Mar 16, 2016 ยท 4 minutes

Here’s how you know there’s still “air” to come out of the “balloon”-- the preferred gentle metaphor of most VCs-- in the startup economy: A company like Marley Spoon is still getting $17 million in funding.

I don’t know the founders of Marley Spoon, nor have I used it. But you cannot convince me that the world needs another meal kit also-ran that has zero differentiation. You can’t even convince other members of the space. A few weeks ago I met a founder of PeachDish at a conference and he said he was glad they never overcapitalized because-- while a nice business-- this just isn’t a product for everyone.

Blue Apron-- the giant of the space and easily the best offering we encountered in months of testing these services-- is aggressively marketing on everything from The Bernie Madoff miniseries to PBS cooking shows. On the international level, Rocket Internet and others are pumping hundreds of millions into HelloFresh-- which is the same as Blue Apron only slightly less good and in no way differentiated. They are spending so much on marketing that door-to-door HelloFresh salespeople have come by my home. Even though records should show I already tried and cancelled the service.

And, as we predicted, grocery stores-- which carry no inventory or spoilage risk and already make prepared meals and sell pre-marinated meats in their deli departments -- are getting into this game in both suburban markets and at the high end via Whole Foods.

Even if Marley Spoon was just better, even if tasting its recipes was like licking the face of God, there is no reason it should be funded in this climate. It doesn’t appear to be differentiated at all, like, say Gobble which at least gives you the promise of a meal in under 10 minutes, or Munchery which offers either a meal kit or a prepared meal totally on demand, without a subscription.

And frankly, I’m not hugely bullish on those either as stand alone businesses that could one day go public.

Worse: Marley Spoon is a Berlin-based company that is hoping to use this capital to expand in the US. There’s a greater chance that Marco Rubio becomes president than a $17 million series B makes this dream a reality. Sure it also has a $44 million dollar equity-for-ads deal in Europe. But that hardly helps its plan to expand in the US and only confirms that it’s going to be incredibly expensive to compete with existing better-known offerings. Indeed, the CEO told TechCrunch that online advertising wouldn’t move the needle. So you are opting into a war over TV dollars against better-funded, better-known competitors with no differentiation? Good luck.

Again, the Marley Spoon founders may be fantastic. I don’t know them. This isn’t a dig on them. But good God find a new market opportunity, because 90% of this space is artisanal, multi-grain, avocado toast. (Also available gluten free!)

The round was mostly little-known foreign investors, notably one arm of Rocket which is apparently just competing with itself here.

The news today in the food-space is less rosy and makes more sense: SpoonRocket has shut down. Is it a sign the food-pocalypse is upon us? Or was SpoonRocket simply a poorly executed take on a brutally challenging market? My guess is both.

SpoonRocket’s USP was low prices and speed, not quality. It essentially opted into a business where it was competing purely on price for a product that no one loved. While there will always be people who need food fast and cheap, there’s already a billion dollar fast food industry doing that.

Competing solely on price left SpoonRocket little alternatives when funding fell through and a potential acquisition fell through. As Brad Jonas Tweeted when SpoonRocket tried to raise prices as a last gasp of staying alive:


Because the economics of a food business are so challenging, the options in this market aren’t great: A premium product that only a portion of the population may adore or a low priced option that’s more people may be able to afford, but don’t really love.

It’s no wonder SpoonRocket’s potential acquisition fell through. If SpoonRocket didn’t have quality food or huge number of customers that loved it, what does an existing prepared food chain need with its assets?

I don’t mean to be callous. Every startup death is a tragedy. I feel for the founders, who clearly were good enough that they were able to raise money from some prominent Valley investors. But the quicker non-starter categories like this can shake out the more quickly their employees can get absorbed into companies that have a better shot of making it.