The rapid collapse of fast-delivering startups like Joker

It just took Eight months for Jokr, the super-fast delivery company, to become a rhinoceros, and just six more months for its strategy to begin to unravel. Joker plastered New York City spray ads Promising to deliver groceries within 15 minutes – for free! With no minimum order! – It raised a total of $430 million in venture capital to continue its lightning strike across cities around the world. From Boston to Bogota, turquoise-clad carriers pedaled on scooters, carrying pints of ice cream and jars of pasta sauce.

Jaker was also bleeding money. In the first half of 2021, the startup earned $1.7 million in revenue but incurred $13.6 million in losses, according to data reviewed by The Information. In April it was closed in Europe. In June — 14 months after launch and a year after touting plans to build 100 tiny homes in New York City alone — Jokr announced it was pulling out of the United States, laying off 50 employees. The company still operates in cities such as São Paulo, Mexico City and Bogota.

Other fast-delivery startups are also rapidly shrinking. In May, Gorillas and Getir – two of the largest companies in the sector – laid off thousands of employees and backtracked from major delivery cities across Europe. Gopuff, valued at $15 billion in 2021, evaporated 76 of its 500 distribution centers this summer. These are the lucky ones. Others, such as Buyk, Fridge No More, and Zero Grocery, have already gone bankrupt, disappearing just as quickly as they arrived.

The collapse in ultra-fast delivery reflects the sober mood of 2022. In the past two years, venture capitalists have invested nearly $8 billion in six fast-delivery startups competing in New York City, encouraging rapid growth and land grabs. Now, investors are increasingly demanding profitability. The sudden reversal shocked Thomas Eisenman, a professor at Harvard Business School, and is reminiscent of the collapse of the internet in 2000, when bustling startups like Cosmo — which promised one-hour grocery deliveries and DVDs — were folded just a few years after raising millions of VCs. He says, “With these new companies, what has changed?” “It didn’t work then and it doesn’t work now.”

Eisenman teaches a class about startup errors, and last year he wrote a letter on the topic titled Why do startups fail?. He says express delivery companies are prone to a common pattern of failure, where early gains and growth are not sustainable. The first wave of customer interests comes easy and free, because people are willing to try out a new service with incredible promise. But in order to retain these customers and gain new ones, the startup has to articulate its value proposition. For quick delivery, that means finding people who regularly need things like BandAids or a banana delivered urgently – and are willing to pay a premium for it – rather than going to the bodega to get it themselves.

When new customer growth starts to wane, Eisenman says, “you start having to give out $20 of free groceries on every order to get new customers.” From there, the economy can rapidly deteriorate. The recent cloudy economic outlook and recent high inflation make it a bad time to try to convince people to adopt a new premium service.

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