Food delivery startups are closing down or downsizing as it would seem that the food delivery tech bubble has popped. (Courtesy photo)

As the food delivery bubble pops, will its startups survive 2017?

As I bunkered down in my house during the rainstorm last week, I came across an article on Vice Motherboard in which the author and his philosopher friend debated if ordering food delivery amid a storm was a virtuous thing to do. (The answer: it’s complicated. Just tip well.)

Food delivery has been on my mind, but not because of me running short on food during the downpour. The food delivery startups, which were all the rage in the Bay Area startup scene earlier in the decade, have been recently downsizing or closing altogether. The food delivery bubble has popped.

Last week, Bento shut its doors and Munchery announced it laid off 30 employees and is parting ways with its co-founders. The former joins Spoonrocket, Din and Kitchit in a graveyard of food delivery startups which folded last year. The latter is cutting back to survive, like Zesty and Sprig.

Food delivery startups backed by an established tech company are also struggling. Caviar has been actively shopped around by its owner Square to no interested suitors, according to Bloomberg. UberEats has not dominated the market with its sheer scale as Uber had hoped, as the company is expected to record a $2 billion loss in 2016.

Even startups going strong into 2017 face problems of their own. Postmates and DoorDash endured a string of lawsuits from restaurants and its own food deliverers. Blue Apron was subject to state inspections after a Buzzfeed investigation uncovered unsafe working conditions, such as bomb threats and assaults, in its Richmond-based warehouse.

When talking about food delivery startups, there are two kinds that should be noted: ones who deliver food from partnered restaurants (Postmates, Caviar, DoorDash, UberEats) and ones who make their own meals and deliver them (Munchery, Spoonrocket, Din, Blue Apron). But despite that divide, the industry as a whole has struggled to meet its early promises.

There are many reasons why the food delivery bubble popped. For one, there were too many startups for locals to keep track and, more importantly, rely upon. Din founder LaFave Olson pointed to a crowded market as a key reason for its closure in a postmortem interview with SF Eater.

On top of fierce competition, the startups could not balance having both high-quality food and expedient delivery. Spoonrocket, for example, was a big hit in Berkeley when I was a student. While quick to deliver, the food was subpar. For many friends and I, Spoonrocket was a desperation meal option reserved for desperate times like finals week.

But most importantly, its inability to balance between keeping its operations sustainable while not exploiting its employees will continue to burden the shrinking industry. Do-good startups like Josephine, which sought to deliver homemade food and giving home cooks stock options in the company, had to close its East Bay operations last May because California forbids selling certain homemade foods. On the opposite end of the spectrum are scale-obsessed companies like Blue Apron, whose warehouse was ridden with crime as terrified employees made only $12 an hour.

In a way, I’m kind of relieved that the bubble popped. For the last few years, food delivery startups were one of the easiest ways to make a quick buck in the local startup scene. Last year, I attended a competition in UC Berkeley, where students pitched their startup idea to judges. One of the weakest ones was a food delivery startup in which students would prepare the food and deliver it themselves on campus.

After the competition, I gave the food startup students lip service on a job well done. They told me it took them less than a week to put together that pitch. The food delivery idea seemed easy enough in a last-minute rush, because hey, everyone was doing it.

****

Donald Trump’s tech czar Peter Thiel was recently profiled in The New York Times’ fashion section. It’s an odd article to say the least, from the fashion feature having little substance on fashion to Thiel enjoying a four-hour dinner with the reporter as he is badgered about Trump.

Throughout the feature, Thiel employs a rhetorical device called Pyrrhonian skepticism, or basically flipping issues on its head to see if there is wisdom beyond the conventional one. When asked about President Barack Obama’s relatively spotless record related to corruption, Thiel did the flip-a-roo. “But there’s a point where no corruption can be a bad thing,” Thiel said. “It can mean that things are too boring.”

Perhaps we would have seen more of his skeptic philosophy if his incognito professorship at Berkeley (no, not UC Berkeley; The Berkeley Institute, a small, private education institution located a block from the campus) continued without leaking to the press. His seminar was to focus on “heterodox science,” which focuses on fields of study that dissent from mainstream science allegedly tainted for political correctness. Sounds like our oddball Peter, all right.

The Nexus covers the intersection of technology, business and culture in San Francisco and beyond. Write to Seung at seungylee14@gmail.com.

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