How do so many meal delivery/prep/kit companies co-exist/survive?

https://news.ycombinator.com/item?id=20136555

by theSemicolon • 7 years ago

4 4 7 years ago

news.ycombinator.com

Every month I get fliers for new/upcoming meal delivery/prep/kit company with discounts. How do they secure funding/customers or continue operation since they are all competing for the same niche market?

luckylion• 7 years ago

How they survive? Who knows if they will, they won't be expected to make enough money to sustain their operation at the beginning.

As to why somebody is funding them, there are probably lots of reasons. Investors may believe that they are backing the best team, or that the market is large enough, or that they need a player in the market, or such a service would compliment other investments (such as a grocery store chain investing in a "we shop for you" startup).

itamarst• 7 years ago

Imagine you're a VC. Meal prep kit investments are hot. Your investors, the people giving you the money, come and say "how come you don't have the a meal prep kit startup in your portfolio?"

Your choices are:

1. Don't invest, and lose your investors to a competing VC firm.

2. Invest, even if you think it's a bad idea. Worst case if it blows up you blew up in a popular way, "I didn't do any worse than our competitors, what do you want?"

Thus once something is hot, it gets lots of investments even if the people doing the investing think it's a bad investment.

This is the same reason most mutual funds and hedge funds invest in similar ways to index funds: incentives for the fund managers are to lose in a popular way.

(This is a variant on the "principal-agent problem".)

tedmiston• 7 years ago

They're losing money on the trial discounts for the hope of acquiring your recurring revenue.

They are propped up by VC dollars and not yet profitable. See Blue Apron's struggle post-IPO.

https://en.wikipedia.org/wiki/Blue_Apron#History

Perhaps the biggest issues are high customer acquisition cost, cost of shipping, and customer retention.

I wouldn't consider meal kits itself a niche market — it's a huge market with many niches inside it for so many specific diets and dietary preferences served by different kits.

I think the future of meal kits is partnerships with grocery stores where consumers can pick up there, like Kroger's acquisition of Home Chef.

cujic9• 7 years ago

They require very little capital and skill to launch and they lose money slowly. The only get hard when you try to scale.

How do so many meal delivery/prep/kit companies co-exist/survive?

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