"The future is delicious": Greylock's $10 million bet on Sprig is the biggest validation of the food prep space yet
Sprig, the food preparation and delivery startup co-founded by the former President of Udemy and former Head of Growth at Lyft, announced huge news today. It has raised $10 million in a round led by Greylock Ventures, with newly promoted partner Simon Rothman joining the board, and participation from Accel Partners and Battery Ventures.
Greylock's investment represents big things and not just for Sprig. It's eight figure validation of the nascent food preparation and delivery startup realm as a whole. Some have suspected that this area is the next sector to be revolutionized, Uber-style, by the advent of smart phones. But until now, there's been no big name investors throwing their weight behind the theory.
As one of the most prestigious firms in the Valley, Greylock's name bears weight. This is the first investment in its planned $100 million marketplace investments, and it sends a clear signal. Greylock thinks that food is ready to be disrupted, and food prep and delivery companies could be the way it happens, just like ridesharing disrupted urban transportation. As Greylock partner Simon Rothman said in his blog post announcing the funding, "The future is delicious."
When you look at the total capital raised by the main food prep and delivery companies -- SpoonRocket, Sprig, Munchery, Chefler, Gobble -- it's $23.12 million. SpoonRocket hasn't disclosed their seed round so that's based on it being a rumored $2.3 million from FundersClub.
$23.12 million includes Sprig's latest $10 million round. Before today, the money raised in the space was $13.12 million, although Munchery is rumored to be raising a $20 million Series B.
So to do some second grade math, Greylock, Battery, and Accel's $10 million investment represents almost half of all the investment in the space so far.
If other investors weren't paying attention to these companies, they're going to sit up and take notice now. There hasn't been a clear cut leader in the already crowded space, with Munchery likely being the front runner until today's news. Beyond the ones named in this story, there are a ton of very local players with no intention of scale and venture capital. The time is now for a funding landgrab while the market is still figuring out who the leaders will be. That is great news for the food companies because if there's anything they're going to need to succeed at these risky ventures, it's a ton of capital.
All of these companies are based around the idea of offering food to people for affordable prices, which means their margins on individual meals are slim. I'm a regular Sprig customer, and I can get a fresh healthy meal delivered to my door in 30 minutes for $12 (sample meal choice today: Mushroom goat cheese tarts). And yes, the $12 includes tax and tip. There's no way Sprig is making that much money per meal -- it's betting that its service is sticky enough customers keep coming back again and again and again, Uber-style.
If the food is good and the price is right, that just might work. But only with a warchest of capital to keep fueling local network effect expansion. Time is going to be the biggest advantage in this slogfest of an industry, and money buys time.
It's only at scale that the food prep and delivery space will make money, but in order to scale and move into new cities these companies will have to set up physical kitchen spaces, hire executive chefs, find delivery people, source ingredients, and execute on a ton of other logistics that will require tons and tons of capital. And tons of capital will require VCs placing faith in this totally risky, untested new model.
Greylock is the first to throw down a decent chunk of capital. We expect others will follow quickly.