The Berkeley-based food delivery service cites strong competition and an inability to raise more capital as factors in the decision to close.

Update: 3.15.16, 9:30 a.m.: SpoonRocket has confirmed it is ceasing operations. Tuesday morning it informed its investors it was shutting down its meal delivery service after failing to raise the necessary capital to continue. Co-founder Steven Hsiao confirmed the decision to TechCrunch. The company also sent out an email to its drivers letting them know it was closing down. It suggested drivers apply to jobs at San Francisco-based Sprig, another food delivery service where, it said, SpoonRocket drivers would be “an awesome fit.” The alert to drivers reads in part:

Admin Bay Area wrote:

3/15/16 URGENT UPDATE FOR ALL DRIVERS

GOODBYE…

SpoonRocket will cease all our operations effective immediately. We set out to build the next generation of food delivery network and we are proud of what we were able to achieve in a short period of time. However, as competition for on-demand food delivery has grown, it became clear that we could not continue to compete. Over the last few months, we’ve been exploring our next options and unfortunately came up short.



Update, 8:37 p.m. VentureBeat published a story at 7:05 p.m. in which it said it had spoken to SpoonRocket cofounder Anson Tsui who said it was not true that the company was shutting down. “We’re just resetting,” Tsui said, adding that the site should be back to normal “within a couple of days.” Tsui said the company had not made any layoffs.

Original story, March 14, 5:24 p.m. SpoonRocket, the food delivery service headquartered on Ninth St. in West Berkeley, has halted operations. A former employee and a contracted driver were both told by the company over the weekend that the business has closed down for good. No meals have been delivered since Friday, and SpoonRocket’s commercial kitchen, at 1725 University Ave., appears to be shuttered.

Anyone trying to order food for delivery over the weekend or on Monday was met with a notice on the SpoonRocket website that the site was “undergoing maintenance.”

On Sunday, Berkeleyside received an email from a tipster who said a friend, a SpoonRocket employee, had been let go. She was told that by management that SpoonRocket had gone under. Berkeleyside has not been able to confirm this. Several emails sent to SpoonRocket and to its PR representative, beginning on Sunday morning, have not been answered. The company is not answering phone calls.

A man who asked not to be named and who has worked as a delivery driver for SpoonRocket on and off since May 2014, was expecting to work this weekend. He said a manager at SpoonRocket told him on a phone call that the company was closing and that he should look for other work. Shortly afterwards, however, he received a text from the same manager saying things had changed and that they might not be closing. The driver said he wondered if the company was preparing an official statement and did not want the news to leak out prematurely.

SpoonRocket was launched in 2013 by UC Berkeley graduates Anson Tsui and Steven Hsiao with a mission to deliver cheap meals to customers rapidly via their smartphones. A typical entrée might cost $6 and be in the customer’s hands in under 10 minutes. Food is delivered by a fleet of contracted drivers whose cars often sport the company’s signature red flag. Drivers keep the food warm in special packaging and then respond to orders via an app and deliver until their supply runs out.

Tsui and Hsiao already had two startups to their names when they started SpoonRocket — Phở Me Now and Munchy Munchy Hippos, both of which came under umbrella company LateNightOption.com.

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The Y Combinator-backed SpoonRocket raised $2.5 million in seed money in September 2013, and $11 million in venture capital in May 2014, according to CrunchBase.

In 2014, SpoonRocket expanded from the East Bay to SOMA in San Francisco. It launched in Seattle in February 2015 but shut that service down just four months later in June of that year. (Update: the service was subsequently resumed in downtown Seattle and on the University of Washington campus.) It also launched and closed a San Diego operation in 2015.

The food delivery market has bloomed in recent years, making for a highly competitive field. Other companies in the same broad market that operate in the Bay Area include: PostMates, Eat24, Blue Apron, Caviar, Munchery, DoorDash, Instacart, Amazon Fresh, Good Eggs and UberEATS. All deliver prepared food, whether from kitchens, restaurants or grocery stores.

According to the driver, SpoonRocket operates different pay structures for its drivers — who are all independent contractors — depending on the time of day. The breakfast shift pays $11/hour not including tips, with a guaranteed minimum of $15, he said. Lunch and dinner on weekdays pays $2/delivery not including tips. And, on the weekend, drivers earn $6 an hour plus $2.25 per delivery, not including tips.

On Monday, speculation was beginning to be voiced on Twitter, with SpoonRocket fans bemoaning the lack of service and wondering what was going on:

@spoonrocket I love your service but the inconsistency is frustrating. What’s the deal with the random closures? — Kevin Wood (@megakwood) March 14, 2016

Not a good start to the week! @spoonrocket might be closing down! 😱 say it ain't so! https://t.co/LeYjI9nhM9 — Shayan Zadeh (@shayang) March 14, 2016

Hm, I was being smarmy, but I'm starting to worry that @SpoonRocket has in fact gone out of business. — Unstable Non-Genius 🏳️‍🌈 (@justizin) March 14, 2016

Not least because of its competitive pricing, SpoonRocket has proved popular among the local student population. But SpoonRocket was keen to stress that it had expanded its market beyond its core student market. In 2014, it contacted Berkeleyside Nosh to say it had “come a long way since serving pho and burritos to Cal students at 4 a.m.” It introduced organic and paleo dishes, and other demographics did indeed appreciate the service. Road-testing food delivery services last October on Berkeleyside, Heather Flett, co-founder of parents and kids website 510Families, reported that her “favorite service for the fastest food in town” was SpoonRocket.

This developing story was updated as Berkeleyside sourced new information.

Related:

Trying out food delivery services in the East Bay (10.08.15)

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