Simon Rothman on Greylock's food investment: "The bet is big because the opportunity is big"
A post-script to our coverage yesterday of Greylock's big $10 million bet on the food prep and delivery space. I chatted with Greylock partner Simon Rothman, who led Sprig's Series A round, on the phone late in the day to get his thoughts on the nascent sector. With his Sprig bet, he's doing some classic venture capital investing: Huge risk, huge potential reward.
On-demand food is a totally unproven model, and $10 million is the biggest bet yet funneled into the sector. Rothman talked about the challenges he thinks these companies will face, how Sprig reminds him of Tesla, and whether food delivery is the next ridesharing.
Rothman has been looking at the on-demand food space for sometime, mostly because of his connection to Sprig's co-founder Gagan Biyani. Biyani and Rothman had met months prior, hanging out in the same network of "entrepreneurs who love marketplaces."
Biyani had left the company he co-founded, Udemy, one year prior and was starting to transition out of his role as Interim Head of Growth at Lyft. He was brainstorming ideas with Rothman for his next venture, and the idea of a food company that acts like Uber -- click a button and get a fresh, healthy meal at your doorstep -- arose.
Of course, that's not exactly disruptive. That's a restaurant.
Then again, to the untrained eye Uber probably seemed like just a black car service on the surface. It was the subtle changes in the experience that made all the difference. One click checkout. Credit card information on file. The tip charge happening automatically. A text when your driver arrived.
These all apply to the on-demand food sector differences, as does the quality of the meals. Companies like Chefler, Sprig, and Munchery are preparing the food themselves, using fresh ingredients that are a far cry from greasy Thai takeout or pizza.
"The proposition is very simple, it's very clear, it's very compelling," Rothman says. "Press a button and get fresh fast food. I want to live in that world."
When pushed on the logistical, financial, and scaling challenges of building such a company, Rothman said that his favorite ideas are the novel ones that are a challenge to execute. "I fundamentally believe in the power of entrepreneurs to figure it out," Rothman says. He explained that he was involved with Tesla early on -- he was a board member for four years -- and that Sprig reminded him of Tesla. They're both tackling complicated and difficult problems.
Of course, most people would scoff at a comparison between a company like Tesla and a food startup cum takeout restaurant. "This isn't the same level," Rothman admits. "But the next generation of companies that are bridging online and offline are far risker than just software companies."
He's right, and as we've written about the obstacles to successfully scaling an on-demand food delivery startup are huge, from opening kitchens in every new location to hiring chefs and then drivers, to developing menus and sourcing food without it going bad. It's a whole added layer of complexity to an on-demand operation like Uber.
"I think there will be risks we don't even fully appreciate now," Rothman says. "But we believe the space is compelling and the world needs it. The bet is big because the opportunity is big."
[Imaged adapted from thinkstock by Brad Jonas for Pando]