INSUBCONTINENT EXCLUSIVE:
Several weeks after a sudden shutdown left customers and vendors in the lurch, meal-kit service Munchery has filed for bankruptcy
In the Chapter 11 filing, Munchery chief executive officer James Beriker cites increased competition, over-funding, aggressive expansion
efforts and Blue Apron failed IPO as reasons for its demise.
Munchery owes $3 million in unfulfilled customer gift cards and another $3
million to its vendors, suppliers and various counterparties, the filing reveals
The company remaining debt includes $5.3 million in senior secured debt and convertible debt of approximately $23 million
Munchery says its scrounged up $5 million from a buyer of its equipment, machinery and San Francisco headquarters.
The business had raised
more than $100 million in venture capital funding, reaching a valuation of $300 million in 2015 before ceasing operations on January 22 and
laying off 257 employees in the process
Munchery was backed by Menlo Ventures, Sherpa Capital, e.Ventures, Cota Capital and others.
The company, which failed to notify its
vendors it was going out of business, has been scrutinized for failing to pay those vendors in the wake of its shutdown
To make matters worse, emails viewed by TechCrunch show Munchery continued aggressively marketing its gift cards in emails sent to customers
in December, weeks before a final email to those very same customers announced it was ceasing operations, effectively immediately.
An email
advertising Munchery gift cards sent to a customer weeks before the startup went out of business.
The latest court filings shed light on
Beriker decision-making process in those final months, touching on Munchery frequent pivots, the company 2017 layoffs, its plans to scale
sales of Munchery products in Amazon Go stores and failed attempts at a sale
Beriker is the sole remaining Munchery board member
He has not responded to several requests for comment from TechCrunch.
In the third quarter of 2018, Munchery, at the recommendation of its
board, hired an investment bank to find a buyer for the startup, to no avail
Beriker suggests the lack of a buyer, coupled with industry trends like larger-than-necessary venture capital rounds and inflated
valuations, were cause for the startup failure to deliver.
&The company expanded too aggressively in its early years,& the filing states
&The access to significant amounts of capital from leading Silicon Valley venture capital firms at high valuations and low-cost debt from
banks and venture debt firms, combined with the perception that the on-demand food delivery market was expanding quickly and would be
dominated by one or two brands& as Uber had dominated the ridesharing market& drove the company to aggressively invest in its business
ahead of having a well-established and scalable business model.&
Increased competition from well-funded competitors drove the startup off
course, too, and the epic failure that was Blue Apron IPO, which had a &material negative impact on access to financing for startups in the
online food delivery business,& was just the cherry on top, according to Beriker statements.
Former Munchery vendors protested today at
@sherpa, one of the startup investors that&ve stayed silent as former employees, vendors and drivers claim to be owed thousands: &Startup
idea don&t steal pies!& Photo by @ThreeBabesBake pic.twitter.com/kfaOZ9CFkq
— Kate Clark (@KateClarkTweets) January 30, 2019
Munchery
vendors, who were not notified or paid following Munchery announcement, have provided outspoken criticism to the company and venture capital
lack of accountability in the weeks following Munchery shutdown
Lenore Estrada of Three Babes Bakeshop, among several vendors owed thousands of dollars in unpaid invoices, orchestrated a protest outside
of Munchery investor Sherpa Capital offices in January
She said she has spoken with Beriker and founding Munchery CTO Conrad Chu in an attempt to pick up the pieces of the failed startup
puzzle.
&None of us who are owed money are going to get anything,& Estrada told TechCrunch earlier today
&But [Beriker], after fucking it all up, is still getting paid.&
Beriker, indeed, is still earning a salary of $18,750 per month, one-half
of his pre-bankruptcy salary, as well as a &success fee based on the net proceeds recovered from the sale of the company assets up to a
maximum of $250,000,& the filing states.
View the full bankruptcy filing here:
After an abrupt shutdown, Munchery small business vendors
are the ones picking up the bill
