On-demand startups that promised to spoil you rotten are starting to fail

Nate keller, gagan biyani, sprig, sv100 2015Sprig/Photo by Peter SamuelsSprig’s executive chef Nate Keller and CEO Gagan Biyani

The on-demand economy is starting to show its cracks, and companies are falling apart in an environment where funding is suddenly hard to find and low-to-no margin businesses are facing tighter scrutiny.

On Tuesday, Bay Area food delivery food business SpoonRocket closed its doors after it was unable to raise money after more than a week of rumours that the company was looking for a last minute buyer. TechCrunch previously reported the shut-down.

Rival Sprig took a hard look at the company, but decided to pass on the acquisition, according to multiple sources familiar with the situation. The intellectual property and other company assets didn’t justify an acquisition, one person involved said. SpoonRocket didn’t employ its delivery drivers, who worked as independent contractors, so they could not be acquired as part of a deal.

Sprig did formalise a partnership and money changed hands amidst the shutdown, but that was more of a marketing play to attract SpoonRocket’s customers to Sprig, the person added. A memo to SpoonRocket drivers also pointed them to join Sprig, although Sprig’s structure of employing drivers means they will have to interview.

A Sprig spokeswoman would not comment or acknowledge any acquisition talks, but did confirm the partnership between the two. SpoonRocket did not return multiple requests for comment in the last week.

“We are partnering with SpoonRocket to invite all of their current servers and delivery staff to interview to become Sprig employees in San Francisco. Our server employees are core to our mission as we continue to grow at a rapid pace in our home city, where we currently serve thousands of meals per day,” Sprig’s spokeswoman said. New customers coming from SpoonRocket also get a discount as part of the transition.

SpoonRocket’s shut down comes at a time when the once-hailed on-demand economy is starting to see pivots and moves away from it.

Valet company Zirx moved entirely away from parking consumer cars at a push of a button. Its rival Luxe is also starting to ask to schedule car returns instead of making it as easy as hailing an Uber, according to a report in Bloomberg. In the food space, which has been overrun with companies for years, more startups are turning away or shutting down entirely. Uber rival Ola shut down its food delivery arm. Startup GoodEggs closed in several cities. Meanwhile, Uber itself is entering into the competition, adding another well-funded player in an already way too crowded space.

SpoonRocket founder Steven Hsiao wrote in the company’s goodbye note that the competition amongst startups combined with a bad funding environment lead to the sudden shutdown.

“We explored all strategic options till the very last minute but unfortunately, they all fell through,” he wrote.

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