Imagine you wanted to build a complete-from-scratch meal delivery company.
Not just the delivery part like Doordash. I’m talking about building a company that is essentially an entire restaurant and food delivery industry in a box, one that works with big-name chefs to develop new restaurant concepts, builds centralized food production facilities, creates a network of mini-kitchen hubs around a large metro area, and owns the delivery network to get the food to people’s doors.
In other words, everything. If that sounds like a big vision, it is, and it’s exactly what Marc Lore is building with Wonder. The founder of Jet.com and Diapers.com described the concept in a Linkedin post last December:
Our innovative, vertically-integrated approach begins with exclusive menus from the country’s best chefs and restaurants. A central commissary sources high-quality, fresh ingredients and serves as the start of each meal’s journey. Orders are then fired, finished, and plated in our mobile kitchens just steps away from your door, and served as soon as they’re ready — allowing you to experience the food the way it’s meant to be enjoyed.
Lore is no stranger to big industry-shifting ideas. He created Diapers.com, one of the early pioneers in online baby products (acquired by Amazon) and Jet.com, a discount-pricing based online retailer acquired by Walmart in 2016. He also has plans to build a Utopian city in the American west.
Wonder’s business model is essentially built around a three-layer logistics network, one where the company owns centralized production, a distributed network of mini-kitchens in various neighborhoods, and the final delivery network that drops the food off at the consumer’s doorstep.
If it sounds reminiscent of Zume, it’s because the two ideas are kinda similar. Zume created a vertically integrated food delivery business complete with a robot-powered pizza-making ghost kitchen, mobile food trucks with ovens built-in and a fleet of scooters to deliver pizza to the customer. Zume also raised a bunch of capital – $423 million – before the company ended up laying off 80% of its employees and exiting the food delivery business to focus on sustainable packaging.
Despite the similarity between the two concepts, Zume’s troubles haven’t dissuaded investors from investing in Wonder. Lore has raised $900 for Wonder so far, including a $350 million Series B announced this month.
In fact, if one thing is clear, it’s that Lore is good at raising money. He raised over $800 million for Jet before he sold it to Walmart, and he’s also started an investment company with Alex Rodriguez with plans to raise $500 million. He also is raising $25 billion for the first phase of construction of utopian city called Telosa, with eventual plans to raise $400 billion.
But even for someone as talented as raising money as Lore, you still have to wonder how long investors will stay patient as his company builds out its food delivery business and scales it to other cities. After raising close to a billion dollars, the company is serving one metro market so far, a cluster of neighborhoods in the New Jersey area. While it’s clear that standing up its first metro market will probably be more capital intensive than its second and third market – the restaurant concepts, recipe development and core technology development built now can be leveraged for each new market expansion – the company will still need to build out a three-layer delivery network for each new metro is expands into.
Who knows, maybe Lore and Wonder can generate enough cash flow with its New Jersey business and can cost-control its burn rate to extend the $900 million out for a couple of years to fund another market build-out or two. Still, no matter how frugal the company remains, it’s going to have to go back to investors at some point, and with things getting tougher in a global macroeconomic environment filled with increasing uncertainty, nothing – including the future availability of multi-hundred million funding rounds – is a certainty at this point.
And it’s not just the economy, but an extremely competitive, fast-changing restaurant and food delivery business. I’d argue the restaurant and food delivery business is even more competitive and market-saturated than baby products or discount e-commerce offerings. Wonder is competing not only with well-capitalized competitors in Amazon, UberEats, and DoorDash, but also facing off against a local mom-and-pop restaurant on every street corner that is increasingly relying on digital business models to survive as we emerge from the pandemic.
All that considered, Lore has an amazing track record that would be foolish to ignore. He’s achieved successful exits for his previous companies, selling both Jet and Diapers.com to big entrenched players (though both companies have been subsequently shut down by their new owners). So maybe investors are looking at those two previous exits and are comfortable Lore can pull yet another rabbit out of a hat.
For his sake and theirs, let’s hope he can do it once again, because if he can’t, I suspect we’ll be studying the case of Wonder years from now as another cautionary tale of audacious visions and spent venture capital.
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