Milkrun collapse: Instant delivery startup lays off remaining staff and plans to close doors this week

Instant delivery pioneer Milkrun will reportedly lay off its remaining staff and cease trading this Friday, marking the demise of a startup which promised to revolutionise the grocery shopping experience but struggled to adjust to a rapidly changing economic climate.

The Australian Financial Review reports co-founder Dany Milham informed Milkrun’s staff of the decision via email on Tuesday morning, saying that winding up the business is “the right decision in the current environment.”

Dramatic changes to “economic and capital market conditions” led to the decision, Milham added.

The business has enough cash on hand to reimburse its suppliers, the email stated, with Milkrun also promising severance payments to its office staff and delivery riders.

Launched in early 2022, Milkrun banked an initial $75 million Series A funding round with contributions from AirTree, and Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar, who invested through their respective VC firms Grok Ventures and Skip Capital.

The company initially promised grocery deliveries within ten minutes, with riders deployed from a series of miniature grocery hubs covering 35 Sydney suburbs.

Its operations soon spread to Melbourne’s inner suburbs.

But as pandemic-era lockdown restrictions faded, allowing Australians to return to their regular shopping habits, Milkrun’s operating and customer acquisition costs continued to mount.

At the same time, rent increases made it costlier for Milkrun to operate its neighbourhood hubs.

Rising interest rate hikes also spooked investors away from cash-burning startups, making it harder for growth-oriented companies like Milkrun to attract follow-up investment.

Milkrun dropped its ten-minute delivery pledge in June last year.

As cost pressures rose, the startup laid off 20% of its staff and began “consolidating” its network of delivery hubs in February.

At the time, Milham said the company had a 12-month runway in which it could chase profitability and the prospect of further investment.

Responding to the closure, AirTree partner Jackie Vullinghs said Milkrun executed an “ambitious vision” which “forced incumbents to invest in improving their offerings.”

“We knew the business wouldn’t be profitable from day one and would require material scale to achieve profitability,” Vullinghs told SmartCompany.

“As a seed-stage investment, we felt this risk was justified by the size of the upside.

“The economic environment shifted quickly and so did the sentiment of growth investors.

“Despite great effort from the team to adjust, they were not able to find a path to breakeven with the remaining funds available.

“Failure is a part of VC and we will continue to back outlier founders at the earliest stages of their journey.”

Milkrun was the last major instant delivery service to operate independently of major supermarket players.

Send, Voly, and Quicko have ceased their operations in the Australian market, with DoorDash’s iteration, Dashmart, shutting up shop last week.

More to come.