Peach has nailed down a successful formula for delivering lunch to office workers in places like Seattle and San Diego. Now, the young company has more capital to help bring its model to other big cities across the country.
The Seattle startup today announced a $8 million Series A round led by Madrona Venture Group that also included participation from Vulcan Capital. Total funding for the company stands at $10.75 million.
Peach partners with different restaurants each day and delivers boxed lunches to offices in Seattle and San Diego — Boston and Washington D.C. will have access to the service by the end of 2015. Peach members receive a text each morning for that day’s selected $10-to-$12 dish, and customers have 90 minutes to place an order by responding with a “yes” text. Their food shows up an hour later at one of 300-to-400 pre-determined office spaces on the system.
In Seattle, tech companies like Amazon, Microsoft, Zillow, Expedia, Tableau, and several others all have their offices as pickup locations on Peach’s platform.
“Turns out food delivery and takeout is a $70 billion category, only $9 billion of which is transacted digitally,” Peach CEO and co-founder Nishant Singh told GeekWire. “The vast majority of people who go to work every day are still figuring out what to have that day for lunch and where to go to pick it up or who to call to have it delivered. We’re not the only company to see this opportunity, but it’s a big market and one in which we’re happy to compete for the hearts and minds of our customers.”
Peach launched about a year ago, starting as “Peachd” and equipped with $2.75 million in seed financing. Singh, an ex-Amazon engineer, founded the company with former Amazon colleagues Denis Bellavance and Chenyu Wang after he began ordering different dinners from popular eateries for his co-workers, who enjoyed the variety of options.
Singh realized that restaurants liked bulk orders, and on the other side, big groups of customers liked paying low individual delivery costs. He then teamed up with Bellavance and Wang to develop a platform that would make the lunch-ordering process more seamless and also help restaurants make money off what Peach describes as “excess production capacity” they may have before the lunch hour.
So far, so good for Peach. Since last year, the 25-person company has delivered more than 400,000 meals and has signed up hundreds of offices.
Part of Peach’s secret sauce lies in algorithms that predict each restaurant’s order volume a week in advance, optimize delivery routes, and advise drivers where to park.
Singh noted that his company has also been energized with the reception from restaurants, who have the opportunity to add thousands of dollars in extra revenue each week while expanding their reach.
Peach’s early success is notable in part due to the long list of other services that people can use to order lunch. It competes against a flurry of other companies like Caviar, Postmates, Bitesquad, Seamless, GrubHub, Yelp-owned Eat 24, and many others that we tested last year.
Singh said Peach differentiates itself by helping both restaurants and customers at the same time.
“There are some-vertically integrated players who would be happy to put local restaurants out of business,” he told GeekWire. “And there are others who play an intermediary role between restaurants and consumers, but spend surprisingly little time investing in their relationships with restaurants and learning how to best partner with them. Peach works as well for our restaurant partners as it does for our members, and we’re really proud of the investments we’ve made in designing Peach to improve our restaurant partners’ businesses.”
Those “vertically-integrated players” include startups like Munchery and Lish, both of which hire professional chefs to make pre-packaged meals specifically for delivery orders. Others in the “intermediary role” include the likes of Eat 24 and GrubHub, who partner with individual restaurants to deliver their food.
Peach customers seem to enjoy the efficiency of the platform and diversity of options from popular lunchtime spots like Paseo, Musashi’s, and others who pay Peach a 15-to-20 percent fee on each item to offer their food on the platform.
My @Peach menu for the week makes my heart sing. Kukai, Musashi, Paseo, Pintxo, Guamacos!? klfjdklsfkafln I can't even.
— Mercedes (@mercedes_luna) August 17, 2015
I tested Peach last year, and while my order was a bit botched, I was impressed with the customer service. It appears Singh and others have carried on the customer-obsession preached in the workplace at Amazon.
— Tara Tegtmeyer (@tbt924) August 12, 2015
@Mikesteezie Hey Michael, we followed up with Musashi's and they apologize for this! If you'd like a refund for today's dish please DM us.
— Peach (@Peach) August 17, 2015
As we noted in June, Peach has also expanded its services to include catering for Facebook’s Seattle office, Porch, and other customers. “Peach Perks” is another new offering that lets companies subsidize lunch for their employees. Many tech companies have their own in-house chefs to cook food for workers, and Peach allows startups without a kitchen or cooking staff provide a similar perk.
Nick Wood, the “Happy Manager” at Porch, said he likes not managing inventory or costs associated with providing food to employees.
“We can reward and recognize our employees with the simple click of a button,” Wood told us in June.
Most restaurants use their own employees to deliver the lunch, but Peach also hires third-party drivers — including some from Sidecar, the San Francisco-based company known for its ride-hailing service but now focuses on on-demand deliveries.
Peach will use the fresh funds to expand to Boston and Washington D.C. — it will be operating in four cities by the year’s end. The company also plans to expand its menu items and related services.
As a result of the new funding, Madrona Managing Director Scott Jacobson will join Peach’s board.
“While technology does not immediately come to mind when you think of food production and delivery, there is a lot of software and data mining that goes into delivering the simple, friction-free service Peach has built,” Jacobson said in a statement.
It’s worth noting that Peach does not offer a smartphone app — all orders are made via SMS or MMS. This strategy is similar to ReplyBuy, another new startup finding success by letting sports fans purchase tickets with a simple text message reply.
The text messaging mechanism makes Peach unique among a throng of new startups using technology to meet the demands of today’s customer that expects speedy on-demand delivery with excellent quality and service. Uber and Lyft are two of the most well-known examples of this trend to provide efficient and innovative on-demand services.
For the past few years, there always seems to be a new food delivery startup sprouting up. When we spoke with Sherpa Ventures co-founder Scott Stanford last year about a potential “food delivery bubble,” he noted how there is room for many players to succeed in the space.
“There are several startups going after food, but there are over 600,000 restaurants in the U.S.,” he said. “If the market has already proven that it can support that many restaurants, I would argue that there is room for one, two, five, or ten more coming at it from a completely different angle.”
Stanford also described how the Internet changed media and changed consumer expectation from a media consumption standpoint — the same thing is happening to commerce, he said.
“Consumer expectation has changed as a result of greater connectivity,” Stanford noted.
Stanford, an investor in Uber and Munchery, said that with the amount of people eating every day, and the new demand for having items arrive at your door within minutes, there is ample opportunity for startups to innovate and succeed.
“When you introduce something like Uber or Munchery, you change the paradigm with not only how that service or product is consumed, but how it is provided,” Stanford explained. “If you can change the underlying economics of that delivery platform or that value chain, it puts you in a really interesting position from a financial perspective.”