Article from CBInsights:

An Uncertain Future: New Entrants In The Food Delivery Space Decline As Existing Startups Struggle.

APRIL 6, 2017

Food delivery startups originally became popular among VC investors in the early 2010s, with many large players such as Blue Apron ($2B valuation) quickly reaching high valuations, thus encouraging more 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.

Most recently, Munchery made headlines for a recapitalization financing worth $5.6M led by Menlo Ventures and Sherpa Capital. The recapitalization was seen as a last resort by the company to attract investors after a turbulent year in which the company burned through much of its cash and laid off employees. The new financing has lowered Munchery’s valuation to $80M from $300M.

In a climate in which an increasing number of food delivery startups have been acquired or died, we took a look at how the once-overcrowded food delivery market has changed over the past few years.

We used CB Insights data to create a timeline of first fundings to US food delivery startups between 2011 and 2017 YTD (4/3/2017). For our graphic, we only featured food delivery startups that have raised at least $5M in total funding. We also chose to highlight any subsequent mergers, acquisitions, or deaths among companies that fit the aforementioned criteria.

We define food delivery as companies facilitating the delivery of food to users’ doors, including restaurant delivery, grocery delivery startups like Instacart, farm-to-table services like Door-to-Door Organics, meal delivery startups like Delivery Hero or Sprig, and meal kit services like Blue Apron.

Key insights from the infographic:

Graphic only includes US companies that raised their first equity funding round after 1/1/2011, and that raised over $5M in total.

Initial success: Notable food delivery startups like Blue Apron ($2B valuation), 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 flurry of first fundings took place in 2012 and 2013, and again in 2014 through the first half of 2015, periods in which notable companies like Instacart, Blue Apron, and EatWith Media first attracted investor attention. However, 2016 and 2017 have only seen a combined 7 new entrants, compared to 8 in 2014, and 12 in 2013.

Untimely exits: There were a notable number of mergers, acquisitions, and deaths in 2015-2016 among the 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.

Glimmer of hope: Interestingly, some of the largest first funding rounds have taken place in the last year, including a $32M Series A to Habit, among others. This suggests that investors may believe there are still opportunities within the food delivery space amidst consolidation.

CBInsight article link for more information: An Uncertain Future: New Entrants In The Food Delivery Space Decline As Existing Startups Struggle via @cbinsights

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