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Is this a feasible/profitable concept?

A new company in New York recently raised $36M with the objective to deliver lunch, $12 and dinner, $15 in a brown bag. Delivering with bicycle in half hour, no tips, and no delivery charges. In a city environment it is probably the speediest and most cost efficient. This company is backed by numerous venture capitals. But I question the return on investment. If only $1 per bag is profit, they need to deliver over fifty million brown bags in five years? That's over 38,000 per day! Is this a feasible concept or another Webvan?

14 Replies

Chris Kitze
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Chris Kitze Entrepreneur
CEO at Safe Cash Payment Technologies, Inc.
Is it a feasible concept? Do you mean to raise money or actually create a real business? (joke)

As for a real business, sure, it could make sense. Margins will be tough, you've got a lot of perishable things and labor involved, but those could be mitigated through tight control of inventory and automation. It will also need to be scaled to become nationwide fairly quickly and that means the business will be dependent on marketing and advertising, though a well thought out packaging could help many people see the food arrive and promote the brand. For now, cities like New York and San Francisco would probably be their best bets, $12 is about average for a take out (yes, I know that sounds outrageous if you are outside this bubble).

It's not a business that's appealing to me, but there are investors who have done well with food related businesses, for example Starbucks. Margins will be the key.
David Crooke
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David Crooke Entrepreneur
Serial entrepreneur and CTO
It goes down to details, and yes ... Jimmy Johns started in NY afaik. I think you're a bit udnerpriced, I'd go $15 a meal plus one $5 delivery charge / tip. With minimum order and tip, pizza or Chinese delivery is at least $30 here in Austin. Hard to imagine less in 10001. While Webvan and Peapod tanked, Tesco in the UK has had enormous success with home delivery. We have InstaCart here in Austin, they seem to be making it. Cheers Dave
Dr. Stephen Gomes
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Dr. Stephen Gomes Entrepreneur • Advisor
President and Founder at Gomes and Company
First of all I find it hard to believe that the founders raised $36M.. Do you know what the sources were. Was it angel investors or VC funders?? Whoever made those pitches is worth their weight in gold. As to the viability of the idea, to me it will be a very uphill fight which will require a national roll out to even have a slim chance to hit their performance numbers. And in every market they are sure to have significant competition. I was hired as a consultant to two start ups with related business concepts but they were both in the country of Korea. One got funded and the other fizzled.

My answer is that there are easier ways to enter entrepreneurial world.

Steve Gomes
jerry smith
1
4
jerry smith Entrepreneur
Investor/lender
I am an investor in early stage-start-up ventures,existing Ventures anddo total completion and investment expansion projects. Leverage walk-in equityon discounted commercial or residential purchases by employing our funds fordown payment & closing costs. Qualify for better Rate & Term based on alower LTV but still achieve high CLTV or $0 down financing. Funds availablefor acquisition, rehab or carrying costs including CASH-OUT! Advance equityfund disbursement based on verifiable walk-in equity.
Fernando Vaz, Ph.D.
0
0
Fernando Vaz, Ph.D. Entrepreneur
CEO at FansNet
They may be using it as marketing strategy, but in the real world customers buy more products increasing total sales voucher
Gilbert Stouvenot
0
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Gilbert Stouvenot Entrepreneur
www.finefoodtogo.com President/Chef/ at Fine Food-to-Go, Inc.
I am not sure I can post the name of the company here.
Chef Gilbert
Andy Horvitz
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Andy Horvitz Entrepreneur
Founder at No Pots & Pans
Is it feasible? Yes, at significant scale.

It looks to me like the business you're referring to in Seamless. They raised $36M last November. They appear to be playing in the same space as GrubHub, Eat24, and Caviar.

These are thin margin businesses, at least relative to the total sales generated. But looking at them as technology businesses and considering only their share of the sale as revenue, margins are far more impressive.

To me, the online ordering space seems crowded, but there continue to be new entrants. These tools are most useful, efficient, and effective with many restaurant options and dense populations, which is why they focus on major metros.

I see opportunity in bringing new food options to market and delivering to areas with fewer delivery / takeout options.
Michael Brill
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0
Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
38,000 meals a day out of the roughly 1,000,000,0000 daily meals we eat doesn't seem too far-fetched on the face of it.

However, I'm in the "another Webvan" camp. Actually, they're the inverse of Webvan which failed because of fixed costs + unit economics. Food delivery services are simply likely to be unable to compete against horizontal delivery services. Seems more reasonable for an Uber et al driver to grab your pizza after their peak evening rush hour is over.

OTOH, companies focused on the content (e.g., Blue Apron-type companies) seem to be in a much better position.




Alex Eckelberry
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Alex Eckelberry Advisor
CEO at Meros.io
Why is this company some secret? Anyone can go to Crunchbase or a ton of other sources and look up funding information on anyone. Naturebox, BlueApron, Plated, Seamless, Grubhub, Tapingo, Instacart, EatStreet, Postmates, Chefday, HelloFresh, Munchery, PlateJoy, Spoonrocket, the list goes on and on and on.

The point is not "making a $1/bag". It's not like they raised $36 million and have to pay it back as debt. The investors are betting that the company will ostensibly be worth a lot of money in the future. It's a question of what the ultimate valuation of the company will be -- and that's it. The ultimate valuation of the company will be driven by comparable public multiples, precedent transactions in the space and the ultimate value of the company's stream of (discounted) cash flows.

It's a very hot space. Probably way overfunded, probably a bubble. But you're looking at it through the wrong lens.
Gilbert Stouvenot
0
0
Gilbert Stouvenot Entrepreneur
www.finefoodtogo.com President/Chef/ at Fine Food-to-Go, Inc.
OK, Alex, No secret! The company is Maple.com
Maple is backed by Greenoaks Capital, Thrive Capital, Primary Venture Partners and David Chang & The Momofuku Restaurant Groupas well as other angel and institutional investors. Our investors have backed companies including Instagram, Warby Parker, Harry's, Spotify, Oscar Health, Instacart, Palantir and Flipkart. Maple has raised $36 million to date.

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