PitchBook, the financial data and software company, released its 2017 Startup Graveyard list today, highlighting eleven companies that raised more than $1 billion combined in VC funding, and all of whom shut down this year.
Of the eleven notable startup failures, three were in the food tech space: Juicero, Sprig and Teforia. Together, these companies had raised $197 million and had a valuation just shy of $700 million. That they all met an untimely demise should serve as a cautionary ghost story for any company looking to get into, or get more funding for, a high-end drink device or meal delivery service.
Juicero, creator of the connected (and expensive) juice machine, raised $121 million in funding and had a very Icarus-like valuation of $459 million. That is, until word got out that you could squeeze the juice packets with your hands, decimating the company and any value it had created.
And just last week Teforia, the maker of the $1,000 tea infuser, reached a bitter end after raising $17 million (for a tea maker) and reaching a $35 million valuation.
Then there was Sprig, which waded into the competitive world of on-demand food delivery. The service raised $59 million and hit a valuation as high as $169 before shutting down in May, with the company noting the challenges of scaling meal production and delivery.
While the food tech startups on the list raised their fair share of VC funding, its not like the sector was that egregious. Juicero, Sprig and Teforia almost seem frugal compared with Jawbone, which raised a whopping $542 million and was worth $1.5 billion at one point before crashing and burning.
Nor should this list be interpreted that food tech is dead or on life support. Far from it. There are a number of successes to celebrate this year such as InstantPot, Anova and PicoBrew. And the meal kit companies… well, to be honest, there will probably be more hardships to endure as the space matures, and its likely only a company like Amazon has the level of infrastructure needed to truly make it work.
Food tech has a lot of promise (everyone eats and drinks), and its share of pitfalls. Earlier this week, Mike Wolf here at The Spoon wrote a great piece examining why some smart kitchen companies fail while others succeed. Two of his takeaways were that products should offer consumers new capabilities that would otherwise be too difficult or time consuming without it, and a product should be either affordable or provide immense value.
If you can fulfill those criteria, it’s less likely anyone will dance on your company’s grave.