Michael Moritz, chairman of Sequoia Capital and one of the most successful venture capitalists in history, said the “on-demand” model made a lot of sense. It was a huge trend enabled by smartphones and he invested about nine billion into it.
But in the last half of this year that money stalled completely. Several prominent Silicon Valley venture capitalists are now saying that many delivery start-ups could fail, leaving investors with big losses.
Delivery start-ups continue to grapple with fierce competition, thin margins and a host of operating challenges that have defied easy solutions or economies of scale. This has resulted in widespread discounting and artificially low consumer prices have made on-demand delivery.
There have been a few high-profile failures, including US meal delivery firm SpoonRocket, which went down in March, and PepperTap, an Indian grocery delivery service backed by Sequoia that folded in April.
Some think that the only thing which could transform the sector are driverless vehicles and sidewalk robots. However, that remains far from a practical reality, leaving many start-ups with no clear path to innovate their way to profitability anytime soon.