Dive Brief:
- Venture Capitalists in Silicon Valley have invested approximately $9 billion dollars into 125 on-demand delivery, or "Uber for X" start-ups within the past 10 years, Reuters reported Tuesday.
- In 2016 alone, roughly $2.5 billion of that $10 billion poured into start-ups, before investor disillusionment took hold. Most of 2016's investments, or roughly $1.9 billion, occurred between January and June. Since then, just $50 million was invested.
- More challenges exist than previously realized by the on-demand delivery start-ups, causing failures (at worst) and stumbles (at best).
Dive Insight:
Capital investment is perpetually sniffing the wind, trying to discern where success will land, and where it won't. Start-ups have long been the darlings of investors. Yet, as the flops multiply, and the difficult reality of on-demand delivery becomes more obvious, start-ups are feeling the effects as funding fades.
The supply chain has seen a wide variety of Uber for X startups attempting to disrupt the market, particularly when it comes to delivery. App-based load boards are attempting to optimize freight pickup and delivery, others are betting on home delivery of meal kits or services aiming to compete with FedEx, UPS, DHL and Amazon for local parcel delivery.
As is often the case, however, few have succeeded. Some of the reasons for failure include worker dissatisfaction, as misclassified workers sue parent companies and affect the bottom line, a misunderstanding of supply and demand dynamics where competitive markets stifle the company's ability to hike prices, or a rush to scale supply chain infrastructure without the required expertise.
Now that the rosy clouds of easy money are parting, on-demand start-ups may find it more difficult to succeed.
