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The sudden shift reflected the broader turbulence in this sector. Buoyed by billions in venture capital and a surge in demand earlier in the pandemic, a long list of on-demand companies promised to deliver ice cream, toilet paper, vodka or even a single apple in as little as 10 minutes. These startups opened offices and micro-fulfillment centers in cities across the country and rapidly recruited couriers.
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Then the music stopped. Soaring inflation, rising interest rates, fears of a looming recession and a war in Ukraine forced much of the tech industry to rethink expenses. Perhaps nowhere was that pullback as severe as this flashy, and very costly, corner of the on-demand industry — an industry which was born out of the Great Recession of 2008 and had never experienced a prolonged downturn.
"It's the model we saw with Uber a decade ago of heavily prioritizing growth over profits to be able to rapidly seize first-mover advantage," said Alex Frederick, a senior analyst focused on emerging technology at PitchBook, a data analytics company. This model "requires high burn, high capital investments to continually expand into new markets, attract customers and retain them," he said. Now, investors may have less appetite for it.
The sudden shift reflected the broader turbulence in this sector. Buoyed by billions in venture capital and a surge in demand earlier in the pandemic, a long list of on-demand companies promised to deliver ice cream, toilet paper, vodka or even a single apple in as little as 10 minutes. These startups opened offices and micro-fulfillment centers in cities across the country and rapidly recruited couriers.
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Then the music stopped. Soaring inflation, rising interest rates, fears of a looming recession and a war in Ukraine forced much of the tech industry to rethink expenses. Perhaps nowhere was that pullback as severe as this flashy, and very costly, corner of the on-demand industry — an industry which was born out of the Great Recession of 2008 and had never experienced a prolonged downturn.
"It's the model we saw with Uber a decade ago of heavily prioritizing growth over profits to be able to rapidly seize first-mover advantage," said Alex Frederick, a senior analyst focused on emerging technology at PitchBook, a data analytics company. This model "requires high burn, high capital investments to continually expand into new markets, attract customers and retain them," he said. Now, investors may have less appetite for it.
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