Food-delivery startups use tech
Cassandra Santana rarely has time to shop for food, let alone cook it.
The Venice, California, social-media manager gets groceries delivered weekly to her house. She also orders regularly from trendy restaurants such as Gjelina for delivery to her home or workplace.
“Just a year ago, I would be running to the grocery store, and I hate going to the grocery store,” said Santana, 28. “Now I have all the food options in the world at my fingertips.”
Technology entrepreneurs have revolutionized how people shop for clothing, find vacation rentals and flag down taxis. Now they’re shaking up the world of eating.
Whole Foods Market Inc. is partnering with startup Instacart to deliver groceries to shoppers’ doorsteps, and tech behemoths Amazon.com Inc. and Google Inc. are also testing delivery services.
A new crop of startups is popping up that carry piping-hot meals to homes or offices from fancy restaurants that normally don’t deliver. Some will deliver sliced ingredients for a gourmet meal to your doorstep. Others are aggregating local chefs in an easy-to-search website to cook for your next dinner party.
Helping drive this golden period in food innovation: busy Americans who have less time to cook and are keener than ever to boast on Instagram about their delicious meals. Many new companies cater to affluent shoppers working around food allergies or on trendy diets that ban entire food groups.
Investors are jumping into the food space. GrubHub Inc., the owner of delivery service Seamless, raised $192 million in an initial public offering this year. Mobile payment firm Square recently snapped up restaurant delivery startup Caviar.
Nearly $4 billion was invested in food-related tech companies in the first half of 2014, more than double the $1.6 billion invested all of last year, according to food consulting firm Rosenheim Advisors. Investments in 2013 were up 33 percent over the year before.
“There is definitely a lot more money pouring into food,” said Brita Rosenheim of Rosenheim Advisors. “Everybody eats — if there isn’t a bigger market opportunity than that, I don’t know what it is.”
Startups and investors alike are quick to point out that smartphones — and the up-to-the-second data they provide — are a crucial tool separating food innovators today from ancestors such as Webvan and Kozmo, which crashed with the dot.com bubble of the early 2000s.
Jon Swire, owner of barbecue joint Chop Daddy’s in Venice, said working with delivery startups enables restaurants to appeal to new diners without the headache of managing a delivery staff. Chop Daddy’s works with DoorDash and has previously used GrubHub; it will continue outsourcing delivery as it expands to as many as 15 locations in coming years, he said.
“As an owner, it’s fantastic because these are incremental sales that aren’t stretching my fixed costs,” Swire said. “My kitchen staff is there either way.”
Food-delivery companies such as Instacart also no longer need to pour millions of dollars into warehouses, delivery trucks or inventory.
Just as people with a car can become a taxi service on Uber or Lyft using a smartphone, Instacart’s “personal shoppers” are actors, retirees and college students with vehicles and without jobs, said Walker Dieckmann, the grocery delivery’s manager in Los Angeles.
Instacart partners with supermarkets such as Ralphs and Bristol Farms, and its website lists the available inventory for sale at each store. It recently began embedding workers in some Whole Foods Markets in Boston and Austin who will quickly shop and package orders for home delivery or in-store pickup.
Customers drop items into a virtual basket, and then Instacart dispatches someone who shops the supermarket using a specially created app. The smartphone app maps the store and suggests how to tackle the list efficiently by aisle. Employees are trained to spot a ripe melon or avocado, and also call customers to suggest substitutions if an item runs out.
“Your shopper will call you and ask, ‘They didn’t have the Gala apples you wanted, but they had Fujis or Pink Ladies, do you want that instead?’” Dieckmann said.
Alfred Lin, a partner at venture capital firm Sequoia Capital, said food startups can bring modern tech to the problem of making a profit in a traditionally low-margin business. His firm has invested in several companies, including DoorDash, Instacart and Good Eggs.
Despite carrying around “scar tissue” from backing Webvan, a delivery service that failed in 2001, Sequoia still sees opportunities in the intersection of food and tech, Lin said.
“Food is still one of the biggest expenses in any person’s budget after maybe rent,” he said. “There is room to make money when you are smart.”