Sarah Van Dell is the CEO and co-founder of Plum Relish, a D.C.-area food delivery startup.
Sprig and Maple, the on-demand companies that create and deliver meals in San Francisco and New York City, respectively, shut down last month. Collectively, the VC-backed start-ups raised $160M in four years, making national headlines before halting operations.
Does this mean the sky will fall for D.C.-based food delivery ventures? No.
Focused, scrappy, and steadfast, food delivery businesses born in D.C. are growing up without the same hype and funding of Sprig and Maple. It turns out, with more pluck and less luck, D.C.-based start-ups may succeed after all. Here’s why:
1. Food delivery is ripe for disruption despite the notable failures. Across the globe, food delivery is a multi-trillion dollar industry. No one is wrong about this. However…
2. Food is not a winner take all category. Saas-based startups are financed to be rocketships of $1B successes – or total crashes. The intended outcome is binary for founders and investors. Food is not this way; the category does not warrant it. At a micro level, winning in food requires the trifecta of capturing stomachs, hearts, and heads of eaters often at war with themselves.
3. Taking institutional money within the first two years is like taking a bite of the apple. We’ve been warned. With Sprig and Maple raising $12M and $29M, respectively, within their first twelve months of founding, their respective paths to a unicorn exit became statistically difficult. Very difficult. The lesson? The early-VC backed businesses took money too early. Investors and founders have been wrong on their assumptions. Really wrong.
4. Real is real, is real. Just as we produce “real” food, for food delivery businesses “real” equates to real revenue, real profit, and real value. De-risking food businesses is a lesson of understanding unit economics, executing on cold chain/operations, building an authentic community, and analyzing consumer behaviors (real and perceived). This must happen from the start, not on the path to scale.
5. Food delivery is now a stale funding category. Talk about guilty until proven innocent, the funding market in food delivery has gone dark (in the U.S.). The good food investors have fled to consumer packaged goods and the tech-based investors have fled to, well, tech-based (not tech-enabled) companies for their unicorn outcomes. Those that can survive in this environment can survive mostly anything.
6. Lack of angel and early-stage capital in D.C. is a blessing in a disguise. In D.C., a city notorious for having weak early-stage VCs and a lack of angel investor appetites as compared to New York City, San Francisco, and Los Angeles, the ecosystem makes founders ruthless about business priorities, including unit economics. There are no bail outs with funny money floating around.
7. D.C. startups have Sweetgreen and Cava in our DNA. When food companies look nationally at the correct growth path, we do not need to look passed our hometown roots. Over the last ten years, Sweetgreen and Cava raised a collective $184M of funding to spur high-growth ambitions. Both upstarts bring great disruption to the restaurant industry through innovative supply chains, digital platforms, payment systems, labor practices, and critical data science learnings. They did so in a systemized way with an appropriate cadence. Even better, we know that purpose, mission, and authenticity are required too, thanks to them.
8. In more recent successes, we point to the former D.C. Lean Startup Circle leader who has built Territory (born: Power Supply) over the last seven years. The success of Territory, with a four-city expansion, is rooted in the founding team. Patrick Smith, the CEO and co-founder, led D.C. Lean Startup Circle for two years. In fact, unlike Maple and Sprig, Territory raised $5M after five years in business. Not only is Territory still around, but they’re better than ever.
9. D.C. is the optimal test market. The “on-demand” companies, whether related to food, or laundry, or dog-walking stemmed from the needs of our modern day Peter Pans and his lost boys. Building apps to replace parents seemed to be an investable business case. This is not the case in D.C.
Territory, From the Farmer, Galley, Vegetable & Butcher, and Plum Relish all bring fresh prepared food to various audiences. As it turns out, we do not require the early, VC- money to validate convictions. We walk before we run, and that has made all of the difference.
