Those food delivery startups crowding your favorite lunch spots so rich people don’t have to go outside are somehow not “unicorns,” Silicon Valley’s term for startups with billion-dollar valuations. Who would have thought a business model relying on lots of manual labor and low profit margins would have difficulty convincing investors it’s worth all the money?
Edison Investment Research, a London-based team of more than 100 researchers, wrote: “It is the startups that involve pick-ups or drop-offs of an asset that have got into trouble as the unicorn disguises are already slipping, revealing the true colours of the donkeys underneath.”
Huh. Turns out the opposite of a unicorn is a donkey.
In case you’re not familiar, delivery startups such as DoorDash, Postmates, UberEATS, and Caviar require “independent contractors” (see: employees who aren’t classified as such for tax purposes) to manually pick up food from a restaurant, then deliver it in person to the customer.
These contractors are often forced to wear brightly colored polo shirts while taking up space in line at your favorite restaurants. (Unlike Uber, most of these startups don’t have vehicle leasing options, which explains why most people who are forced to deliver DoorDash for a living aren’t exactly driving nice cars.)
Anyway, it’s probably certain all of these labor-intensive startups – who are forced to charge the lowest prices possible just to be mildly palatable for customers (har har) – will suddenly see their profit margins explode.
That’s what happened with the wildly successful grocery delivery startups during the dotcom boom, right?
While HomeGrocer went public in March 2000 – the same day that Nasdaq Composite Index topped out at 5048.62 – it soon realized its cash-intensive business couldn’t continue alone with the capital markets drying up. . . . The business model was just poorly executed. At the time of the HomeGrocer acquisition, Webvan was burning through $30 million per month, The Wall Street Journal reported.
As Terry Drayton, who founded HomeGrocer in 1997 with $500,000, griped to Fortune magazine after Webvan’s demise: “The ego and incompetence….They pissed it all away.”
Just in case you’re feeling nostalgic for the dot com bubble days, here’s a five minute compilation of Pets.com commercials: