Will Wonder reinvent the food delivery business or become another cautionary tale? Only time will tell

Imagine you want to build a complete meal delivery business from scratch.

I’m not just talking about the delivery part like Doordash. I’m talking about building a business that’s essentially a complete food-in-a-box restaurant and delivery industry: one that works with top chefs to develop new restaurant concepts, builds centralized food production facilities , creates a network of mini-kitchen hubs around a major metropolitan area and owns the delivery network to get food to people’s doorsteps.

In other words, everything. If that sounds like a grand vision, it is, and that’s exactly what Marc Lore is building with. Wonder. The founder of Jet.com and Diapers.com described the concept in a Linkedin post last December:

Our innovative, vertically integrated approach begins with exclusive menus from the country’s top chefs and restaurants. A central commissary sources fresh, high-quality ingredients and serves as the starting point for each meal’s journey. Orders are then cooked, finished and served in our mobile kitchens just steps from your door, and served as soon as they are ready, allowing you to experience food the way it was meant to be enjoyed.

Lore is no stranger to big ideas that change the industry. He created Diapers.com, an early pioneer of online baby products (acquired by Amazon) and Jet.com, a discount-based online retailer acquired by Walmart in 2016. He also intends to build a utopian city in the United States. West.

Wonder’s business model is essentially built around a three-tier logistics network, one where the company has centralized production, a distributed network of mini-kitchens in various neighborhoods, and the final delivery network that drops off food at the consumer door.

If it is reminiscent of Zume, it is because the two ideas are somewhat similar. Zume has created a vertically integrated food delivery business with a robotic shadow kitchen for pizza making, mobile food trucks with built-in ovens, and a fleet of scooters to deliver the pizza to the customer. Zume also raised a bunch of capital – $423 million – before the company ended up laying off 80% of its employees and exiting the food delivery business to focus on sustainable packaging.

Despite the similarity between the two concepts, Zume’s troubles haven’t deterred investors from investing in Wonder. Lore has raised $900 for Wonder so far, including a $350 million Series B announced this month.

In fact, if one thing is clear, it’s that Lore is good at fundraising. He raised over $800 million for Jet before selling it to Walmart, and he also started an investment company with Alex Rodriguez with plans to raise $500 million. It is also raising $25 billion for the first phase of building the utopian city called Telosawith eventual plans to raise $400 billion.

But even for someone as talented at fundraising as Lore, you still have to wonder how long investors will remain patient as his company grows its food delivery business and expands to other cities. After raising nearly $1 billion, the company so far only serves one metropolitan market, a cluster of neighborhoods in the New Jersey area. While it’s clear that setting up its first metro market will likely require more capital than its second and third markets – restaurant concepts, recipe development and core technology development built now can be put profitably for each new market expansion – the company will still have to build a three-tier delivery network for each new metro it expands into.

Who knows, maybe Lore and Wonder can generate enough cash with its New Jersey business and can control its burn rate to extend the $900 million for a few years to fund another market build or two. Yet no matter how frugal the company remains, it will have to come back to investors at some point, and with things getting more complicated in a global macro environment filled with growing uncertainty, nothing – including the future availability of several hundreds of millions in round funding – is a certainty at this point.

And it’s not just the economy, but a hugely competitive and fast-paced restaurant and food delivery business. I would argue that the restaurant and food delivery industry is even more competitive and market saturated than baby products or discount e-commerce offerings. Wonder is competing not only against well-capitalized competitors like Amazon, UberEats and DoorDash, but also against a local family restaurant on every corner that increasingly relies on digital business models to survive as we go out of the pandemic.

All of that considered, Lore has an incredible track record that would be foolish to ignore. He achieved successful exits for his previous companies, selling both Jet and Diapers.com to big, established players (although both companies were later shut down by their new owners). So maybe investors are considering those two previous outings and are comfortable that Lore could pull another rabbit out of a hat.

For him and for them let’s hope he can do it one more time because if he can’t I think we’ll be looking at Wonder’s case years from now as another cautionary tale of bold visions and capital -risk spent.