Lyft's former interim head of growth thinks food is the next big startup market
Gagan Biyani has the Silicon Valley serial entrepreneurship bug. It started in 2009, when he co-founded one of the first MOOC platforms Udemy. Then he began organizing the popular Growth Hackers Conference. He was brought into Lyft as the interim head of growth. And now, he's launching a food making and delivery startup called Sprig.
Biyani got the idea for Sprig when he was running growth at Lyft. "One of my friends called and said, 'Have you ever thought of applying the Lyft model to food?'" Biyani remembers. The idea stuck with him and in April 2013 he left Lyft to try it executing it.
With Sprig, customers in San Francisco can order a balanced meal prepared in Sprig's industrial kitchen and get it delivered in 15-20 minutes. The meals range from grilled chicken with honey tarragon carrots to tofu vegetable curry. They're all created by Nate Keller, Google's former executive chef. Biyani certainly has the pedigree to back up his efforts, with his Udemy-Lyft background. He has three other co-founders, Morgan Springer, Matthew Kent, and Neeraj Berry. Their chief culinary advisor Kyle Connaughton is a former chef at three Michelin 3-star restaurants, and it helps that they've got Nate Keller by their side.
Sprig is the latest in a collection of companies in the Bay Area that are streamlining the food creation and delivery process to make healthy "home-cooked" meals affordable. These startups are leasing their own kitchen spaces, hiring chefs to cook meals, setting up a delivery process, and creating apps so customers can order healthy food easily and cheap-ish. Munchery was the first in 2010 (raised $7.92 million from Sherpa Ventures, Menlo Ventures, and others), followed by SpoonRocket in September 2013 (raised an undisclosed amount of seed money), Chefler also launched in September 2013 (bootstrapping), and now Sprig.
As Erin Griffith covered, venture capitalists are giving food startups a chance, despite the big fat flop of Webvan over a decade ago. Their hope is that delivery has gotten cheap enough to make it possible this time. Furthermore, mobile has managed to disrupt other old-timey physical industries like taxi rides. The thinking goes that perhaps it's time for food to see the same fate.
Since Gagan Biyani ran growth at Lyft before starting Sprig, he's obviously a believer of this philosophy. Biyani says, "What's exciting about Uber and Lyft is reinventing an industry that was stagnant for so long, using the entry point of the mobile phone." Biyani thinks that food is the next logical frontier after transportation. He believes Americans are ready for healthier food that's accessible, and that startups should take notice.
Of course the operational and regulatory problems faced by Uber and Lyft are tiny baby potatoes compared to those burgeoning food startups will encounter. The companies will need to hire enough delivery people and cooks to scale for demand while simultaneously managing food supplies and orders. Every time they want to expand to new markets they'll need to find new executive chefs, lease new kitchen space, consider local eating habits and set up delivery systems for different types of geographies. Not to mention the fact that at some point these companies will come up against the FDA and need to ensure their practices are up to cooking codes. And throughout all this they have to try to bring in venture worthy returns.
In the new wave of food startups there's already been some failures, like Pop-Up Pantry in Los Angeles. Despite having prominent partnerships with MasterChef, Pop-Up Pantry didn't grow fast enough. It needed a ton of repeating customers to make the margins worthwhile and the money ran out before that happened.
That seems to be the trick with these new food companies. Since their goal isn't to make healthy meals affordable, they aren't going to have high margins on each individual food order. They're banking on repeat customers ordering frequently to bring in enough money. Battery Ventures Brian O'Malley, who led the firm's investment in Sprig, put it to me like this, "If you get half of your customers to order repeatedly, your dollar margin for orders isn't particularly high but those customers become incredibly profitable over time."
O'Malley says the reason Battery is backing Sprig as opposed to its competitors is because the co-founders show the ability to be flexible, changing the product as the customers see fit. "This is one of those businesses where the way you're operating today will probably look very different six months from now."
[Illustration by Hallie Bateman]