SpoonRocket raises its Series A: “We know we can make a profit on this. We’re already doing it.”

By Carmel DeAmicis , written on May 15, 2014

From The News Desk

The on-demand meal sector is hot and it just won’t stop. In the last few months we’ve seen the remaining companies — because there has already been one casualty — beefing up their venture war chests and entering the scaling phase.

Sprig was the first with big news, announcing a $10 million Series A from Greylock at the end of March. Munchery came soon on its heels with expansion to Seattle and a whopping $28 million Series B — in the biggest investment that Uber’s Shervin Pishevar’s new fund has made to date. And today rings the dinner bells for the final player: The scrappy, speedy SpoonRocket. Conducting some of their first ever media interviews, the previously press shy YC company announced a $11 million Series A in a round led by Foundation Capital and expansion to all of San Francisco for lunch service.

Regular Pando readers might know that I’ve been less than impressed with SpoonRocket to-date. The company has offered the fattiest, cheesiest, blandest food of the lot, in line with its cheaper prices. That was all well and good when it was ridiculously cheap — $6 — but once the company bumped its prices to $8 it saw a customer revolt on Yelp.

SpoonRocket CEO Steven Hsiao says the anger was short-lived. “It only dipped for one week and then our sales picked up again,” Hsiao says. “Initially it was shock but our customers realized we’re solving a great problem for them and at $8 its’ still a great value. “

Hsiao spoke with Pando to defend the service, explain how its product vision is changing after it switched chefs, and discuss whether its prices could go even higher.

In terms of where SpoonRocket’s meal quality is headed, Hsiao says the days of greasy, heavy food are numbered. “Since we sell so much volume, one bad day has an impact on our image,” Hsiao says. The company has decided to shift in a healthier direction, “not super healthy like vegan,” but more like a “healthy alternative.”

Part of that development is SpoonRocket’s former lead chef leaving the company. “In terms of menu development he had full [creative] range and he wasn’t going in the right direction we wanted SpoonRocket to go in,” Hsiao says. “It does take time and research to perfect the product.” That chef is being replaced by Barney Brown from Neiman Marcus’ Rotunda restaurant, and salads and smoothies are being added to SpoonRocket’s offerings.

The shift towards healthier fare puts SpoonRocket directly in competition with Sprig and Munchery, both of which have served higher quality meals from the beginning. When asked whether SpoonRocket’s prices could ever head farther north to $10 a meal, Hsiao gave a definite no. “Never. It was tough going to $8 already,” Hsiao says. He doesn’t believe that healthier fare will cost the company any more to produce. “We actually [already] source our ingredients from the top suppliers in the area. The biggest problem before was just execution. You can take great ingredients and turn them into not so great end product.”

Price has been a huge point of contention in the on-demand meal wars, much like in other sectors of the mobile web. At the lowest price point, SpoonRocket actually managed to drive out one of its competitors — Chefler — which lowered its prices to compete. Because Chefler hadn’t raised a boatload of venture to subsidize that effort, it eventually had to close up shop despite a five star Yelp rating.

When asked whether he thought SpoonRocket was hurting the nascent sector by setting customer expectations to an unusually low price, subsidizing that in an unsustainable way with venture, Hsiao disagreed. “We know we can make a profit on this,” Hsiao says. “We’re doing it right now.”

[illustration by Brad Jonas]