Venture capitalists are still hungry for food delivery startups.
Foodsby, the provider of a lunch delivery service based out of Minneapolis, has raised a $13.5 million Series B led by Piper Jaffray Merchant Banking. Greycroft Partners, Corazon Capital and Rally Ventures also participated. With the new capital, Foodsby plans to expand to 15 to 25 new markets. The round brings Foodsby’s total raised to $21 million.
“We have established a successful model for new market entry with a tried and true combination of talent and technology,” Foodsby founder and CEO Ben Cattoor said in a statement. “We look forward to building on our early successes and learnings to deliver continued growth for our investors and our team.”
Founded in 2012, the company connects employees in office buildings in 15 cities with local restaurants. How it works: A hungry worker uses Foodsby to pre-order a meal from a restaurant in its network, Foodsby aggregates all the orders it receives, sends the orders to the restaurants and the restaurants then make all the deliveries at once, streamlining what can be a logistically complicated process.
That strategy, the company says, sets Foodsby apart from competitors. Because Foodsby only works with businesses and has restaurants make the deliveries rather than its own fleet of delivery agents, the overall costs of the operation are lower. It’s free to join the Foodsby network as both a company that wants to provide the service to its employees and as a restaurant. Deliveries cost $1.99 per person.
While continued VC support may give the company a vote of confidence, the food delivery space is crowded and competitive. Foodsby is not unlike Peach, a Seattle-based office lunch delivery service that shed one-third of its staff in March. Peach had also landed VC support, raising about $11 million from Madrona and others. Munchery, another similar meal delivery service, also looks to be in hot water, laying off 30 percent of its workforce in May and ceasing operations in Los Angeles, Seattle and New York.
Food delivery startups are hit or miss, but VCs continue to flock to investment rounds in hopes of betting on the next Uber of food delivery — though Uber itself is really the Uber of food delivery, its food delivery service is reportedly the most profitable arm of the ride-hailing giant. And Uber, much like Amazon, is not a company you want to be going head-to-head with.