The closure was the second in the span of a week by an ultra-fast delivery service in New York City after failing to secure a deal or financing, leaving hundreds unemployed.
Fridge No More CEO Pavel Danivol told employees in an email Thursday that a deal with a potential buyer fell through two days earlier and that it could not continue operating.
“This decision was sudden and unforeseeable,” Danivol wrote in the email, a copy of which was viewed by CNN Business.
“Due to the dramatic and unexpected lack of funding and failure to close the sale of Fridge No More,” the email continues, “this letter shall serve as notice to you that there will be a mass layoff.”
Though the buyer was not named in the email, a source familiar with the deal talks told CNN Business that DoorDash, the publicly-traded delivery company, had discussed acquiring select assets of Fridge No More, such as its real estate and products, in recent weeks and had been providing an undisclosed amount of bridge financing — a type of funding startups sometimes use to continue operations in between formal funding rounds — as it assessed a deal.
“However, the restrictions [Russian President] Putin has imposed in response to US sanctions have made this bridge financing setup untenable, despite neither of our founders being sanctioned,” the spokesperson said in an email.
While ties to Russia may have complicated matters, the sudden failure of the two startups due to inability to secure capital quickly underscores a more fundamental issue with their businesses. “The worst business model ever created was rapid grocery delivery,” said Brittain Ladd, a food supply chain consultant who said he has advised a number of companies in the space and formerly worked in strategy at Amazon.
Ladd said that some of the startups lack a path to profitability and are relying on venture capital funding, calling it “the only reason [they’re] able to exist.”
“It is too similar to Kozmo.com,” said Ladd, of the infamous dot-com era delivery startup that raised hundreds of millions in capital on a similar premise before going bust.
Essence Wilson, who worked as a part-time courier for Fridge No More in New York City, told CNN Business that she’d sometimes have to ride her company-owned scooter many blocks from the company’s mini-warehouse to deliver a box of Raisin Bran cereal, or a single apple. Wilson said she didn’t see the company thriving in the long-term, but she didn’t think the end would come quite so soon.
“I feel like they were so eager to customer please they ended up, kind of, doing themselves in,” she said.
Workers were notified in a Telegram chat group with more than 800 members that they could retrieve any personal belongings from their stores on Friday. According to a screenshot viewed by CNN Business, the workers were also told they could take any products from produce, dairy, cheese and meat, or its bakery.
Wilson told CNN Business she would consider joining another ultra-fast delivery startup though she specified she likely wouldn’t apply for courier roles, citing the physical toll of the job.
While Uber helped to popularize the model of treating drivers and couriers as independent contractors, many of the ultra-fast delivery startups employ their couriers, which allows for more control over their schedules but also affords workers certain benefits and protections.
In its email to employees concerning the layoffs, Fridge No More provided a phone number to reach the company’s cofounders with any questions. When CNN Business called the number, there was an automated voice message: “Due to the current circumstance, if you’re calling for the unemployment [employer identification number]the number is….” (Callers can also leave a voicemail.)
Fridge No More did not respond to CNN Business’ request for comment.
When attempting to place an order on Buyk Friday morning, the app read: “Hey everyone! Our services are temporarily unavailable. Check back soon!” Meanwhile, doing the same on Fridge No More simply returned: “Sorry we’re temporarily closed until further notice.”