Full-stack food delivery services have been dealt another harsh blow with the recent reveal that startup darling Maple experienced an operating loss close to $9 million in 2015 alone. This news highlights not only the precarious nature of the food delivery game but the devastating effect a lack of funding can have on budding companies.
The Story So Far
First, some background. Food delivery seems to be entering something of a renaissance lately. Though it started with apps like GrubHub, Seamless, who developed a kind of "piggybacking" service to bring user's favorite restaurant cuisine straight to their doorsteps, more recent apps such as Maple have been honing the idea of the "full stack" service.
In this newer model, the company not only supplies the ordering platform, they also run the kitchen, deliveries, and other aspects of the business as well. Sounds like a good plan, as it gives the app developer complete control over the entirety of the service. They build the software, set the menu, hire the cooks and delivery staff, and fine tune the experience to fit their definition of "delivery done right."
What could possibly go wrong?
As it turns out, quite a bit. It started with SpoonRocket shutting down. Their ability to generate a profit flagged and costs for the service continue to rise. Unable to raise any capital or spur on an acquisition by a larger entity, the company had to close its doors. Though recent reports show that it will have a limited revival (in Brazil), they're eliminating the kitchen portion of their service, essentially withdrawing from the "full stack" game.
Then there was Munchery, a California-based startup that specializes in the "full stack" experience. Back in November, Bloomberg released a thorough report on the company's failings. One detail that had many buzzing was that unsold meals and food waste had cost them nearly $1.9 million.
Wasted food was just the tip of the iceberg, though. The company saw revenue stagnate, and has reportedly been operating at a shrinking, but still significant loss. Their deal with celebrity chef Roy Choi fell through.
Just last month, they began the "CEO shuffle," replacing Co-Founder Tri Tran with James Beriker of Yahoo! and Simply Hired fame. Not exactly what one would call the most inspiring situation for a burgeoning startup struggling to find its place in the food landscape.
And that brings us back to Maple, whose own financial worries were recently reported upon—burning through cash and needing to continually raise funds to supplement their revenues.
Lessons To Be Learned
It's not all gloom and doom, though. It isn't uncommon for new businesses to operate in the red for a while before turning things around. As it turns out, Munchery is still hanging in there, and Maple has a chance to revise their model and pull themselves back from the brink.
One of the most crucial deciding factors will likely be whether or not they can sustain themselves with enough funds to hold out until they become profitable. As lenders like Mulligan Funding (and the ability of Maple/Munchery to hold on) have shown, the difference between success and failure can often rest on a reliable source of capital to weather the storm of a business' tough initial years.