HOLY COW: Grocery delivery start-up Milkrun is dead, $86 million later, 19 months old
The dream is over for the rapid delivery of Milkrun, which is closing this week after 18 months of operations and has raised $86 million in the past two years.
Co-founder Dany Milham emailed staff today after Easter break to say “we’ve made the difficult decision to wind down the business, and as a result MilkRun will cease trading this Friday”.
More than 400 people have been laid off.
Milkrun was the last express delivery service left standing after several failed or left town last year, including Voly, Send and Deliveroo.
The decision is in stark contrast to the picture painted just 7 weeks ago, when the company is cutting headcount by 20% and Milham said the company would have enough runway for 12 months and all hubs would be profitable or profitable after those most recent cuts. would be cost effective.
Amid rising interest rates and cost-of-living pressures, it seems that the discretionary spending on which the startup has built its business has also topped the list of cost savings made by consumers.
“Since we announced our structural changes in February, economic and capital market conditions have continued to deteriorate, and while the business continued to perform well, we strongly feel that this is the right decision in the current environment,” Milham told it. staff in his emails.
Milkrun first launched in Sydney in September 2021 as a 10-minute delivery service, having raised A$11 million in June of that year. It went on to bank $75 million from Tiger Global in a Series A in early 2022 and aimed to raise again in the second half of 2022, but to no avail. It served about 80 suburbs in Melbourne and Sydney.
The company exits with enough money in the bank to pay suppliers and redundancy payments to the company’s more than 400 employees, including delivery drivers.
“We have always strived to do things the right way, and winding down the business while still having plenty of cash allows us to ensure that our people and suppliers are paid in full,” Milham wrote.
VC funding for the startup also came from Airtree, as well as Skip Capital and Grok Ventures – the family investment vehicles of Atlassian billionaires Scott Farquhar and Mike Cannon-Brookes.
While it appeared to be cash and generated about $4 million in monthly revenue 12 months ago and into February of this year, the average order value had doubled to over $50.
The first signs of change emerged in June 2022, after only 10 months in operation, when Milkrun cut overtime and casual hours. It was losing money on every order – $10 per delivery at the time, which Milham said was “actually a good number compared to international peers” at the time. The 10-minute delivery rule was also relaxed.
While Milham talked about total sales of $7 billion by 2026, the bigger problem was that the industry had no real barriers to entry, so cashed-in traditional players in the space – Woolworths and Coles – could easily replicate and match the offerings.
Woolworths launched Metro60 in June last year, which enabled 50 popular items to be delivered within an hour, backed by US tech giant Uber.
A crowded market was already losing challengers, with Send collapsing in May 2022 after failing to find investors for a $15 million raise at a $50 million valuation.
Sydney-based rival Voly cut its workforce in half and closed warehouses the following month. It launched in July 2021, raised $18 million in December 2020 in a Seed round led by Sequoia Capital India alongside Global Founders Capital and Australia-based Artesian Capital. It had a net loss of $13.6 million in FY22.
Creditors, who owed $17.7 million, received between 15c and 27c in the $1.
Milham said he wanted to change the face of grocery delivery in Australia, “while staying true to our values, people and culture,” in a statement to Startup Daily.
“We did that thanks to the passion, dedication and hard work of so many of you, and you should be really proud of what we have achieved together,” he said.
AirTree partner Jackie Vullinghs said growth investor sentiment was shifting along with the changing economic climate and the company was unable to “find a path to break even with the remaining available resources.” Nevertheless, the company forced the incumbents to invest.
“We knew that the business would not be profitable from day one and that it would take scale to become profitable. As an early stage investment, we felt this risk was justified by the size of the benefit,” she said.
“Failure is part of VC and we will continue to support outlier founders in the earliest stages of their journey.”
