What Founders Can Learn From SpoonRocket’s Demise

By: , New Economy Editor at LinkedIn

SpoonRocket, an on-demand pre-made meal delivery startup with $13.5 million in funding, announced today that it is shutting down. Despite supposedly figuring out a way to make money on each of its deliveries, SpoonRocket failed to secure the money it needed to continue operating.

Not only is it a challenging time for founders trying to get funding, startups in the on-demand space are all racing to get to scale in a saturated space. SpoonRocket was competing with other pre-made meal delivery services like Sprig and Munchery as well as restaurant delivery upstarts like Postmates, Caviar and DoorDash.

In the past couple of months, I’ve spoken to several founders and investors about how exactly the growing cohort of on-demand companies can survive in this environment. In light of SpoonRocket’s inability to do just that, here are the major takeaways from those conversations.

It’s never too early to scrutinize your finances.

In the race for market share and repeat customers, too many on-demand startups have lost sight of the importance of solid unit economics. On-demand founders can become obsessed with customer acquisition, leading them to burn too much cash on new users to recover. SpoonRocket eventually reached a point where it could earn cash off every order, but that achievement may have been too little too late. Kevin Gibbon of Shyp, the on-demand package delivery startup, shared with me in January that he strategically figured out a way to earn money on every delivery by negotiating highly reduced and undisclosed shipping rates with UPS, FedEx, and USPS. Recently, I spoke with Bastian Lehmann of Postmates and he told me from the beginning, he has always kept an eye on profit margins. While Lehmann acknowledges that his focus on unit economics has led to slower growth, he said he couldn’t imagine running a business that was focused from day one on making money…… To read the whole article, click HERE

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