Dive Brief:

• Good Eggs, a Bay Area e-grocer, announced it has received $50 million in new funding, according to a news release. The round was led by Benchmark and included contributions from Index Ventures, Obvious Ventures, S2G Ventures, DNS Capital, Uprising and Collaborative Fund.
• The company says the funds will allow it to quadruple its capacity in the region, add around 1,000 employees and grow its delivery footprint. Good Eggs also plans to expand to Southern California next year.
• Founded in 2011, Good Eggs offers same-day delivery of a wide assortment of groceries, including meal kits, beer and wine and fresh produce. Seventy percent of its products are locally sourced, and most of its produce is delivered to customers within 48 hours of being harvested.

Dive Insight:

Good Eggs’ big funding round shows that, despite their struggles to grow and make money to date, online grocers are still a popular bet to capitalize on home delivery demand.

The company’s growth path has not been smooth, and initially it was a niche grocer filling niche orders. As Good Eggs has added more products, improved its sourcing and sped up delivery, it’s become more of a regular shopping destination. In a recent interview with Food Dive, CEO Bentley Hall said average order size is well north of $100.

“We’ve shifted from what was an occasional grocery store to a primary grocery store for most of our customers,” Hall said.

The obligatory question at this point is: What about Amazon? Hall, like the heads of other startup grocers nibbling around the edges of the food industry, maintains that he just needs to appeal to a niche audience — in this case, the sort of affluent, food-conscious consumers that are also receptive to online grocery shopping.

“We’re not trying to be everything to everybody like [Amazon],” he said. “We want to be everything to somebody somewhere.”     

Despite the new infusion of cash, Good Eggs has been marred by failure, and much of its tenure remains a cautionary tale for e-grocers. Shortly after its 2011 founding, Good Eggs quickly expanded beyond its home base to include operations in Los Angeles, New Orleans and New York. The company grew too quickly before it had honed its operational model, according to reports, and found itself rapidly losing cash.

After hiring Hall, a veteran executive with CPG experience at Plum Organics and Johnson & Johnson, Good Eggs made the decision to retrench its business, focusing on its population-dense San Francisco home market.

This experience speaks to the limit of e-commerce, and particularly pure-play operations that don’t have established loyalty to build off. For every operation that succeeds, there’s usually two or three that haven’t fared so well. Door to Door Organics, which operated for 20 years, shuttered in November. Even well-capitalized operations like Peapod, which is owned by Ahold Delhaize, have struggled.

However, these e-grocers are tightening up their operations and improving their marketing. It’ll be interesting to see how their nimbleness and values-oriented approach fares against a rapidly evolving Whole Foods, and against all the brick-and-mortar grocers that have rolled out home delivery.