Building HelloFresh As A Capital Intensive Marketplace & Competition

8 Jan 2023 · 2 min

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HelloFresh needed $30-33 million just for a New Jersey warehouse, and spent over $100 to acquire each $70 customer. This capital intensity sparked an arms race where competitors poured hundreds of millions into the space, defying the usual assumption that marketplaces are efficient to scale.

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So you did mention the note of competition. I guess it's relevant to just kind of, I guess for us all to kind of realize that you were so early in the space, right? How do you think, you know, like access to kind of capital and then, you know, competition impacted, you know, like the early days of HelloFresh and maybe even kind of like the market?
Yeah. So I think another lesson from HelloFresh, which is a relevant one for driver is HelloFresh was an intensely, highly capital-intense business. Okay? So when we are building a warehouse distribution center in New Jersey, that cost $30 million, $33 million, and we had big like subsidies and things like that. To acquire a customer, the customer acquisition cost, getting someone acquired a $70 subscription was over $100. So we did have to raise a lot of money. And that's where ideally with marketplaces being, you know, depends on your marketplace, but most marketplaces are like, you know, ideally very capital efficient businesses. That's definitely a learning. And that was, you know, did become a bit of an arms race. We all raised, you know, hundreds of millions of dollars in the end because you have to do that because, you know, you're building like full infrastructure to be able to, you know, it's a full-service business, it's vertically integrated, it's brilliant. That costs a lot.