QR-code startup cuts staff and pulls out of 4 global markets less than a year after raising over $120 million, as layoffs strike restaurant tech sector
Sunday uses QR codes for payments. Sunday
The QR-code-payment startup Sunday raised more than $120 million in less than a year in 2021.
This month, the Atlanta startup cut staff and pulled out of four of seven global markets.
The spiraling of food-tech startups comes as investors seek profits over growth, analysts say.
An economic downturn and a looming recession have a handful of well-funded food-tech startups spiraling, laying off staff, and restructuring business models to focus on profitability.
The downsizing this month of staff at startups like Nextbite and Gopuff underscores how investors like SoftBank made high-risk bets on companies that flourished earlier in the pandemic, when consumers and restaurants were forced to rely on digital ordering solutions as a precaution to keep guests safe.
For Nextbite and Gopuff, recent cuts are the second round of layoffs for the companies this year. Both have received millions from SoftBank and other investors. In May, the ghost-kitchen operator Reef Technology, also backed by SoftBank, cut staff and ousted Michael Beacham, a key executive, in June.
Perhaps the biggest example of a struggling food-tech startup that blossomed during lockdowns is Atlanta's Sunday. The QR-code-payment startup raised more than $120 million in less than a year from Coatue and DST Global, according to TechCrunch.
Earlier this week, a Sunday spokesperson confirmed the layoffs and restructuring at the company but declined to say how many employees were let go. The layoffs were first reported by Sifted and the Atlanta Inno business journal.
Citing investor pressure for profits, Sunday told Insider it had pulled out of four of its seven markets — Portugal, Italy, Spain, and Canada. It's now focusing its growth in the US, the UK, and France.
"With the current state of the market, investors are now expecting profit from the get-go. Sunday, which is just 16 months old, has been navigating this shift by refocusing its geographical footprint to its most important markets," the company told Insider in a statement. "Focusing on its biggest markets will also allow Sunday to innovate even faster and to keep being the leading and best in class technical solution, across all product lines — Order & Pay, Pay at Table and Click & Collect."
The startup used its initial venture-capital funding to grow rapidly internationally. In the US, the startup works with 1,000 restaurants, including the local Atlanta restaurants Two Urban Licks, Atlanta Fish Market, and Bulla Gastrobar. Yohan Bisson, a Sunday spokesperson, told Insider the company planned to expand locations in the US by 50% by the end of the year.
Sunday, whose technology was launched in France amid the pandemic, brought its QR-code software to the US in April 2021. The codes are used as a contactless way for customers to read menus and pay a restaurant check via their cellphones.
Food-tech startups are focusing on core businesses to satisfy investors
Restaurant-industry analysts said these food-tech startups faced multiple headwinds, including investor demand for profits over rapid growth, an onslaught of competitors, and a slowdown in demand for pandemic-fueled technologies like QR codes and curbside pickup.
"The change in the investing climate has adjusted tolerance for loss-making businesses, as the market has been least kind to high-flying, high-multiple companies with an occluded path to profitability," John Zolidis, a retail- and food-tech analyst at Quo Vadis Capital, said.
Meredith Sandland, a restaurant technologist, author, and private-equity advisor, added that food-tech layoffs prevalent in the industry didn't address profitability. Rather, they are usually the outcome of an underlying pivot in a business model to focus on core products, she said.
That's true for both Nextbite and Gopuff. In announcing their layoffs, both companies said they would be prioritizing business segments with the most promise for success.
Sunday is also focusing on growing in core markets but still diversifying its product mix, the company told Insider.
Sandland said food tech cuts didn't mean demand for digital technologies in the restaurant industry were going away.
"What we are seeing now is not at all emblematic of a return to pre-COVID restaurants," she said. "Even after all the change we witnessed during COVID, we are still at the very front end of restaurant digitization."
Businesses 'perceived as pandemic tech' are out of favor
By the end of the summer, Sunday said it planned to launch a customer-feedback form for restaurants and a loyalty program. A few months ago, the company introduced a feature to order and pay at the table using a QR code, while before it offered only a payment option.
Zolidis and Jim Balis, a food-tech expert, said that made sense for a startup that relied heavily on a service that was more in demand earlier in the pandemic.
"Businesses that are perceived as pandemic tech, i.e., their models were accidentally or purposely suited to the unique consumer behaviors or conditions that occurred during the pandemic, are out of favor," Zolidis said.
Still, Balis, a managing director at the restaurant investment firm CapitalSpring, said Sunday faced a string of food-tech competitors offering the same services.
Sunday brought its QR-code-payment technology to the US last year when it was ubiquitous among other players, including the popular point-of-sale provider Toast. Sunday's new products are also offered by well-established restaurant-tech companies, including the loyalty companies Thanx and Punchh and the customer-feedback startups Tattle and Ovation.
"Investors are just looking more closely at burn rates, realistic modeling, and what the competitive set is and how they differentiate," Balis said.
One former Sunday corporate employee, who wished to remain anonymous fearing career repercussions but whose identity is known to Insider, said the startup "didn't study the market," adding: "They had no idea what they were doing."
Bisson, the Sunday spokesperson, told Insider Sunday had the advantage over rivals because the company was run by restaurateurs, not tech people. Sunday's cofounder Victor Lugger is a high-profile hospitality figure in France who operates a string of well-known restaurants in Europe under the company Big Mamma.
"We are the beginning of something that is big, and we're not looking at our competitor," he told Insider on Tuesday. "The first obsession of a restaurant is its guest, and so everything we do, we do it to merge the interests of the guests and the owner and to never forget guests because we believe that's the path to success."
Are you an insider at Sunday, Gopuff, Reef, or Nextbite with insight to share on recent layoffs? Got a tip? Contact this reporter via email at nluna@insider.com or via the Signal encrypted number 714-875-6218.
