Even as deal activity in the food delivery sector as a whole continues its downward trajectory, grocery delivery startups continue to pull ahead of meal delivery startups in both deals and dollars. The meal delivery space once commanded investments totaling billions above grocery delivery, but grocery delivery startups have raised almost $600M more than meal delivery startups so far in 2017. While Instacart’s $400M Series D round of funding in Q1’17 accounts for a large portion of dollar investment in the grocery delivery space, deal activity to grocery delivery startups had already begun to pull ahead of activity to meal delivery startups starting in 2016.
Using the CB Insights database, we examined funding trends between 2013 and 2017 YTD (5/4/2017). We define meal delivery startups as those providing prepared meal delivery and restaurant delivery (e.g., Ele.me, Delivery Hero, Munchery), and grocery delivery startups as those delivering uncooked groceries from stores or in the form of meal kits (e.g., Instacart, Door to Door Organics, Blue Apron).
Annual deals and dollars
Deal activity to meal delivery startups continued its downward trajectory totaling only $130M over 30 deals this year as of 5/4/2017. At the current run rate, investment to the space is expected to total $382M over 88 deals for 2017. If 2017 year-end projections hold true, it would represent a 63% decline in dollar funding from 2016 totals.
While the number of deals taking place in the meal delivery space has substantially declined since 2015, it has not plummeted like dollar funding. Deals shrunk from 135 in 2015 to 104 in 2016. At the current run rate, 2017 is on track to see another decline to 88 deals in the space.
While investor interest in meal delivery startups has slipped, grocery delivery startups have taken a somewhat different path. Grocery delivery startups have attracted an increasing amount of investor dollars year-over-year since 2013, totaling $1.4B in funding in 2016 (the first year to surpass meal delivery startups). Interestingly though, the number of deals to the grocery delivery space has dropped in a similar fashion to meal delivery startup deals, peaking in 2015 and declining thereafter.
While the run-rate for total dollar funding to the grocery delivery space would put 2017 at a record high, this number is somewhat misleading as Instacart’s $400M Series D round of funding in Q1’17 accounts for more than 50% of dollar funding to the space so far this year. Without this deal, 2017 dollar funding projections would total less than $1B.
Although the grocery delivery space has experienced a slightly less difficult year than the meal delivery space, both meal delivery and grocery delivery companies face many of the same issues, and existing players have struggled to maintain traction. Tough operating conditions due to an on-demand business model and high competition have both created a challenging environment for food delivery startups.
Quarterly deals and dollars
On a quarterly basis, we can see on a more granular level how the number of deals to both meal delivery and grocery delivery startups have followed a relatively similar trend. There was a sharp drop off in dollar funding to meal delivery startups starting at the beginning of 2016, set off by an 82% drop between Q4’15 and Q1’16. The meal delivery space has not come close to rebounding to its 2015 quarterly funding levels since.
Conversely, after a sharp dollar funding drop to grocery delivery startups in Q2’16, the grocery delivery space gradually regained dollar traction and set a new quarterly dollar funding record of $685M in Q1’17, albeit mostly due to the $400M deal to Instacart (mentioned above). Without such a deal, Q1’17 dollar funding would have totaled $285M, marking a 25% decrease from Q4’16.
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