Hot on the heels of AgFunder’s recent investing report which detailed some $1.65 billion of investment in food e-commerce companies in 2015, Hungryroot, a New York-based meal kit delivery service, has raised $3.7 million in Series A funding.
The startup, which focuses on natural and healthy food, raised the funding from early stage investment firms Lightspeed Venture Partners, Lerer Hippeau Ventures, tech-focused investor Crosslink Capital, private equity growth investors KarpReilly, and New York seed investor Great Oaks Venture Capital.
This recent funding brings the company’s total raise to $6 million. In Spring 2015, the company raised a $2 million seed round with New York seed stage fund Brooklyn Bridge Ventures and early stage internet startup investor Mesa Ventures.
The high level of investment into food e-commerce has sparked some concern that the sector is overheating. The segment, which AgFunder classifies as including online grocery delivery and meal kits companies, accounted for 36 percent of the total $4.6 billion raised in agtech in 2015. And that’s excluding any restaurant delivery startups.
This 300 percent increase in investment on 2014 volumes makes it essential for startups to differentiate themselves from others in their segment. Hungryroot is hoping to do so by not using the subscription model favored by so many in the meal kit space; and by offering vegetable-centric, gluten-free meals of under 500 calories. It also focuses on designing meal kits that can be prepared in just seven minutes or less.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Products it delivers fall into a number of categories, including meals, sides, sweets, spreads, breakfasts, and noodle dishes. Black bean brownies are one of its most popular items.
Launched in 2015, Hungryroot distributes its meal kits through Amazon and Fresh Direct and is hoping to expand into Whole Foods. With this new injection of funding, the company is now focusing on accelerating the business.
Jeremy Liew, partner at Lightspeed Venture Partners, told TechCrunch that Hungryroot reminded him of the Honest Company, a multi-product business founded by actress-turned-entrepreneur Jessica Alba. In an environment where consumers are paying more attention to what’s in their food and where it comes from, Hungryroot’s platform may have widespread appeal. Its quick-cooking angle will also appeal to busy consumers who don’t have time to shop and prepare fresh, healthy ingredients, he said.
Despite food e-commerce investment topping the 2015 charts, it hasn’t been smooth sailing for every startup. In India, perhaps the biggest arena for food e-commerce, a number of startups have fizzled out and shuttered their doors. For many, whittling down delivery costs to make sure margins are profitable has been the biggest challenge. Others have expanded too rapidly and found their models unsustainable. It’s likely 2016 will be a year of clear winners and losers.
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