RIP to the on-demand companies that fizzled in 2016

Ashes to ashes, dust to dust. We take a look back at those on-demand companies that perished over the last year, from SpoonRocket to Shuddle to Sidecar to Washio.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
6 min read

In 2016, a handful of on-demand startups passed away. Analysts believe 2017 is going to be even worse.

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Visit the website of Sidecar, Shuddle or SpoonRocket and you'll find a broken link. Go to Washio or Karhoo and you'll get a farewell note. These companies are just a few of the first casualties of the on-demand economy.

With all the bombastic talk of millions in funding and unicorn companies with valuations of more than $1 billion, it appears things are not as flush for disruptive startups as they seem. Sure, ride-hailing service Uber is valued at $68 billion and room rental company Airbnb is valued at $30 billion. But competition is stiff and investment in all these new ideas appears to be cooling.

"A lot of these on-demand startups were propped up early on by [venture capital] money," said Zoe Leavitt, tech industry analyst at venture capital research firm CB Insights. "When that spigot starts to tighten, when actual profitability starts to matter, is when we see some startups begin to struggle."

House-cleaning service Homejoy was one of the first on-demand companies to die, in July 2015. But 2016 saw many more go. Startups focused on ride hailing, like Shuddle, Sidecar and Karhoo, met their demise, along with food delivery apps like SpoonRocket, Kitchit and Kitchensurfing.

A few years ago, dozens of on-demand companies were starting up, delivering everything from haircuts to doctors to ice cream. But the tech world is now realizing the challenges to on-demand everything.

First off, on-demand companies are difficult to scale, said RRE Ventures early stage investor Steve Schlafman. While some apps do well in heavily populated cities, it doesn't mean they'll work in suburbs or small towns. Another basic business issue: the high costs and low revenue any startup faces as it works to win customers. An on-demand meal service has to pay for food, refrigeration, cooks, packaging and delivery -- just like a restaurant -- but it might not be selling enough to cover those expenses.

Then there's the problem of frequency of use, Schlafman said. Someone could use an app like Uber every day, but they may use a haircut app only once a month.

And finally, not all apps make life easier. People don't really need an app to do laundry, fly in a helicopter or buy beer.

"Are you Uberfying a service just for the sake of Uberfying it?" Schlafman said. "Or is there a specific reason and advantage for a service coming online?"

After throwing money at on-demand companies in 2014, venture capitalists sharply pulled back toward the end of 2015, according to CB Insights. And 2016 was even worse. Excluding Uber and Chinese ride hailing service Didi Chuxing, funding to on-demand startups fell by nearly 50 percent this year, from $12.4 billion to $6.56 billion.

Dwindling funds and the deaths of on-demand companies could be just the beginning of what's to come.

"I think there are going to be a lot more [deaths] in the next year," Schlafman said; "2017 will be a tough year for the segment."

Here's a list of a few companies we lost in 2016:

1. Sidecar

Founded in 2011, Sidecar was the original ride-hailing company in the US but was quickly dwarfed by Uber and Lyft. Ultimately those rivals squeezed Sidecar out. During its four-year lifespan, the San Francisco-based service dabbled in ride hailing, grocery drop-offs and even marijuana delivery. Citing a "significant capital disadvantage," Sidecar co-founder and CEO Sunil Paul announced the company had met its demise on December 29, 2015, (so technically not 2016, but close enough). It had raised a total of $45.5 million in venture funding.

"This is the end of the road for the Sidecar ride and delivery service," Paul wrote in a farewell blog post. "But it's by no means the end of the journey for the company." In January, Paul announced that Sidecar sold its technology to General Motors for an undisclosed sum.

2. Zirx

On-demand valet parking app Zirx seemed like a good idea. Take a traffic-filled city, like San Francisco, and help people with the annoying work of finding parking. But that proved easier said than done. Launched in March 2014, the San Francisco-based company announced in February that its consumer on-demand valet service was dead. Instead, Zirx said it was refocusing on being an enterprise business that manages company vehicle fleets. It said the reason for the pivot was that it was too difficult to scale the valet business and become profitable.

Zirx was one of many parking valet apps to depart; Vatler and Caarbon both fizzled in 2015. "Consumer on-demand parking, while one of those novel, amazing experiences for customers, is a very difficult business to scale," the company wrote in a goodbye letter. "And, an even harder business to scale to great profitability."

3. SpoonRocket

With the goal of delivering under-$10 meals in less than 10 minutes, SpoonRocket wasn't long for this world. After its site went offline for a few days in March, the company confirmed it was shutting down because of lack of funding. Founded in 2013, Berkeley-based SpoonRocket cooked up several meals a day, like salmon salad and tarragon chicken, which customers could order through a smartphone app.

The company was soon competing with other on-demand meal services like Sprig, Munchery and Uber's take on food delivery, UberEats. But it couldn't keep up. "We explored all strategic options till the very last minute but unfortunately, they all fell through," the company wrote in its send-off blog post.

4. Shuddle

Known as "Uber for kids," San Francisco-based Shuddle passed away in April. Company CEO Doug Aley cited a lack of investment as the reason it couldn't keep driving. Shuddle launched in 2014, offering rides to unaccompanied children and sometimes senior citizens. The majority of its drivers were women and all drivers were required to have experience in child care.

Toward the end of its life, Shuddle underwent an executive shakeup, with Aley taking over from company founder Nick Allen. "We worked hard to find the financial resources that would allow us to continue to grow," Shuddle wrote in a farewell email to customers, "but ultimately could not raise the funding required to continue operations."

5. Kitchit

Getting its start in 2011, Kitchit let people hire an on-demand chef to come cook in their home for events ranging from a dinner party to cooking classes. The San Francisco-based company offered up veteran chefs from well-known local restaurants, including French Laundry, Chez Panisse and Jardiniere. But Kitchit was laid to rest in April. Company founders Brendan Marshall and Ian Ferguson said the reason for shuttering was tough competition and a lack of funding. "Investment runways are finite, and unfortunately ours reached its end at a moment of substantial upheaval in the food-tech world," Kitchit wrote in a goodbye note on its website.

6. Kitchensurfing

It wasn't a good year for on-demand chef companies. Along with Kitchit, Kitchensurfing also perished in April 2016. The New York-based startup was founded in 2012 but reportedly couldn't create enough demand to be sustainable. "We believed we could create a global marketplace for people that love food, change the way people eat and build the largest common table in the world," wrote Kitchensurfing co-founder Borahm Cho in a Medium post. "We failed, but I look back and have a collection of amazing memories I will always carry with me."

7. Washio

During its three-year life, Washio dry-cleaned more than 1 million pieces of clothing and washed more than 21,000 tons of laundry. But that wasn't enough to keep the on-demand laundry service alive. Founded in 2013, Los Angeles-based Washio folded in August. "We generated millions in revenue and hundreds of thousands of orders," Washio wrote in its sign-off letter, "but the nature of startups is being innovative and venturing into uncharted territory: sometimes you make it, sometimes you don't."

8. Karhoo

It took less than two years for Karhoo to kick the bucket. The ride-comparison app let passengers toggle through different taxi and ride hailing options to find the type of ride and price they wanted and then book it. The New York-based company operated in New York and London but reportedly was unable to scale and get enough investments to stay afloat. It shut down in November. "It became clear two weeks ago that the financial situation was getting pretty dire with Karhoo in urgent need of funding," the company wrote in its final blog post. "Discussion with a potential new backer ended last night forcing the company to stop trading."