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These Two Food Tech Startups Changed Their Models And The Chefs Are Not Happy
Posted on: September 30, 2015
A recent article in Grub Street highlights changes in the new on-demand chef space, one of the fastest growing segments within food-tech. The story focused on how two startups,Kitchensurfing and Kitchit have changed their business model from a chef marketplace model, where customers can book chefs for private parties, to an on-demand model, where customers get pre-set menus cooked at their homes. Although this may seem like a small tweak in the models, it’s a much bigger change —especially for the chefs who work for the two companies to generate much needed extra income. The pivot by both startups means that chefs are limited to an hourly rate on a set menu price—as opposed to a revenue share on a job capped only by how much customers might spend on a dinner party.
The online personal chef business has been heating up over the last few years. Kitchit, a San Francisco startup, launched in 2011 with $600,000 in seed money led by 500 startups. New York-based Kitchensurfing launched in 2013 with $1,000,000 in seed capital led by the BoxGroup. Both companies have been growing slowly since their launch, but that did not stop them from attracting additional funding in 2014. Kitchensurfing raised an additional $15 million, bringing their total funding to $19.5 million, while Kitchit brought in an addition $7.5 million. With funding in place, both startups were poised to enter 2015 with hopes of hyper growth.
But the Grub Street article highlights the pain points of growing a food-tech business, especially one with no real product. As both companies grew their marketplaces, they seemed to have happy customers and more importantly—because they are known for being difficult to work with—happy chefs. However, both companies quickly realized that, in the fast-paced world of Venture Capitalists, their slow steady growth based on a small revenue share wasn’t going to cut it.
“As it turns out, making 12.5 percent off of bespoke, high-end cooking has not been lucrative enough for the company.” Jessica Pressler was writing about Kitchit, but Kitchensurfing had learned the lesson she described a few months earlier. Although the on-demand meal space will bring larger margins to both startups, the model will be more difficult to manage and scale while at the same time disenfranchising their biggest assets, their chefs.
Kitchit and Kitchensurfing are banking on the on-demand meal space, hoping that customers prefer their meals cooked in their homes instead of at a catering facility or restaurant. But with Uber Eats, Munchery, Farm Hill, Radish and countless other startups delivering on-demand meals around the country for $10-$15 per meal, Kitchit and Kitchensurfing may have a difficult time convincing consumers to have on-demand meals cooked in their kitchen at rates of $25/person (Kitchensurfing) or $39/person (Kitchit). Additionally, the two startups have left many chefs feeling angry and left behind, especially the most talented ones, who have no interest in the on-demand, fast food model.