This Week in Australian Startups - Issue #18, 12th April 2023
From banks runs to Milkrun, where founder Dany Milham made the difficult decision to wind down the business and cease trading this Friday shared in an email to employees.
Launched in September 2021, Milkrun went on to raise a total of $86M from investors including AirTree, Tiger Global and Atlassian founders, Scott Farquhar and Mike Cannon-Brooke in a short space of time. Now only 19 months later it’s shutting down.
So what went wrong?
Just in February Milkrun reduced its workforce by 20%. That same month The Australian broke news Milkrun had made two failed attempts to raise more capital whilst losing as much as $13 per order according to a slide deck shown to prospective investors.
On 1st February’s edition of This Week in Australian Startups, I wrote about the consolidation happening across Europe in the fast delivery space, the changing economic environment, why Australian’s still like to shop in person and how incumbents like Woolworths were taking market share back with much more compelling offerings. You can read the deep dive here.
“Since we announced our structural changes in February, economic and capital market conditions have continued to deteriorate, and while the business has continued to perform well, we feel strongly that this is the right decision in the current environment,” Milham told staff in his email.
Two weeks ago I wrote a deep dive into the changing economic environment in tech, and the rising cost of capital, predicting more startups will shut down.
I had to count this morning, but in my career I’ve witnessed 8 rounds of layoffs in tech at companies I’ve been at. Whilst it’s never black and white, and maybe there are things that could have been done better - what’s clear is that there is a right and a wrong way to go about it and especially if you’re making the decision as a founder to shut your business down.
Without working at Milkrun, what I’m seeing externally is not normal in tech - in all the right ways. Milham is closing at a time with enough cash in the bank to pay suppliers, redundancy packages to all 400+ employees including delivery riders in full.
“We’ve always been committed to doing things the right way, and winding down the business while we still have a sufficient cash balance enables us to ensure our people and suppliers are paid in full,” Milham wrote
This is in stark contrast to experiences I’ve had where the team has been asked to chase down debt in order to get paid whilst making you redundant and winding the business down.
AirTree partner Jackie Vullinghs said the sentiment of growth investors shifted along with the economic environment shifted alongside the company being unable “to find a path to breakeven with the remaining funds available”. Nonetheless, the business “forced incumbents to invest” in response.
“We knew the business wouldn’t be profitable from day one and would require material scale to achieve profitability. As a seed-stage investment, we felt this risk was justified by the size of the upside,” she said.
“Despite great effort from the team to adjust, they were not able to find a path to breakeven with the remaining funds available.
Investment priorities have changed, with the rising cost of capital profitably is more important than ever. Unfortunately this has also impacted startups like Milkrun who were invested in with a ‘growth’ outlook - the startup playbook we’ve seen for the last decade or two, grow at all costs and figure out profitably once you have market share.
Milkrun isn’t the first and won’t be the last startup in Australia closing down. Whilst it’s never nice to see any startup fail, and there’s many lessons that I’m sure Milham and the team at Milkrun has learned along the way - this is a good lesson for every founder, VC and executive in tech in how to treat suppliers and people fairly and frankly doing things the right way when faced with the difficult decision to call it a day.
There is also something to be said about timing, and knowing when your time, energy and money (as a founder, employee or investor) is better spent on something new.
Vale Milkrun.
Top News
Australia
Gourmet ready-made food startup CoLab hits the wall (Business News Australia)
Grocery delivery startup MilkRun collapses, blaming economic conditions (The Guardian | Startup Daily | SmartCompany)
Wasting no time, Our Cow eyes MilkRun’s customers (AFR)
“It f*cking rocks and this sucks”: Gourmet ready-meal service CoLab calls in the administrators (SmartCompany)
Former Luxury Escapes crew back with new travel tech start-up (AFR)
Start-ups change financing strategy to avoid dreaded ‘down rounds’ (AFR)
Coporate cop ASIC cancels Binance Australia’s licence after it misclassified retail investors, leaving them without consumer protections (Startup Daily)
Chris Minns announces TikTok ban on NSW government devices (ABC)
Latitude shuts down ransom payment demands over stolen data (ARN)
Around the World
Whoops, Samsung workers accidentally leaked trade secrets via ChatGPT (Mashable)
30 under 30-year sentences: why so many of Forbes’ young heroes face jail (The Guardian)
In Wake of SVB Collapse, Venture Lending Faces Uncertainty (The Wall Street Journal)
The Company Behind Stable Diffusion Appears to Be At Risk of Going Under (Futurism)
As Anthropic seeks billions to take on OpenAI, ‘industrial capture’ is nigh. Or is it? (VentureBeat)
How the tech squeeze is affecting Silicon Valley's famous office perks (Quartz)
More tech employees should expect to lose their jobs even after 330,000 roles got wiped (Insider)
I worked on Google’s layoffs during the Great Financial Crisis. Here’s what feels different about Big Tech redundancies in the era of ‘loud firing’ (Fortune)
Twitter vs. Substack feud: Everything you need to know (and how it affects you) (ZDNet)
Substack's new short-form 'Notes' feed looks a lot like Twitter (TechCrunch)
Twitter’s former CEO sues over unpaid legal bills (Financial Times)
Visa partners with PayPal, Venmo, and others to power interoperable digital payments (TechCrunch)
Meta's New Segment Anything Model (SAM) is a Game Changer (HackerNoon)
Google Bard's new 'experiment updates' page lets you know what's new (Engadget)
Mark Zuckerberg Abandons Metaverse as Shiny New Toy Appears (Futurism)
Twitter, Inc. is now X Corp. (TechCrunch)
Laid-Off Tech Workers Launch ‘Revenge Startups’ Just as Money Dries Up (The Wall Street Journal)
Microsoft, Amazon face cloud competition probe as UK regulator raises alarm (CNBC)
Google CEO Says It's Adding AI to Search (Futurism)
After mass layoffs, Meta is pulling remote work back in a big way (SFGATE)
Former Google CEO Eric Schmidt doesn’t support a 6-month A.I. pause ‘because it will simply benefit China’ (Fortune)
Tesla sued by car owner over alleged intrusion of privacy (Al Jazeera)
Google workers in London stage walkout over job cuts (CNN)
Bob Lee, creator of Cash App and former CTO of Square, stabbed to death (TechCrunch)
Australian Funding Rounds
Rampersand & Investible treble down on 3D presentation platform Jigspace in $5.2 million raise (Startup Daily)
Internet-scanning intelligence startup, Fivecast lands $30 million Series A (Startup Daily)
Bailador backs volunteer management platform Rosterfy with $9.8m investment (Business News Australia)
Mental health app Modo that’s ‘like Marie Kondo for your mind’ kicks off with $800,000 (Startup Daily)
International Funding Highlights
Nestle takes a big swig of Yfood in a deal that values the meal replacement startup at $469M (TechCrunch)
Data firm Quantexa hits unicorn status with £104m raise (UKTN)
Fintech startup Clear Street raises $270M at a $2B valuation (TechCrunch)
Uber sells $400M stake in Careem super app business (TechCrunch)