Good Eggs raises $15 million to expand across the U.S.

A San Francisco startup that many people assumed was toast, Good Eggs, has raised $15 million in a new round of venture funding led by Index Ventures to expand its online, organic grocery business first in the San Francisco Bay Area, and later across the U.S.

In recent years, Good Eggs tried to ramp up its eco- and farm-friendly grocery business only to face logistics problems, high costs and lagging customer satisfaction in some markets.

It shut down all its operations outside of the San Francisco Bay Area, laid off employees and retrenched, expanding the assortment of products it offers by more than 1,000 items, and beginning to use third-party logistics services to supplement its fleet of truck drivers to ensure on-time deliveries.

While Good Eggs founder and former CEO Rob Spiro, an ex-Googler, has stayed on in the capacity of a company adviser, the company is now led by long time food and consumer packaged goods executive Bentley Hall who joined the startup late last year.

Hall is an accountant by training who previously served in a number of senior executive roles at Plum Organics, and worked for other mainstream consumer goods manufacturers including Clif Bar and Johnson & Johnson.

The CEO declined to comment on terms of the new deal.

He said while not all of Good Eggs’ previous backers were in the new round, many were, including Index Ventures, which led the round. New investors also joined including firms with a depth of expertise in foodtech, including S2G Ventures and Obvious Ventures, he noted.

Good Eggs faces a huge amount of competition in its quest to link customers who’d fall into the “picky eater” and “foodie” category to all the vegan, gluten-free, paleo-friendly and other ingredients that they crave from local farms and sustainable producers.

Online groceries today in the U.S. range from Instacart or Postmates, which both deliver from brick and mortar businesses, to services from tech titans like Amazon Fresh or Google Express, and other venture-funded sellers of produce like Relay Foods.

Then, there are countless small businesses and regional players like Fresh Direct in New York, Crisp in Chicago, and others that focus on healthy and organic packaged goods snacks, like Thrive Market, LoveWithFood, Naturebox and to name just a few on the national scene.

Beyond the online players, Hall sees traditional brick and mortar groceries like Whole Foods Market or Safeway as competition as well. “A majority of people still shop at brick and mortar. I eager to get people shifting to online grocery and accelerating that shift,” he said.

Good Eggs investors also declined to comment on terms of the new venture funding round, including whether or not the company has taken a “down round,” or lower valuation than it had previously.

Index Ventures’ Danny Rimer said his firm upped its investment in Good Eggs because the company has improved its operations, churn and “basket” size, and can consistently deliver with the level of service quality it needs to support expansion now.

“The original value proposition holds true. Customers want to understand who are the suppliers and creators of the food that they eat and feed their families. They want a relationship with local suppliers and farmers. It’s no longer enough to sell a decent product at a good price,” Rimer said.

In groceries online and off, the “basket” is of paramount concern, generally. The more people buy per order, the better the margins on that order.

He compared Good Eggs to Etsy’s online marketplace for hand-made gifts, accessories and other items. Etsy now sells food but not fresh produce.

Investors expect Good Eggs to focus on scaling in the Bay Area near-term and beyond it longer-term, hiring, and maintaining a high, average order value among customers, Rimer said.

Hall said he believes the startup has an advantage over other players in the space thanks to the software that Spiro and the early Good Eggs team built to run the business including, especially, an app that helps the company conduct speedy sorting, tracking, packing and shipping of a high volume of goods from a wide variety of farms and local vendors.

Corrections & clarifications: Rob Spiro is an advisor to Good Eggs but not a chairman with the company as previously stated. Bentley Hall held several senior executive roles at Plum Organics prior to joining Good Eggs.