Albertsons' acquisition of Plated and Sprig's shutdown highlight existing challenges in food delivery and in the wider grocery retail space, which include heightened competition, fewer fundings, increased M&A activity, and more.
Food delivery startups originally became popular among VC investors in the early 2010s, with many large players such as Blue Apron (now public and struggling) quickly reaching high private-market valuations, and encouraging new competitors to enter the market. However, as competition has increased and startups have struggled to find a financially viable business model, the challenges of food delivery have become more apparent to investors, and activity in the space has begun to cool.
We looked at how the once-overcrowded food delivery market has changed over the past few years. Using CB Insights data, we created a timeline of first fundings to US food delivery startups between 2011 and 2017 year-to-date (10/20/2017). For our graphic, we only featured food delivery startups that have raised at least $5M in total funding. We also higlighted any subsequent mergers, acquisitions, IPOs, or deaths among companies that fit the above criteria.
Note: Please click image to enlarge.
We define food delivery companies as those facilitating the delivery of food to users’ doors, including grocery delivery startups like Instacart, farm-to-table services such as Door-to-Door Organics, meal delivery startups like Delivery Hero, and meal kit services like Blue Apron.
Key insights from the infographic above:
- Initial success: Notable food delivery startups like DoorDash ($659M), and Postmates ($609M) quickly reached large valuations after their initial financings between 2011-2013, encouraging more new competitors to enter the market.
- A slowdown in new entrants: The heaviest flurries of first fundings took place between 2012 and 2013, and between 2014 and 2015, periods in which notable companies like Instacart and Blue Apron received their first equity financings. However, 2017 year-to-date has seen only 3 new entrants, the lowest number across the time period, falling dramatically from the 12 seen in 2013.
- Untimely exits: There were a notable number of mergers, acquisitions, and deaths among food delivery companies that received first fundings since 2011. Kitchit, which first received equity funding in Q2’14, was already dead by Q2’16, and SpoonRocket was acquired by Brazil-based iFood after it was essentially no longer able to operate due to lack of funding. New York-based meal delivery service Maple ceased its operations and was acquired by Deliveroo in May 2017, less than 3 years after its first equity financing, and California-based Sprig shutdown in May 2017. Although UK-based, the most recent food delivery startup to shutdown was Jinn, which highlights that challenges in the food delivery space exist internationally.
- Big grocery scoops up meal kit delivery: Meal kit delivery startup Plated was acquired by Albertsons in September 2017, marking a significant step for the grocery retailer as it seeks to stay ahead of its competition.
- Public struggles: In an ill-timed exit, Blue Apron (IPO June 2017) has struggled to convince public markets of its viability as a company in a competitive market, which now potentially includes a Whole Foods-armored Amazon.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
- Earnings Transcripts Search Engine & Analytics to get an information edge on competitors’ and incumbents’ strategies
- Patent Analytics to see where innovation is happening next
- Company Mosaic Scores to evaluate startup health, based on our National Science Foundation-backed algorithm
- Business Relationships to quickly see a company’s competitors, partners, and more
- Market Sizing Tools to visualize market growth and spot the next big opportunity