100,000/year. (Not to mention office staff, executives, VCs, and all the other costs of running a firm.) Pretty much everybody involved in food works like a dog, and gets paid an absolute pittance. That nice restaurant down the street? Their head chef probably makes ~$34,000/year, works 100 hours a week, and sleeps in the kitchen. Oh, and the restaurant is as likely as not to go bankrupt and shut down in <2 years. (And he's not doing it with the hopes that Ricky's Pizza Joint will IPO as the next Facebook.) Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table.
  - PhasmaFelis 10y ago
    This is what happens when developers drink the startup Kool-Aid and decide they're the only smart people around. Not every industry is stodgy and "ripe for disruption".
  - metaphorm 10y ago
    well, they aren't running a restaurant. it's a delivery only service and the economics are very different. For example, in the Brooklyn branch of the service the prep kitchen and delivery center was located in Gowanus (low rent, industrially zoned neighborhood) and they were certainly not running a full-compliment of front-of-house and back-of-house staff the way a restaurant would. They also don't have to pay high rent for a good location. They also don't have a head chef on premises, and they aren't locked in to a specific menu style. I'm not totally familiar with the economics of it but I can easily imagine that it could, in principle, be a profitable operation even with the overhead of having a technology division to produce the website and app. for point of comparison: https://order.andofood.com/ https://order.andofood.com/ that's David Chang's delivery-only food service, which also has a technology division that produces a website and app. the prices on ando's menu are in line with their competitors in NYC. Munchery was always overpriced. I don't know if ando is taking a loss on every order or what, but I doubt it.
coenhyde 10y ago
We used to order Munchery all the time back in ~2013 because the food was really high quality. Then they dropped the price which I was fine with, then they the dropped quality too. At which point we stopped. There are a lot of options available for shitty food.
coldcode 10y ago
To me this seems like a dead end business to be in, too many competitors in limited markets (like SF or NY), competition with brick and mortar options (Joe's Deli etc), and enormous cost of acquisition trying to outdo the competition. This seems like a market for one winner and lots of losers. Is investing $120M in such a business a good idea? You have almost zero ability to innovate and produce something better than your competitors, so why even get into this?
blizkreeg 10y ago
It's hard to fathom how no one at any point just presses the pause button and says, guys, everybody STOP! Let's take a step back and make this damn thing profitable in one city before we scale it. Sheer VC-fueled insanity.
SomewhatLikely 10y ago
I recently canceled my membership after a year. I love the idea, and the food is good too, but the dish prices have skyrocketed recently. Now I know why. I liked to order 4 or 5 dishes and eat them over the next couple days for lunch and dinner. It tastes way better than frozen food, and is better quality than prepared dishes I could pick up at the grocery. However, their model seems to actively punish ordering multiple dishes. They have raised dish prices rather than delivery fees, and their rewards program rewards you per order rather than for dollars spent. Regardless, $10 is a psychologically significant limit for me per meal, and while they used to have a number of dishes under this price point, very few are now.
- Analemma_ 10y ago
  And that's why all of these companies are going to go under: as soon as they start having to charge real prices, instead of the artificial, VC-funded promo prices, people bail. Because, whoa, food delivery is actually expensive. Did none of these companies check, before moving in to "disrupt" the restaurant industry, that there was actually anything to disrupt? Restaraunts are not lazy incumbents growing fat on their unchallenged dominance: it's a cutthroat business. And their costs are almost entirely the food and the labor, which are, for all practical purposes, fixed. There are no margins to steal from here.
  - rhizome 10y ago
    They're not going to go under per se, because I think the customers are probably pretty valuable. I think a more vivid hint as to their future is in their choosing someone from Simply Hired as their new (7/16) CEO: positioning Munchery for acquisition in a crowded marketplace.
    - Analemma_ 10y ago
      Honestly, I don't agree that the customers are very valuable. There doesn't seem to be either loyalty or lock-in with these delivery startups: as soon as they raise their prices, people just uninstall the app and grab another one. I don't see anything worth acquiring here, so an IPO is pretty much it for an exit strategy, if they can last that long.
pg_bot 10y ago
This seems like it will be an extremely difficult business to turn around. Food delivery is an extremely competitive and low margin business with highly price sensitive customers. I've seen coworkers rotate to whichever new service was offering a discount to juice their adoption numbers. I don't see this ever being a lucrative investment, just good money being thrown after bad.
I_am_neo 10y ago
eww, processed snack food is gross, do they deliver fresh fruits?

"The startup has been trying to muster a turnaround effort under the helm of new Chief Executive Officer James Beriker, the former head of recruiting company Simply Hired. He has cut jobs across the company this year to stop the bleeding." Ironic that the former head of a recruiting company has cut jobs at Munchery

HillaryBriss 10y ago
i wonder if he sent their resumes over to SimplyHired

jtchang 10y ago

What exactly is a recapitalization? It says the round doesn't value them but doesn't the $5MM note have a cap of $80MM?

arikr 10y ago
I think it means doesn't value because convertible notes set an upper cap on a valuation, but don't actually set the valuation. e.g. the next round could be at $40mm, and if it's priced, then this $5mm note would be at $40mm (minus any discount on the note). or if the next round is at $100mm, then this note would be at $80mm.
clairity 10y ago
a recap is when the company issues new shares to change the capital structure of the company (i.e., the ownership percentages). the early investors aren't getting any new shares, so their stake in the company gets "crammed down". it might be to make room for a new shareholder to get a larger stake of the company for a given dollar amount than might otherwise be implied by the current capital structure (a down round).
- lawnchair_larry 10y ago
  Why is it legally easy for them to do this, but in other high profile examples it was difficult for companies to dilute a now-unwanted partner? For example, Gates and Ballmer pushing out Allen, or Zuckerberg pushing out Saverin.
  - joshjkim 10y ago
    it's not quite apples/apples, and the law tries to protect minority shareholders from unfair actions by majority holders, but if the major stakeholders can say "it's in the best interest of the company" with a straight face and not just so the major stakeholders can enrich themselves at the expense of others, it's usually passable. in general, you'd ask lawyers a lot of questions about this, and you definitely take into account the risk of a shareholder lawsuit. so, it's a lot easier to do this kind of thing when there's a downround and the alternative to these terms is the company shutting down - basically, the new folks diluting old folks can say this is ultimately in the best interest of the company because the alternative is a shutdown. in the context of MS or FB, both companies were on the up and increasing in value, so harder for the big stakeholders to say pushing out another SH was just about "serving the best interest of the company" with a straight face.
  - mvpu 10y ago
    Legally very easy because it's a down road (read up on "VC cram down"). They'd raised $120million prior, and now they're doing a $5-$15million convertible at a $80million valuation (significantly down round). All existing investors will either "play" (invest more at this valuation) or "pay" (suffer significant dilution). When valuation takes a down turn, all rules are off - the board has the fiduciary duty to do whatever it thinks is right for the company, even if it means getting rid of all previous shareholders who are not pitching in to help. VC backed companies are like drugs - feels great as long as you're high but could die in a second.
  - rhino369 10y ago
    It's been a long time since I took business associations, but you aren't allowed to discriminate against any of the shareholders. You can dilute everyone, but you can't dilute just some people. IIRC Zuckerberg and Thiel created a new entity and gave Saverin a difference class of shares/equity then diluted that class. They must have known they'd never get away with it, it was likely just a move to be able to fire him quickly and just cut a check at a later date.
joshjkim 10y ago
a recap is a pretty general term used to describe any time capital structure is meaningfully changed, but in this case (and oftentimes in the realm of VC-backed co's) it usually refers to a situation where in connection with a new round of fundraising, existing stakeholders have their (preferred stock) rights meaningfully altered, and usually for the worse. this usually occurs in the context of a downround, where the new investor has a lot of leverage and the existing investors are effectively asked to give up some meaningful portion of their rights in order to sweeten the deal for the new investors, either by literally giving those rights up (usually by converting to common stock), or else by granting the new investors some very superior terms that diminish the existing investors rights (like a discount on IPO shares for new investors that existing investors do not get, or a higher-than-usual liquidation preference that supersede existing investors'. in contrast, the "cleanest" fundraising terms would be something like: new investors get the same rights as older investors, just with the price-per-share-based rights adjusted for the higher valuation the new investors bought at. (for reference, here's a good example of a widely read VC post where the term is used with that general framework: http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/) in some cases, a recap is also formulated to incentivize existing investors to put in more money by setting up a deal where existing investors who don't put in more money will end up with their shares converting to common stock (thereby losing their liquidation preferences and anti-dilution provisions), but those who put in their share (usually pro rata) will maintain comparable preferences to the new investors (or whoever is leading the round). (this is sometimes called pay to play, and it's one of the more common recaps i saw when i was an attorney) In this case, could be a novel spin on the same dynamics using a convertible note valuation cap: they are raising a down round (their last reported valuation was $300m, so a major down round here), and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." it does not go exactly into the mechanism for how the value would be reduced, it might just be through straight up dilution (see note below), but in any case it seems like the ultimate objective is the same: using a new structure to reward new (or returning) investors who are willing to save the company in these (arguably self-imposed!) hard times, and push/punish existing investors who may have lost faith in the company. one thing I'd note: honestly, they seem to be implying a significant recap, but there's nothing specific in the article that points directly to any particularly unusual mechanisms. In fact, it's possible that this is just be a down round using a relatively straightforward convertible note with a cap, and even in that case the following statements that seem to imply a recap could still be true: "The value of shares that may be doled out to backers later will change depending on the company's subsequent valuation." (that can be true in a regular convertible note deal) and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." (weirdly worded, but this could be true for any new infusion of capital). also, for relatively small investments ($5m) on mid/late stage companies, convertible notes are used just because they are fast/easy to negotiate and execute on, so i would not be surprised if this is just something like that - still, a major downround in any case!

RyJones 10y ago

650,000 prepared but unsold meals? I hope they were able to direct them somewhere worthwhile.

Someone 10y ago
That is not the number to be worried about; that it is "an average of 16 percent of the food the kitchen was producing" is, because "Wasting an average of 16 percent of food produced is above the typical 4 percent to 10 percent that most restaurants waste" (both quotes from https://www.bloomberg.com/news/articles/2016-11-21/munchery-s-struggles-show-how-hard-the-food-delivery-business-is https://www.bloomberg.com/news/articles/2016-11-21/munchery-...) Also, that was over a period of almost two years, so 'only' about 1000 a day, and the company claims most of it was donated to charities. From those two Bloomberg articles, I don't think that's the main reason they need more money.
jmcgough 10y ago
I see homeless people eating them all the time in the mission (and the plaid-colored boxes littering the streets). My guess is they're being given to shelters and food kitchens.

ilamont 10y ago

The other Bloomberg article gets into the details of why this company has burnt so much cash (1). Shaking my head after reading this: In August of 2015, Munchery held a party at the Line Hotel in Los Angeles to celebrate a new partnership with chef Roy Choi. He's known for his Korean taco fusion food truck, Kogi, and for his L.A. restaurants, including two in the Line Hotel. Choi's new contract promised him more than $100,000 a month to design his own line of meals. He was also consulting on branding. At the party, people lined up around the block for free kimchi pork fried rice served in Munchery's cardboard containers. Pishevar, Munchery's chief hype man and a major investor, arrived wearing a black cowboy hat. Hollywood filmmaker Jon Favreau attended. By the end of the year, the startup ended Choi's contract. It cost the company more than $500,000, according to people familiar with the matter. Choi had provided Munchery with just two recipes. An agent for Choi declined to comment. Around the same time, Munchery also terminated a contract with marketing agency West, according to former employees. The firm had helped Munchery offer free meals to attract new customers and to strategize about its branding. Munchery spent heavily on direct to consumer marketing ahead of fundraising rounds, former employees said. In a month, the company could easily spend hundreds of thousands of dollars putting flyers on people's doors offering discounts on Munchery, they said. 1. https://www.bloomberg.com/news/articles/2016-11-21/munchery-s-struggles-show-how-hard-the-food-delivery-business-is https://www.bloomberg.com/news/articles/2016-11-21/munchery-...

pvg 10y ago
A party and half a mil on Roy Choi recipes doesn't seem like a significant factor compared to a peak burn rate of $5mil/mo or millions in prepared but unsold meals.
- zdean 10y ago
  Well, that gives you two solid data points...a few more and you've got a pretty reliable trend to explain that burn rate and wasted meals.
  - pvg 10y ago
    A data point and wishing for a few more does not give you a 'pretty reliable trend'. It does the opposite of giving you that.

metaphorm 10y ago

personal anecdote: I signed up for munchery after receiving some discount codes via marketing email, and a few more discounts from referral incentives. I found the food to be high quality and the delivery service to be adequate. However, once my discount codes were used up I stopped using the service because they could not provide competitive pricing even in my very expensive zipcode (a nice neighborhood in Brooklyn). I really wonder what was going on. At a fundamental level, when competing in an ultra-competitive market (food delivery), you have to take price seriously, and they just didn't. Everything they were offering was 25% more expensive than similar delivery options from neighborhood restaurants.

vkou 10y ago
The problem with competing in an ultra-competitive market, like food delivery is that you don't have the margins to pay multiple software engineers ~$100,000/year. (Not to mention office staff, executives, VCs, and all the other costs of running a firm.) Pretty much everybody involved in food works like a dog, and gets paid an absolute pittance. That nice restaurant down the street? Their head chef probably makes ~$34,000/year, works 100 hours a week, and sleeps in the kitchen. Oh, and the restaurant is as likely as not to go bankrupt and shut down in <2 years. (And he's not doing it with the hopes that Ricky's Pizza Joint will IPO as the next Facebook.) Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table.
- PhasmaFelis 10y ago
  This is what happens when developers drink the startup Kool-Aid and decide they're the only smart people around. Not every industry is stodgy and "ripe for disruption".
- metaphorm 10y ago
  well, they aren't running a restaurant. it's a delivery only service and the economics are very different. For example, in the Brooklyn branch of the service the prep kitchen and delivery center was located in Gowanus (low rent, industrially zoned neighborhood) and they were certainly not running a full-compliment of front-of-house and back-of-house staff the way a restaurant would. They also don't have to pay high rent for a good location. They also don't have a head chef on premises, and they aren't locked in to a specific menu style. I'm not totally familiar with the economics of it but I can easily imagine that it could, in principle, be a profitable operation even with the overhead of having a technology division to produce the website and app. for point of comparison: https://order.andofood.com/ https://order.andofood.com/ that's David Chang's delivery-only food service, which also has a technology division that produces a website and app. the prices on ando's menu are in line with their competitors in NYC. Munchery was always overpriced. I don't know if ando is taking a loss on every order or what, but I doubt it.

coenhyde 10y ago

We used to order Munchery all the time back in ~2013 because the food was really high quality. Then they dropped the price which I was fine with, then they the dropped quality too. At which point we stopped. There are a lot of options available for shitty food.

coldcode 10y ago

To me this seems like a dead end business to be in, too many competitors in limited markets (like SF or NY), competition with brick and mortar options (Joe's Deli etc), and enormous cost of acquisition trying to outdo the competition. This seems like a market for one winner and lots of losers. Is investing $120M in such a business a good idea? You have almost zero ability to innovate and produce something better than your competitors, so why even get into this?

blizkreeg 10y ago

It's hard to fathom how no one at any point just presses the pause button and says, guys, everybody STOP! Let's take a step back and make this damn thing profitable in one city before we scale it. Sheer VC-fueled insanity.

SomewhatLikely 10y ago

I recently canceled my membership after a year. I love the idea, and the food is good too, but the dish prices have skyrocketed recently. Now I know why. I liked to order 4 or 5 dishes and eat them over the next couple days for lunch and dinner. It tastes way better than frozen food, and is better quality than prepared dishes I could pick up at the grocery. However, their model seems to actively punish ordering multiple dishes. They have raised dish prices rather than delivery fees, and their rewards program rewards you per order rather than for dollars spent. Regardless, $10 is a psychologically significant limit for me per meal, and while they used to have a number of dishes under this price point, very few are now.

Analemma_ 10y ago
And that's why all of these companies are going to go under: as soon as they start having to charge real prices, instead of the artificial, VC-funded promo prices, people bail. Because, whoa, food delivery is actually expensive. Did none of these companies check, before moving in to "disrupt" the restaurant industry, that there was actually anything to disrupt? Restaraunts are not lazy incumbents growing fat on their unchallenged dominance: it's a cutthroat business. And their costs are almost entirely the food and the labor, which are, for all practical purposes, fixed. There are no margins to steal from here.
- rhizome 10y ago
  They're not going to go under per se, because I think the customers are probably pretty valuable. I think a more vivid hint as to their future is in their choosing someone from Simply Hired as their new (7/16) CEO: positioning Munchery for acquisition in a crowded marketplace.
  - Analemma_ 10y ago
    Honestly, I don't agree that the customers are very valuable. There doesn't seem to be either loyalty or lock-in with these delivery startups: as soon as they raise their prices, people just uninstall the app and grab another one. I don't see anything worth acquiring here, so an IPO is pretty much it for an exit strategy, if they can last that long.

pg_bot 10y ago

This seems like it will be an extremely difficult business to turn around. Food delivery is an extremely competitive and low margin business with highly price sensitive customers. I've seen coworkers rotate to whichever new service was offering a discount to juice their adoption numbers. I don't see this ever being a lucrative investment, just good money being thrown after bad.

I_am_neo 10y ago

eww, processed snack food is gross, do they deliver fresh fruits?