{"id":44865,"date":"2023-10-20T15:39:12","date_gmt":"2023-10-20T15:39:12","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/startup-with-17-million-in-funding-collapses-four-lessons-for-your-business-startupsmart\/"},"modified":"2023-10-20T15:39:12","modified_gmt":"2023-10-20T15:39:12","slug":"startup-with-17-million-in-funding-collapses-four-lessons-for-your-business-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/startup-with-17-million-in-funding-collapses-four-lessons-for-your-business-startupsmart\/","title":{"rendered":"Startup with $17 million in funding collapses: Four lessons for your business – StartupSmart"},"content":{"rendered":"
\"An<\/div>\n

Earlier this week a US-based on-demand delivery service startup that had secured $US13.5 million in funding shut down suddenly.<\/p>\n

SpoonRocket announced on its blog that due to an increasingly competitive market and an inability to raise the necessary funds to keep afloat, it would be closing operations immediately.<\/p>\n

\u201cWe continued to face intense competitors like Sprig and an ever tightening funding environment,\u201d the blog post says.<\/p>\n

\u201cWe explored all strategic options till the very last minute but unfortunately they all fell through. Despite our efforts, unfortunately, the downturn of market and lack of interest in on-demand companies like SpoonRocket from the venture community has forced us to shut down prematurely before we are able to grow into a viable business.\u201d<\/p>\n

The startup offered home delivered low-cost meals in under 10 minutes, and had been funded through Y Combinator in 2013 and a Series A round in 2014.<\/p>\n

The rapid demise of the highly funded startup offers many lessons for other budding entrepreneurs and founders, as Caroline Fairchild writes on LinkedIn.<\/p>\n

Don\u2019t lose track of basic finances<\/h3>\n

According to the founders, SpoonRocket had successfully reached a point where it was making money on each order made, but it still wasn\u2019t enough to offset other costs.<\/p>\n

Fairchild says that founders need to make sure they remember basic economics and not obsess over customer acquisition.<\/p>\n

\u201cIn the race for market share and repeat customers too many on-demand startups have lost sight of the importance of solid unit economics,\u201d she writes.<\/p>\n

\u201cOn-demand founders can become obsessed with customer acquisition leading them to burn too much cash on new users to recover.<\/p>\n

\u201cSpoonRocket eventually reached a point where it could earn cash off every order but that achievement may have been too little too late.\u201d<\/p>\n

Tech Crunch writer John Constine adds that keeping track of finances closely is especially important for startups operating in the on-demand space.<\/p>\n

\u201cOther on-demand services should be scrutinising their finances and cutting costs however they can to give them a longer runway to hit milestones and secure their next round,\u201d Constine writes.<\/p>\n

\u201cOtherwise we might see more startups suddenly vaporise.\u201d<\/p>\n

Take the money when you can<\/h3>\n

SpoonRocket successfully raised nearly $18 million, but with its last round coming in early 2014 the startup found it impossible to find the further funding in needed to keep it above water.<\/p>\n

Fairchild says that startups shouldn\u2019t wait until it\u2019s a life or death situation to reach out to investors.<\/p>\n

\u201cHoarding cash during good times has been stigmatised by some investors, but for others the strategy is smart if deployed correctly,\u201d she writes.<\/p>\n

The fact that the last round was back in 2014 was a \u201csign that they could have made a bigger push to close another round before the market turned cold\u201d, Fairchild says.<\/p>\n

Being just a cheaper alternative isn\u2019t enough<\/h3>\n

While many startups think they can follow in the footsteps of Uber and completely disrupt their chosen industry, it takes much more than just a cheaper alternative.<\/p>\n

While SpoonRocket was usually less expensive than its food delivery rivals, according to Constine, the food actually wasn\u2019t very good.<\/p>\n

\u201cI and other customers I spoke to found the meats to be sketchy and the whole meals to be somewhat gross,\u201d he writes.<\/p>\n

\u201cI ended up switching to SpoonRocket\u2019s more expensive and slower, but much tastier, competitor Sprig.\u201d<\/p>\n

This points to a general trend of startups forgetting the \u201cand\u201d aspect of disruption, Sarah Tavel says.<\/p>\n

\u201cWhile Uber made way for tons of startups rushing into on-demand, too many forgot what went into the ridesharing company\u2019s secret sauce,\u201d Tavel writes.<\/p>\n

\u201cThe magic of Uber is that it used mobile to create a 10 times better product than the incumbent and did so at a lower price. The \u2018and\u2019 is everything.\u201d<\/p>\n

While SpoonRocket is cheaper, its actual offering wasn\u2019t enough to differentiate it from the pack, Fairchild says.<\/p>\n

\u201cIt seems SpoonRocket forgot to deliver on the \u2018and\u2019,\u201d she writes.<\/p>\n

\u201cThey believed that they could figure out a way to quickly deliver hyper-low-cost meals to customers but the product itself didn\u2019t hold up to the test.\u201d<\/p>\n

Don\u2019t stall during market uncertainty<\/h3>\n

The natural tendency is to halt expansion plans during market upheavals, but as Fairchild writes, this isn\u2019t always the best tactic.<\/p>\n

\u201cWhile in downtimes it may seem like the only successful strategy is to put on the brakes to hunker down for the storm, during market uncertainty things like customer acquisition and hiring talented employees get a lot easier,\u201d Fairchild writes.<\/p>\n

\u201cWithout knowing exactly what happened at SpoonRocket, pushing on the gas when the road got bumpy might have been best.\u201d<\/p>\n

Follow StartupSmart on<\/em> Facebook,<\/em> Twitter,<\/em> LinkedIn<\/em> and<\/em> Soundcloud.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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