On-demand delivery start-ups lose their luster as investors decide to keep the change
Investment in food delivery startups slowed to a halt in the second half of 2016 as backers seemingly lost faith in the saturated, low-margin scene.
A pizza delivery in the movie Home Alone
Data collated by Reuters found that a total of $1.9bn was invested into food delivery start-ups in the first half of the year – dwarfing the $50m raised by the industry in the second half, a disparity which could be a cause for concern in 2017.
The report, compiled using data from the “companies, their backers and third-party websites including Crunchbase, PitchBook and MatterMark” cited the entrance of Uber and Amazon into the market, their war chests and logistical expertise providing an existential threat to any group looking to crack the market.
Around 125 companies in this sector have benefited from $9bn of investment in the last decade.
Venky Ganesan, of Menlo Ventures signaled the decline of the sector, he told Reuters: “You can’t raise prices on consumers, and you can't cut labor costs, the core unit economics didn't make sense."