A €1-million-lesson on meal-kit delivery

BuyFresco was a venture-backed startup delivering fresh meal kits and recipes in Spain. I founded it in 2012 and shut it down in July 2016. We sold its assets to El Super, and we made no return on our investment. However, our peers HelloFresh and BlueApron will soon go IPO. Here is why BuyFresco had a different finale.

The start.

Buyfresco’s origin lies in the feedback of some users of my first venture, SupraChef. These users asked us to deliver the ingredients of the recipes displayed on our web app. We thought it was a cool idea but a hard problem to solve. In 2012, SupraChef’s traffic collapsed (that’s another epic story), and we rapidly pivoted into eCommerce. The food eCommerce category in Spain was small but promising compared to other markets. We didn’t want to accept the failure of SupraChef and eCommerce was the hot topic at that time in Spain. That was my first (big) mistake.

Thanks to the feedback of our SupraChef’s users, we built a mockup of an online store delivering recipes and its ingredients. But, finally, we thought that it would be very hard in Spain to raise money for a brand new business model. So we built an online supermarket like PeaPod and followed the same steps the founders took to avoid the mistakes of WebVan. It was cool to learn from other’s mistakes.

We sold around 200 orders from our online supermarket and looked for new funding. Then the Spanish subsidiary of the online supermarket Alice, the hottest startup in Madrid at that time, filed for bankruptcy. So we didn’t find any funding. A few weeks before shutting down our supermarket, we found a Swedish startup established in 2007, Midaggsfrid, that was delivering recipes and its ingredients. Her founder should take the credit for this industry: she unlocked the value. However, other global players (HelloFresh and BlueApron) had captured most of it. A few days before shutting down our supermarket, we found that Rocket Internet was building HelloFresh, a copycat of that Swedish startup, in 4 European countries already (not including Spain). We raised some money from friends, bootstrapped again, and copied HelloFresh. “One day we will sell the company to Rocket Internet,” I thought. I didn’t have a long-term ambition. That was my very second (big) mistake.

The going.

Once we got started, I believe we executed very well. My team (and friendly freelancers) did a fantastic job. I now salute and thank them (Susana, Silvia, Oscar, Lara, Laura, Gloria, and Agustin) and all my investors, they didn’t get any cent back from their money and they also put in time and effort. Shout out to Ángel and Paco (from Mola) who stayed with us from the very very beginning to the very very end; Juan Luis and Rubén(from Plug & Play) who, with the Kobilanksy brothers (from Danka) and Carlos D., made the first institutional push to BuyFresco when things were hard in Spain; Luis Felipe, Jose María T. and all the angels meeting monthly with me near Retiro Park; David and Curra (from Daruan) who, with my entrepreneurial family, made the biggest bet; Antonio Q., José María D., Nacho, Antón, Cristobal, and all the IESE investors, who never ever quitted; my bold friends (especially Luis, Eduardo, Pedro S., Javier, and Jaime); and my amazing family, unconditionally willing to help and support.

We were very passionate about the venture, the business model, and the excellent feedback we had from our clients. We could perceive the impact of our work. Myself, I was excited about a business model that could beat that of the supermarkets, especially from the logistics perspective.

A very cool business model that scales unlike that of supermarkets

During the going, we learned to do a bunch of things quite well; for instance:

  • Every round, set a series of key milestones.
  • Be under the radar, focus on customers, marketing, and product.
  • Improve your business model day by day. Don’t wait.
  • Build an excellent (digital) distribution for a great (digital) product.
  • Marketing = customer acquisition + retention. Avoid the crap, love the data.
  • Attending events and media are distracting. Talking to your customers is useful.
  • Share mistakes. Take calls from other entrepreneurs.
  • Take extreme ownership of your product, your service…, your work.
  • Be friendly with your competition. Be fierce with the incumbents.
  • Have a criterion about when to kill your venture. Google X has it.
  • If so, close your venture smoothly: “Como un señor.
We tried to improve our business model every day, until the very last day

And we also made some mistakes:

  • Our model was hard to bootstrap, I spent 33% of my time fundraising.
  • We had a long cap table, and I didn’t have a formal board of directors.
  • We lacked a growth expert on the founding team. I learned on the fly.
  • We were not familiar with demand generation. Same: on the fly.
  • When we had no bandwidth, I didn’t sport. That didn’t help.
  • Fail faster. Fail faster. Fail faster.
  • Before going all in, make small bets (great learning thanks to André Calmon).

Read Paul Graham‘s post for the nicest list of startups’ mistakes. And check Forward Partnerstools for startups. And remember: when the going gets tough, the toughs get going.

Why we failed.

Between 2012 and 2016, BuyFresco, in Spain, sold around 120k meals with total revenues of around €0.5 million and fund-raised €1 million. Gousto, in the UK, sold 300k meals in just one month in October 2015 with c.a. €10 million fund-raised from local investors. HelloFresh, in northern Europe and the US, went from $3M of revenue in 2012 to $290M in 2015 with c.a. €200 million of fund-raising. If we take a look at the attractiveness of the leading eCommerce markets in 2015, this is what we get:

Spain is #18, after Mexico and Sweden. The 2015 Global Retail E-Commerce Index, AT Kearney

In 2015 Spain was ranked #18, way below smaller countries like Belgium or the Netherlands. In 2014, I thought that the consumer crisis was about to end soon and that the young digital consumers will start increasingly buying premium consumer products in 2015. That was my third (and biggest) mistake.

BuyFresco was a nice-to-have product for the people who could afford it. In Spain, the market was getting more and more polarized: the low-cost segment was becoming lower, and the premium was becoming more premium. There was no more room for the middle segment: goodbye, Spanish Middle Class.

On the other side of this coin, models like Wallapop, a marketplace that helps young digital consumers to save money or to make money, had been very successful during 2014–16. That means that there is always an opportunity.

Is it now the right time?

A question that I get a lot these days is it now the right time in Spain? I don’t know. Timing is the single biggest reason why startups succeed or fail. But I know that most of my clients were young working couples, so let’s take a look at the unemployment rate in Spain vs. that in the UK and in Germany.

The happy 2000’s and the (almost) Lost Decade.

On the other side of the coin, models like Wallapop, a marketplace that helps young digital consumers to save money or to make money had been very successful during 2014–16.

If I were to start again in 2012, what would I do differently?

If I were again in 2012, I’d start BuyFresco in London, not Madrid, where the e-commerce market was more developed, and the unemployment rate was below 10%. Yes, there was more competition in the UK, but the downside was the same whether you fail in Spain or in the UK. However, the upside was not the same: the UK market was more attractive for those who dared to win it. The founders of Gousto are successfully competing in the UK with a giant, HelloFresh.

BuyFresco was a grocery e-commerce; therefore, it was not possible for us to be based in Spain and target the US like some successful Spanish e-commerce startups do (i.e. Hawkers). I now like that approach very much.

That’s all folks. I hoped it was useful.

Originally published at andyareitio.com on April 5, 2017

Partner @TheVentureCity. Previous ventures: @BuyFresco, @Suprachef. Education: @INSEAD, ICADE, and a few failures ;-)