
How do so many meal delivery/prep/kit companies co-exist/survive? - theSemicolon
Every month I get fliers for new&#x2F;upcoming meal delivery&#x2F;prep&#x2F;kit company with discounts. How do they secure funding&#x2F;customers or continue operation since they are all competing for the same niche market?
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itamarst
Imagine you're a VC. Meal prep kit investments are hot. Your investors, the
people giving you the money, come and say "how come you don't have the a meal
prep kit startup in your portfolio?"

Your choices are:

1\. Don't invest, and lose your investors to a competing VC firm.

2\. Invest, even if you think it's a bad idea. Worst case if it blows up you
blew up in a popular way, "I didn't do any worse than our competitors, what do
you want?"

Thus once something is hot, it gets lots of investments even if the people
doing the investing think it's a bad investment.

This is the same reason most mutual funds and hedge funds invest in similar
ways to index funds: incentives for the fund managers are to lose in a popular
way.

(This is a variant on the "principal-agent problem".)

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luckylion
How they survive? Who knows if they will, they won't be expected to make
enough money to sustain their operation at the beginning.

As to why somebody is funding them, there are probably lots of reasons.
Investors may believe that they are backing the best team, or that the market
is large enough, or that they need a player in the market, or such a service
would compliment other investments (such as a grocery store chain investing in
a "we shop for you" startup).

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tedmiston
They're losing money on the trial discounts for the hope of acquiring your
recurring revenue.

They are propped up by VC dollars and not yet profitable. See Blue Apron's
struggle post-IPO.

[https://en.wikipedia.org/wiki/Blue_Apron#History](https://en.wikipedia.org/wiki/Blue_Apron#History)

Perhaps the biggest issues are high customer acquisition cost, cost of
shipping, and customer retention.

I wouldn't consider meal kits itself a niche market — it's a huge market with
many niches inside it for so many specific diets and dietary preferences
served by different kits.

I think the future of meal kits is partnerships with grocery stores where
consumers can pick up there, like Kroger's acquisition of Home Chef.

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cujic9
They require very little capital and skill to launch and they lose money
slowly. The only get hard when you try to scale.

