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$56 Million Couldn't Save These 140 Jobs: Good Eggs Shuts Down All Operations Outside San Francisco
Yesterday, Good Eggs, an organic grocery delivery startup, announced that it will shut down all operations outside of San Francisco, affecting customers in Los Angeles, New York and New Orleans. They will also lay-off roughly 140 employees.
Good Eggs was founded in 2011 and less than a year ago raised $21 million in a series C bringing their total funding to a whopping $56 million. The startup was created to change the way people eat, making it easier for customers to buy organic foods produced by independent, local farmers and vendors. Referred to as the, “Instacart for rich people,” Good Eggs is the highest quality, and most expensive player, in the growing grocery delivery space.
After its February 2013 launch in San Francisco, Good Eggs was off to a quick start with rapid growth. Within 18 months the company had expanded from San Francisco to deliver to customers in Los Angeles, New York and New Orleans. The bulk of the capital from last year’s raise of $21 million was slated for Good Eggs to continue entering new markets. Instead, the company will contract, even after such a large raise.
In yesterday’s announcement by Good Eggs, co-founder and CEO Rob Spiro talked about his startup’s next steps. He said the team is still, “100+ strong,” will continue to deliver to the Bay Area, and will still roll out product improvements.
Here’s how he explained his decision to make the cuts:
“The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain. We were motivated by enthusiasm for our mission and eagerness to bring Good Eggs to more people. But the best of intentions were not enough to overcome the complexity. Today we realize that in order to continue innovating in San Francisco, our original market, in order to continue figuring out all the complexity that is required to achieve our mission, we cannot productively maintain operations in other cities.”
Unfortunately, for some Good Egg employees and customers who were counting on a paycheck or a delivery today, the reasoning behind the decision comes as very little solace. However, as entrepreneurs we can more closely examine Good Eggs’ troubles and learn from their missteps. As the company’s’ CEO explained, he believes the number one reason for yesterday’s decision was the choice he made to expand too quickly. But was this really the core reason behind the decision that will no doubt affect so many? Was there no way to continue to grow markets instead of reducing the number of existing markets? With $56 million in capital most entrepreneurs would deign to believe they would find success with such an enormous amount of money and if Good Eggs is cutting back it is perhaps because they irresponsibly used their funding. And, that may be the case, but sometimes money doesn’t solve company’s core problems
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