Two super-fast delivery startups shut down in a week

By Sara Ashley O’Brien, CNN Business

Fridge No More, a startup that offered free fast delivery regardless of order size, told employees this week it was closing after a failed deal with a potential buyer.

The shutdown was the second in the space of a week by a super-fast delivery service in New York after it failed to secure a deal or funding, leaving hundreds unemployed.

After the pandemic made on-demand delivery startups a lifeline for many Americans, New York’s landscape has become crowded with startups offering super-fast delivery. More fridge spear in October 2020, follow-up of competitors jokr, Gorillasand Buyk, who entered September 2021. A month later, Philadelphia-based GoPuff Between the city, followed by Istanbul-based Getir in December. Their fight for consumers has brought rich discounts and brilliant marketing, but the long-term potential of the business model remains uncertain.

Fridge No More CEO Pavel Danivol told employees in an email Thursday that a deal with a potential buyer fell through two days earlier and it could not continue to operate.

“This decision was sudden and unpredictable,” Danivol wrote in the email, a copy of which was viewed by CNN Business.

“Due to the dramatic and unexpected lack of funding and the failure of the sale of Fridge No More,” the email continues, “this letter will notify you that there will be a mass layoff.”

Although the buyer was not named in the email, a source familiar with the talks told CNN Business that DoorDash, the publicly traded delivery company, had considered acquiring certain assets from Fridge No More. , such as its real estate and products, in recent times. weeks and had provided an undisclosed amount of bridge funding — a type of funding startups sometimes use to continue operations between formal funding rounds — when evaluating a deal.

DoorDash, which recently spear its own super-fast delivery service in New York, ultimately gave up on a number of factors, the person said.

The New York Post reported earlier Fridge No More’s layoffs and discussions with DoorDash.

Buyk, which has touted 15-minute grocery deliveries in New York and Chicago with no minimum order or fees, confirmed to CNN Business that its 870 employees were laid off Friday. The news comes days after the New York Post reported the startup had laid off the vast majority of its employees, as well as its CEO, due to disputes over Russian sanctions. Buyk’s Russian founders had provided bridge funding until the company closes its next funding round, a company spokesperson told CNN Business.

“However, restrictions [Russian President] Putin imposed in response to US sanctions made this bridge funding setup untenable, although none of our founders were sanctioned,” the spokesperson said in an email.

While ties to Russia may complicate matters, the sudden failure of both startups due to inability to raise capital quickly underscores a more fundamental problem with their businesses. “The worst business model ever created was fast grocery delivery,” said Brittain Ladd, a food supply chain consultant who said he advised a number of companies in the space and previously worked in strategy at Amazon.

Ladd said some of the startups had no path to profitability and relied on venture capital funding, calling it “the only reason [they’re] to be able to exist. »

“It’s too similar to,” Ladd said, of the infamous dot-com-era delivery startup that raised hundreds of millions in capital on a similar premise before going bankrupt.

Essence Wilson, who worked as a part-time courier for Fridge No More in New York City, told CNN Business she sometimes had to ride many company-owned scooters. blocks from the company’s mini-warehouse to deliver a box of Raisin Bran cereal or a single apple. Wilson said she doesn’t see the business prospering in the long term, but she doesn’t think the end will come so soon.

“I feel like they were so keen on pleasing customers that they ended up pleasing themselves,” she said.

Workers were told in a Telegram chat group of more than 800 members that they could pick up all their belongings from their stores on Friday. According to a screenshot seen by CNN Business, workers were also told they could take any product from the production, dairy, cheese and meat, or its bakery.

(In December, another competitor in New York City operating space folded: 1520.)

Wilson told CNN Business that she would consider joining another super-fast delivery startup, though she made it clear that she probably wouldn’t apply for courier positions, citing the physical cost of the job.

Just two weeks ago, Grubhub, the food ordering and delivery platform, vaunted a new partnership with Buyk. Now he’s distancing himself: “Given their news, the project is on hold until further notice,” a Grubhub spokesperson said in a statement to CNN Business.

Other established companies have also sought to partner with emerging super-fast delivery companies. Uber, for example, announced a partnership in May with GoPuff, the private startup promising deliveries in 30 minutes or less that is valued at $15 billion. In February, Uber announcement a venture with FastAF, a startup that delivers high-end products like Apple AirPods and Olaplex hair products in 25 minutes or less.

While Uber helped popularize the model of treating drivers and couriers as independent contractors, many super-fast delivery startups employ their couriers, which allows more control over their schedules but also provides workers with certain perks. and protections.

In its email to employees regarding the layoffs, Fridge No More provided a phone number to contact the company’s co-founders with any questions. When CNN Business called the number, an automated voice message was displayed: “Due to current circumstances, if you are calling for unemployment [employer identification number]the number is….” (Callers can also leave a voicemail.)

Fridge No More did not respond to CNN Business’ request for comment.

When trying to place an order on Buyk on Friday morning, the app said, “Hi everyone! Our services are temporarily unavailable. Come back soon!” Meanwhile, doing the same on Fridge No More simply returned, “Sorry, we’re temporarily closed until further notice.”

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