By Mary Ann Azevedo, Contributor
The notion of fast food is changing as startups focused on meal kit delivery services, such as Blue Apron, Plated and Green Chef, attract more customers and whet the appetites of investors.
These venture-backed startups deliver meal kits with measured, fresh and often organic ingredients for listed recipes. They are marked by online ordering, overnight shipping, premium ingredients and varied recipes.
These companies are catering to busy consumers who are bypassing dining out in favor of having the ingredients to prepare a fresh meal delivered in. Many of the startups offer variety in their meals, never offering the same recipe twice in a year. Some also cater to the increasing number of gluten-free and vegan consumers worldwide.
Suddenly, cooking a healthy meal doesn’t mean multiple trips to the grocery store to buy a bunch of ingredients a home chef will hardly ever use. And an increasing number of consumers and VCs like the idea of no-waste, no-fuss meal delivered to their door.
New York-based Blue Apron has raised $193 million in funding since its inception in 2012. The meal kit delivery company most recently in June raised $135 million in a Series D round that included participation from First Round, Peak Opportunity Partners, Bessemer Venture Partners, Stripes Group, Fidelity Investments and other investors. The funding valued the company at $2 billion.
Similarly, Berlin-based HelloFresh announced in September it has raised $84.7 million led by the Scottish Bank Baillie Gifford, giving the company a valuation of about $2.9 billion as it possibly prepares for a stock listing. The German company has now raised about $278 million, including a $126 million Series E funding round led by existing investors Rocket Internet and Insight Venture Partners.
Other meal kit startups are newly backed or launched, such as Boulder, Co.-based Green Chef, which started in September 2014 and raised a $15.5 million Series A round in June that was led by New Enterprise Associates and included TA Ventures and others.
Companies delivering actual meals in a hurry are also getting VC interest. Berkeley, Calif.-based SpoonRocket raised $13.5 million in two rounds from Foundation Capital, Base Ventures, SherpaCapital and others. Rather than delivering meal kits, SpoonRocket aims to deliver healthy, fast and relatively inexpensive meals to Bay Area customers.
The sector is a hot market, according to a December 2014 report in which Tracxn analysts estimated that about $1.2 billion was invested last year in the broad food tech space. This includes meal kit delivery services, which offers consumers the ability for consumers to cook themselves a fresh and healthy meal at home, as well as a number of other subsectors.
Just a handful of the companies that VCJ found in this “cook-at-home-recipe box” subsector, located in Europe and the United States, have collectively raised about $560 million in recent years. And many new entrants are coming on the scene, such as San Francisco-based Sun Basket, which last month raised $4.5 million in its first institutional round from Baseline Ventures and PivotNorth Capital.
San Francisco-based TableRunner is also coming onto the scene and has yet to raise venture financing.
Amit Mukherjee, a senior associate with NEA, said he has been watching the meal kit delivery space since some of the early movers were cooking up funding deals.
Mukherjee believes the industry is heading into a big shift in the way consumers are thinking about food and the way it’s delivered.
“We’re seeing a sea change in consumption patterns,” he said. “Having meal kits delivered is more affordable and healthier than eating out so it makes sense at a high level.”
Mukherjee points out that Green Chef was an attractive investment, in part, because unlike a lot of the CEOs in the space, Green Chef CEO and founder Michael Joseph had a background in food. The former pastry chef also worked in organic food for a while and had relationships with organic farms.
Looking ahead, Mukherjee expects to see “a lot of natural fragmentation in the space.”
“We expect to see companies offering a greater variety of meals and branching out to meet varying dietary needs such as vegan, gluten free and paleo,” he said.
Paul Holland, general partner of Foundation, agrees that the food industry is being revolutionized.
“Food is one of the largest markets, and it has resisted disruption and tech innovation for a while,” said Holland, whose firm has not backed a meal kit service, but led the $11 million round for SpoonRocket in May 2014. “For the first time, we’re seeing that the fast food market is beginning to shrink and that indicates that consumers are looking for something different, but still convenient.”
Holland was impressed with SpoonRocket, which originated on the UC Berkeley campus as a way for students to get a hot meal within 10 to 15 minutes for a minimal delivery fee. While SpoonRocket is currently only available in the San Francisco Bay Area, Holland anticipates the company, which offers a mobile app for consumers, will branch out geographically.
For Holland, the success of food tech startups doesn’t mean the end of the traditional restaurant industry.
“It’s essentially food as a service,” he said. “We expect this is going to become a big business over time as people change their habits. This isn’t going to replace restaurants but it is a new way for people to eat, a modern way for people to consume food.”
Mary Ann Azevedo is a Texas-based contributor. She can be reached at firstname.lastname@example.org.
(See table: Select venture-backed meal delivery startups.)