Fizzle Of The Week: Munchery And The Suppliers Left Behind

Despite raising over $125 million in venture funding from the likes of Greycroft, ACME Ventures (formerly known as Sherpa Capital), Menlo Ventures, e.Ventures, Cota Capital, M13 and others, it seem Munchery couldn’t quite serve up the business needed to stay a going concern.

The food on-demand delivery startup announced — rather abruptly — earlier this week that it was shutting down its services immediately. The news was first announced in an email to customers on Monday.

The news comes after what was apparently some strife at the startup. In May of 2018, the firm laid off 257 employees — or about 30 percent of its workforce — following retracting its services in Seattle, Los Angeles and New York in favor of focusing on its largest and most popular market in San Francisco.

“Since 2010, we have been committed to bringing fresh, local, and delicious meals into your homes along with all our customers across the country,” the company wrote in the email announcement, according to reports. “We’ve been delighted to work with world-renowned chefs, experiment with diverse and unique ingredients and recipes, and be a part of your holiday feasts and traditions. We have also enjoyed giving back to our community through meal donations, volunteer service, and so much more.”

Munchery has tried for years to find the right secret sauce to ignite its on-demand food delivery business, but never quite got the scale with users it was looking for. Waste was also an endemic problem for the startup, which reportedly was forced to throw out about 16 percent of the food it ordered.

And Munchery of course, is not the only food delivery startup that has had some difficulty going the distance in recent years. Sprig, Maple, Doughbies and Josephine also tried their hands at bringing customer food orders on demand — though like Munchery they ultimately had to close their doors.

But what makes Munchery different — and pushes it to “win” the Fizzle of the Week designation — is that its rapid and rather surprising evaporation has reportedly left many of its suppliers holding the bag, in a major way.

Vendors speaking to TechCrunch said Munchery did not inform them of its plans to go out of business and “disappeared without a trace” with thousands of dollars in unpaid bills left behind. Charles Farriér, the owner of Crumble & Whisk Patisserie, is waiting on a $1,700 payment; Lenore Estrada of Three Babes Bakeshop said she’s owed more than $20,000; Melissa Cohen of Salty Sweet Cookies, Jennifer Roy of Dandelion Chocolate and Jennifer Nguyen of Native Baking Co. are expecting a total of $16,417.50 between them.

“They just expect us to sit back and take it but we need that money to keep our businesses afloat,” Farriér told TechCrunch. “It may be pennies to them but it’s money to us, we cannot stay afloat without being paid. It hurt my business; I had to take out a loan; I had to tell my staff I couldn’t pay them this week.”

Anger was a common sentiment. Bafflement was also commonly expressed among Munchery’s suppliers, as they don’t understand why the company hid its condition so completely from those who were relying on payments.

“The thing that’s really baffling to me is why they didn’t call it earlier,” Estrada told TechCrunch. “When I was there [Tuesday], there was a truck leaving with food that had been donated. Munchery ran into a wall rather than planning to shut down in an orderly fashion. That’s just crazy, as I’m sure they knew how much runway they had.”

As of yet Munchery has not filed for bankruptcy, though that move is expected soon. To the five businesses that spoke to TechCrunch, Munchery owes nearly $40,000 in overdue bills — bills that will more likely than not go unpaid when Munchery is officially bankrupt.

“This feels like these guys locked the doors and ran off to another country,” Nguyen of Native Baking Co. said. “I only have a couple of employees and I want to pay them. Nine grand isn’t much to a giant company, but it makes a huge difference at our company. It feels as if we’ve been taken advantage of by the big guy and it sucks.”

For those going without payment, it certainly does.

And while going out of business is a fizzle, doing it in such a way that leaves vendors wondering how they will pay their bills is a world-class Fizzle of the Week.

Sizzle

SWIFT volumes: The financial messaging service said earlier in the week that traction with gpi helped push volumes to record levels, and that in 2018, the service logged a record 31 million average daily messages, up 11 percent annualized from 2017.

Corporate AI: Gartner’s survey of 3,000 CIOs finds that artificial intelligence (AI) is a “game changer” and among top-of-mind technologies, and that enterprises that had deployed or would deploy AI were up by 270 percent over a span of only four years.

Amazon’s SMB Traction: Small can be beautiful, as Amazon reports that small to medium-size businesses (SMBs) with more than $1 million in sales grew by 20 percent, as tallied across all 50 states and more than 130 countries.

Fizzle

Corporate earnings forecasts and Wall Street: Earnings season winds on, and so do the bleak macro outlooks. The trade war takes a bite, and so does the government shutdown, out of earnings expectations. The battle rages on about bottom line performance amid top line headwinds, and shares of tech firms were down into the latter half of the week.

Crypto daily fraud: As much as $2.5 million is lost to fraud and stolen from cryptocurrency exchanges daily, estimates Hosho, a cybersecurity firm. The fraud exposes the lack of protection in place at these exchanges, where the bad guys target individual employees for access to the digital hoards — fleecing the unwitting holders in the process.

Debt piles on: Debt, as measured globally, now stands at 310 percent of global GDP, and tops a staggering $244 trillion. The record debt load, as measured by IIF is enough for observers to warn we’re at the edge of what’s sustainable, right as the IMF downgrades GDP growth estimates. Corporates have taken on more than $1 trillion in debt in just the third quarter of 2018, and already may find it hard to service interest and principal.