The Chilly Freeze For On-Demand Startups
We will talk about this topic among others at The On Demand Conference in NYC on September 15, Register Here. We are also running our second contest for the best B2B on-demand startup, more details here!
My, how things can change. When we did the inaugural On-Demand Conference back in May 2015, everything was hot. Now, gearing up to the second installment in September in NYC, things are — shall we say — a wee bit chillier. And, rightfully so. In a few months, we’ve seen high-profile companies broadly in the sector nearly fold overnight, we have yet to see the big rollup consolidation strategies that people wish would happen, and the culture of copycat models is bringing more and more founders into red ocean markets like food delivery.
Investors are applying more scrutiny toward on-demand startups, asking flavors of the following questions: How frequent is the consumer use case? What is the payback period when opening a new geography? What do the unit economics look like, and can they modeled at scale? Does the team understand they should balance unit economics and growth by city to make sure they don’t run out of money? We haven’t seen much M&A in sector, so can this company go the distance? How can the team expand the product/service offering if the service grows? With UberEATS now in San Francisco, the backyard to many well-funded food delivery apps, could Uber crush the opportunity entirely? And, who might follow into the next round of funding should the team set out to do what they want to do?
These are MUCH harder questions than VCs were asking before. Welcome to the new world. Now, that’s not to say there won’t be some companies which continue to fetch large rounds, or that there won’t be on-demand concepts that attract funding in different parts of the world or in different product categories (like healthcare). The concept is bigger than food and transportation, though those two are clearly the consumer drivers.
Luckily for us, the purpose of these conferences isn’t to promote a sector, but rather to gather the most thoughtful minds among company builders and investors to tackle the most pressing issues of the day. So, in September in NYC, that will be no different. You can learn more about the NYC event on September 15 here, and on the VC panel in particular, friends Steve Schlafman (RRE), Kanyi Maqubela (Collaborative), Anu Duggal (Female Founders Fund), and David Tisch (BoxGroup) will debate these and other issues facing on-demand startups in the seed and Series A/B stages.
Register here for the September event in NYC. Unfortunately, I am unable to attend in September now, as I was very much looking forward to seeing everyone, meeting all the new founders with new concepts, and kicking off the day’s activities with a fireside chat with USV’s Albert Wenger, but I can’t make this trip. So, I will give away my ticket to one person who really wants to attend. What I ask for is this — tweet out a link to this event and mention me @Semil on twitter, and my co-organizers will pick one lucky winner to attend the event in my place!