Food tech (including virtual restaurants and ghost kitchens) is a space we cover on occasion. What could be more truly local than eating, after all? But the space is a bit messy. Entrepreneurs who should know better often open restaurants because they love food. They ignore the miserable margins and shockingly high failure rate. The false hope facilitated by food tech — the ability to get into the dining businesses at a much lower cost of entry — has at least in theory led more entrepreneurs, especially those with a passion for food, astray.
Virtual food has its place, of course. The pandemic cemented the notion that we can have quality food delivered to our homes. But as the pandemic has receded, America at least seems to have returned to dining out vs. having fine dining delivered to the home. Still, the appeal of building a massive company around ghost kitchens and virtual dining has endured.
This has even been true among some highly seasoned, celebrated entrepreneurs. Marc Lore is one such business leader. Lore is the founder of Jet.com (later acquired by Walmart) and the owner of the NBA’s Minnesota Timberwolves. He founded Wonder in late 2021 and this year he managed to raise $850 million and hit a valuation of $3.5 billion. Food celebrities like Bobby Flay got involved as well.
We have tracked Lore’s startup, Wonder, with what now appears to be a justified degree of skepticism. Wonder, in a nutshell, is a ghost kitchen on wheels. Over the Summer, the company was the toast of the town, raising gobs of money, and garnering breathless press coverage from CNBC and other blue-chip media outfits.
Here is a bit of what we said about Wonder back in June. We hope the snarky tone has aged well.
“…The big idea behind Wonder is to bring hot and fresh, name-brand, high-end food right to the consumer’s door. At this point, that door has to be in New Jersey, but the company plans to grow outside the Garden State.
“Wonder doesn’t do this by rushing the food from a fixed-location ghost kitchen via Door Dash. The cook is in the van. And the food is prepared outside the customer’s home. As far as we know, Bobby Flay himself isn’t grilling the steaks. But we wouldn’t be surprised if he does so at some point for a publicity stunt. As long as he’s cool with going to Jersey.”
The Inevitable Pullback
Our skepticism aside, a pullback was inevitable, given the current environment in tech venture funding. The new venture vibe takes a dim view of over-funded, highly aspirational startups like Wonder, which seems to have assumed without much evidence that there would be high demand for Bobby Flay steaks cooked in the same van that delivers the hot meal to your front door in suburban Jersey. Wonder hasn’t exactly proven the concept has legs.
So we were not deeply shocked to read today in The Information (the part we could read outside of the paywall at least), that Wonder is scaling back its plans and confirmed plans to lay off 7% of its workforce. The company currently has a headcount of about 1,900, according to The Information. We’re not sure what Wonder’s valuation is today. We assume it hasn’t grown.
Will Wonder survive? Who knows? We remain unconvinced the idea is sound. Here is a little more of what we said about Wonder over the summer. We stand by it.
Lore fancies himself a “serial disruptor”. Or at least that’s what Jim Cramer calls him. But what needs disrupting here? Getting food from a famous chef that’s hotter and fresher than your neighbor’s soggy noodles from DoorDash is interesting. But it just doesn’t feel big.
In Cramer’s CNBC interview with Lore back in April, he called Wonder a “winner take all” concept. We don’t know Cramer personally. Perhaps this is his way of saying, “This idea sucks” to the face of an entrepreneur he respects. And Lore is an entrepreneur who genuinely deserves respect.
Our question is, “Winner take what?”
