# Sprig (2013 – 2017)

- URL: https://girisimcikafasi.com/en/startup-graveyard/sprig/
- Sector: Food and drink
- Country: United States
- Total funding: $56.7 million
- Cause of closure: Business model failed

## What did it do?

Sprig was a San Francisco-based food start-up that sold healthy meals made with local ingredients, cooked by chefs in its own kitchen, for about $10 through an app and delivered them within 20 minutes. It ran the whole chain itself, from sourcing ingredients to cooking and delivery. It offered a menu that changed every day.

## Why did it shut down?

Owning the whole chain from food production to delivery became complex and expensive as the business scaled. An attempt to expand to Chicago struggled, and operations there were halted in July 2016. In its final months the company tried new channels, such as selling to walk-in customers and distributing through Caviar. Despite $56.7 million of investment, it closed in May 2017 in a fiercely competitive delivery market.

## The story

Sprig's promise in 2014 was irresistible to anyone living in San Francisco: a meal made with local, seasonal ingredients in a kitchen run by Nate Keller, Google's former executive chef, at your door within 20 minutes for about $10, with a few taps in an app. To keep that promise, the company took on every stage of the meal itself, from sourcing ingredients to cooking and delivery.

Sprig launched in San Francisco in November 2013. Its co-founders included Gagan Biyani from Udemy's founding team, Neeraj Berry, who ran operations, product lead Morgan Springer and engineering lead Matt Kent. In March 2014 a $10 million Series A led by Greylock Partners, with Battery Ventures and Accel taking part, arrived. In April 2015 a further $45 million was raised in a round led by Social+Capital and Greylock, taking total investment to $56.7 million. The company planned to expand to the rest of the Bay Area and to Chicago.

The food delivery market, however, was both crowded and capital-hungry. Sprig struggled in Chicago and in July 2016 halted operations there, laying off seven people. In its final months it tried new routes, such as opening its San Francisco kitchen to walk-in customers and selling its meals through Caviar. These experiments were a sign that the distribution channel it had built on its own was not enough.

On 26 May 2017 Biyani announced in an email to customers that the app was shutting down that day. The closure affected about 200 people, including part-time staff; all employees were paid two months' salary, and career days were organised to help them find new jobs. Biyani wrote that demand for Sprig's food had always been very high, but that the complexity of owning the whole chain from production to delivery at scale had been a problem. Maple, which had a similar model, had closed the same month; SpoonRocket had gone the same way earlier.

Sprig shows that vertical integration is a powerful tool for controlling quality, but that it loads the costs of kitchen, logistics and staff from scratch onto every new city. High demand is not enough to sustain growth unless profitability per order has been proven.

## Lessons

- If you run both a kitchen and a logistics operation, prove that your contribution margin per order is positive in your first city before opening in a new one.
- Rather than relying solely on your own app, test food marketplaces as an additional sales channel early on.
- Make the decision to close before the cash runs out completely; this timing is what allowed Sprig to pay its employees two months' salary.

## Sources

- [On-demand food startup Sprig is shutting down today](https://techcrunch.com/2017/05/26/on-demand-food-startup-sprig-is-shutting-down-today/)
- [On Demand Food Service Sprig To Shut Down](https://www.theinformation.com/articles/on-demand-food-service-sprig-to-shut-down)
- [Sprig Raises $10M From Greylock To Bring Healthy, Inexpensive Meals To Your Door](https://techcrunch.com/2014/03/27/sprig-raises-10m-from-greylock-to-bring-healthy-inexpensive-meals-to-your-door/)