Tag: Startup

Business startup funding thrives today and finances your business’s future.

There are a lot of reasons that a business may be looking for funding. There are businesses owners who need particular grant or provide particular services. If you are just starting your enterprise then you could need to have startup funds. If your business is already established then you may need some additional funding to expand your business or pay some bills throughout a tough time. These kinds of business owners are required to do some more research to find the funds they need.

During the past decade so much wealth has been created, in so many ways, in the United States and abroad that the capital markets have been flooded with money in search of new, profitable investments. The capital markets, U.S. and international banking communities as well as that vast universe encompassing private and public investment arenas have changed in many far-reaching and deep-rooted ways. But the most significant impact of the changes may well be their effect on the world of entrepreneurial businesses.

Banks and credit unions are the major source for business startup funding you could already know this. If you have several accounts with a bank or credit union that are in excellent standing over a period of time, then you’ll be a lot more likely to get funding. This indicates that if you’re trying to get funding that you’ll want to start off with banks or credit unions that you already have accounts with. This is because they will see it as one more opportunity to make cash and they will know that you can manage your business’s finances.

Whether a bank or credit organizations, being a lender their direct involvement can help a company overcome financial challenges. It is very important to keep lenders apprised of your company’s financial health, particularly when it is experiencing or is likely to face financial problems. However, when a business owner conceals the truth, lenders felt they would be less inclined to cooperate and more apt to act adversely.

When you’re looking for modest organization funding, you will want to maintain a couple of points in mind to make it less complicated. A great place to start when looking for startup funding for your new business is the business grant funding . They are a government entity that helps people such as you get their new businesses off of the ground. Research for the grant would increase the possibility in getting the grant. Therefore it is important to include the particular object and need of the business so the reviewer will understand and finally award the grant. However, it is not only the particular business that needs more research the common small business does need too.

The most important thing is to know that the grants are highly competitive and skewed for certain industries in certain areas. So their listing of federal and state government grants becomes matter of great importance particularly for individuals looking to start their own business.

Whether looking for business startup funding or business grant funding as a way to start up your business, MBC could help you lending loans you actually need, for more information, visit us at https://www.macrobusinesscapital.com/

Related Business Articles

Take your best foot forward by planning for business startup funding.

Starting a business is a calculated risk that is weighed heavily in your favor with a proper plan. Without a plan, start-up businesses can lack the direction to get their business idea off the ground. The financing section of a business plan is a crucial area where potential investors will seek to ascertain the overall financial prowess and skill of the management. The information contained within the finance chapter of a plan might also result in conclusions being drawn on the absolute viability of the proposal and therefore perhaps the future of the venture. Without direction, the limited resources available to a start-up may not be utilized in the right areas.

Starting a business, no matter how small, requires a solid foundation. One also needs to gain substantial knowledge in finance, marketing, business planning, loans for business and market research, among other things. However, it would be fair to say that managing your business finances would be the most important.

Business plan involves lot many things but the most important among all is the planning for business funds. The amount of business start up funding you need will vary depending on the type of business you plan to set up. For instance, if you have staff to pay you will need to look at the real cost of hiring staff.

Nothing guarantees success; however, a plan is the closest thing you can get to a guarantee. Your business plan is a brilliant document that sets in motion a strategy for success that incorporates your greatest strengths and outlines a counterpunch to mitigate every risk–it considers the best- and worst-case scenarios.

So if you need money for your business, there are a number of business loan providers that will be able to assist you. There are different types of small business loans that you can apply for, depending upon the funding you require. With proper planning, your small business’s cash flow will surely be smooth. Applying for a typical loan in today’s economy is becoming more and more difficult. A typical loan involves many hurdles for a small business owner, with paperwork and a lengthy approval process, low approval rates, collateral and personal guarantees for security, fixed monthly payments, and restrictions related to use of funds. Loan proceeds can be used to buy tools, materials, and equipments needed to operate the business.

Depending on the complexity of the business financing and the amount of funds required for the start-up, the section might consist of one page, or at the other end of the spectrum, several hundred pages. It will also depend on your establishment costs and the amount of your own funds that you will be contributing to the business.

For hassle proof business start up funding and appropriate business financing options by visiting us at http://www.macrobusinesscapital.com/

Find More Business Articles

Knowledge and planning is the base of choosing best option for business startup funding

Starting a business and running it smooth is a challenge in itself. The task involves considerations to many aspects of business say, product or service it has in vision, the market competition to it, the resources to reach the objectives and most importantly the financial stability.

For all the above considerations an entrepreneur usually works on certain set of plans. Although the planning process may seem long and tedious now but it surely benefit him/her more than they could imagine in the future. For example, when they are seeking funds, when they are joining an association of professional or when their goals change or when their business changes or if they take on a partner or investor. The plan should be designed in such a way that it guides but not constrain the business goals. Among the many points covered in your final draft financial planning is one major point.

As a start up business owner one surely opts for personal funds and finances as the most handy and available source of business startup funding. The reason behind is to avoid the hassle of going through credit process available in the market. But using personal funds and finances not only decreases the solvency of your business, but by leveraging your personal credit, makes it difficult to obtain business credit down in the future. However, acquiring start up business credit is achievable. Many business owners find that working with a professional in the business development field increases not only the chances of lenders approving start up business credit, but many business owner see favorable terms on the credit granted be lenders.

By using start up business credit to fund a business, one can concentrate on present operations and allocate reserve funds to grow the business’s presence in the market. One just needs to surf around and see what the market has to offer you. One needs to understand the possible business financing options are available for your business.

It is not wise to out your personal assets at risk, for the sake of business. Surely, if you do not offer collateral to your loan and this means your loan is unsecured, there will be higher interest rates you’ll have to pay and most of the time the term of repayment is shorter. This is the drawback of an unsecured loan, while if you opt to make a secured startup business loan, expect to pay lower rates and there will be more flexibility which means a more extended period of repayment.

So whatever one choose as an option for startup credit, one needs to see through the business requirements and apply for such source of funding.

To get help for your business startup funding and hassle free process of business financing options visit us at https://www.macrobusinesscapital.com/

Related Business Articles

Get a flamboyant beginning with business startup funding

Examining your financial situation is a crucial step to determining your cash needs for the start up process. Making a business plan marks the beginning of the project. Therefore the value of financial planning cannot be understated. It is an aid to driving business growth, maximizing the application of working capital, targeting the use of important resources. Emphasizing on the financial requirement and ways and means of repayment will help in procuring business loan financing. Unfortunately, due to budget, time or internal resource constraints, companies are often unable to enjoy the benefits derived from financial planning excellence.

There are several choices for financing sources but each carries its own opportunity cost. You may need a loan for only a portion of the expense requirements; remember that interest on any loans become part of expenses. It is not easy to procure a business startup funding .Collateral requirements and well laid-out business plan are the essential prerequisites for the loan. This sometimes takes a long time to avail a business startup loan. Since there is a lot of risk involved in lending to new entrepreneurs, banks are not in favor of it. Therefore, a lot of hard work is necessary to prepare the ground work for procuring a business startup loan.

Obtaining money refers to two separate processes; banks will likely not lend you the entirety of the sum that you will need to start your business. Banks and other financial institutions expect potential business owners to have their own money to put on the line, as well. In fact, lenders usually require that potential business owners put up as much as a third of the startup costs. This means that if you expect to need $ 100,000, $ 30,000 of your own money will be expected to be put into the business. If you don’t have that sum there are other sources to look to, in order to raise that money.

Loans so obtained can help in recruitment of manpower, expanding business, buying equipments and stationeries, renting office facilities and capitalizing on business opportunities. Every aspect of the business can be covered by business financing loan. The money can be used to finance the purchase or renovation of a building. Advertisement of the business can be done with the money. This can be done through flaunting banners, distributing business cards, starting a website or announcing on radio and television. It can also help to purchase new equipment and tools.

Thus a business startup loan can aid an entrepreneur in many ways. If you really believe in yourself and the business idea then this is a viable option but remember to proceed with caution at all steps.

Macro business capital funds understands your business startup funding needs and thereby provide you with all the viable options for business financing loan in a very prompt manner. For more info visit us at https://www.macrobusinesscapital.com/

Startup Zenefits Under Scrutiny For Flouting Insurance Laws

Zenefits founder Parker Conrad speaks at a conference in New York in 2013.

Brian Ach / Getty Images

The Silicon Valley startup Zenefits, valued at $ 4.5 billion in a funding round earlier this year, apparently flouted insurance laws by allowing unlicensed brokers to sell health insurance — an approach that has led to at least one regulatory inquiry into the legality of its operations.

Zenefits, a middleman in the health insurance business, has repeatedly failed to enforce legal requirements that anyone selling a health insurance policy have an appropriate state license, a BuzzFeed News investigation has found. The San Francisco-based company allowed numerous salespeople to act as insurance brokers in at least seven states without licenses to do so, according to internal emails and records, as well as interviews with eight former employees with direct knowledge of the matter.

BuzzFeed News has reviewed examples of the unlicensed sale of insurance by Zenefits employees dating back as far as the summer of 2014 and continuing through this summer. It is unclear when the practice began and whether it continues today; the company says it now has strict procedures in place to enforce licensing rules.

At least one regulator, the insurance commissioner in Washington state, is currently examining whether Zenefits operated there without licenses, according to a spokesperson for the agency, Stephanie Marquis. The Washington inquiry began in early 2015 and has not yet been resolved, she said.

Zenefits management seemed aware of the potentially serious consequences of violating licensing rules. Under Washington law, anyone who knowingly sells, solicits, or negotiates insurance without the proper state license is guilty of a Class B felony, which can carry a prison sentence of up to 10 years, as well as a civil penalty of up to $ 25,000 for each violation.

“You are putting the company at risk” by not “immediately” getting broker licenses in Washington, Niji Sabharwal, a Zenefits senior sales operations manager, told sales reps in April.

Upon learning of the Washington inquiry, Zenefits scrambled to get its house in order. Sales reps who had closed deals in that state were told of the inquiry by a Zenefits senior sales operations analyst, Erin Stephens, in an email in early April. The subject line read, “URGENT — Get Licensed in Washington.”

The email, and two follow-up notes, were sent on a Thursday. On the following Monday, 22 Zenefits employees became licensed brokers in Washington, state records show. Four others received their Washington licenses later that month.

Only this July, more than two years after Zenefits launched, did the company introduce a standardized “license management system” to track whether sales reps had licenses, an internal email shows. (Earlier efforts at license tracking were not comprehensive, according to two former employees.) That email, sent by Sabharwal to managers who oversaw sales reps, acknowledged that there were still “a few reps” who hadn’t yet received licenses “but are currently working deals.”

While Zenefits sales reps were told that they needed licenses to do their job, managers in many cases showed a blasé attitude toward the requirement, pushing the unlicensed reps to meet sales quotas, the former employees said. In several cases, sales reps who had failed a broker license exam once or more times were allowed to continue working the phones. At least one person who lacked any license in any state but hit his sales quotas last fall was promoted, according to state records and former employees.

“It is — and has always been — Zenefits’ policy that every individual who sells insurance at Zenefits, as well as the company itself, must be licensed to sell insurance,” Zenefits said in a written statement provided to BuzzFeed News by a spokesman, Kenneth Baer. “Zenefits has more than 280 active resident insurance licenses and more than 2,500 active non-resident licenses, and these licensed brokers have sold thousands of insurance policies over the past two-and-a-half years.”

“We have taken corrective action, including terminating the employee, when we have learned of violations, either because individuals failed to pass the brokerage exam or have otherwise violated our licensing policies,” the statement continued. “Any accusations of other individuals violating our licensure policies will be thoroughly investigated, and we will take appropriate remedial action.”

Zenefits gives away free software to small businesses to manage their employee benefits, though fundamentally it is an insurance brokerage firm, collecting recurring commissions when it sells health insurance policies to those businesses. It says its technology and user-friendliness can help it displace stodgy insurance brokers and claim their lucrative commissions.

The insurance brokerage industry is heavily regulated, and technological innovation has historically been slow to take hold. Many conventional brokers still rely on mountains of forms and spreadsheets — enhancing the appeal of Zenefits for customers who resent paperwork and value speed. On the other hand, conventional brokers argue that an important part of their job is to provide advice gained from study and experience, something that can’t easily be replicated by fresh-faced sales reps and sophisticated software.

Zenefits’ strategy for disrupting this industry — where human lives literally are at stake — has typified the current tech boom: rapid growth, with little regard for the conventions of old-school industries.

“If you’re an insurance broker, we’re going to drink your milkshake,” Parker Conrad, the Zenefits co-founder and CEO, said at a tech event in 2013.

Among new startups of recent years, few have generated as much praise from investors and reporters as Zenefits. Launched only in 2013, it quickly grew into a Silicon Valley “unicorn,” with a $ 4.5 billion valuation as of May. Forbes called it the “hottest startup” of 2014. Business Insider said it was a startup “to bet your career on in 2015.”

The Hollywood celebrities Ashton Kutcher and Jared Leto are investors in the privately held company. A Silicon Valley celebrity, the former PayPal executive David Sacks, is its chief operating officer. Its other backers include the mutual fund giant Fidelity and the big private equity investor TPG, as well as the prominent venture capital firm Andreessen Horowitz, which has invested more money in Zenefits than in any other startup in its portfolio. (Andreessen Horowitz is also an investor in BuzzFeed.)

Virginia Mayo / Associated Press

The revelation about unlicensed brokers, which has never previously been made public, comes as the company is facing questions about its ability to live up to its lofty valuation. Fidelity, which bought Zenefits shares in the May investment round, marked down the value of its stake by 48% as of the end of September, according to data from the investment research company Morningstar. While Zenefits has said it hopes to hit $ 100 million in annual revenue by January, one indicator suggested the figure had reached only $ 45 million by August, according to a recent Wall Street Journal report. The Zenefits spokesman declined to comment on that report.

Zenefits is among a class of richly valued startups that have taken an aggressive stance toward longstanding industry rules. Uber and Airbnb, for example, have shown that it can be a winning strategy to clash with state and city governments over rules that the startups claim are outmoded or unfair. Zenefits got a taste of this sort of battle late last year, when Utah insurance regulators sought to block the company from operating there over claims that its free software amounted to an improper inducement for customers. (Utah allowed Zenefits back in this year.)

The sale of insurance is governed at the state level. In every state, brokers who sell health insurance policies to companies based there are required to have a license from that state. Many brokers interpret the laws to mean that they need a license not only to sell insurance but also to discuss it with clients in any meaningful way.

In California, where many Zenefits customers are located, the law says people can't “solicit, negotiate, or effect contracts of insurance” without a license. An important exemption is for clerical and support work, like setting up appointments or gathering basic information from customers. Under California law, selling insurance without a valid license is a misdemeanor punishable by a fine of up to $ 50,000 or up to a year in prison.

Zenefits itself is a licensed brokerage company and Conrad, the CEO, has a broker license in all 50 states. But the employees who do the selling are also legally required to be licensed brokers in the states where they work.

“Whether you’re selling through an app or through a brick-and-mortar store, you have to be licensed” in every state in which you sell insurance policies, said Adam Beck, a professor of health insurance at the American College of Financial Services in Bryn Mawr, Pennsylvania. “Working for someone who happens to be licensed in not sufficient.”

The unlicensed sale of insurance is challenging for regulators to catch, largely because there is no public database of insurance policies sold. Regulators generally rely on tips, including from customers, who can check whether their broker is licensed using state databases like this one, this one, or this one.

“When we started Zenefits, we followed a practice common to many small independent brokerages of having each broker licensed in their home state and having the agency itself also registered in all 50 states so as to allow out-of-state sales,” Zenefits said in its statement. “As we grew and heard from regulators that they wanted each licensed broker individually to acquire a non-resident license, we set out to do just that.”

Conrad speaks at a conference in San Francisco in 2015

Steve Jennings / Getty Images

The Zenefits sales force is run by Sam Blond, the San Francisco-based vice president of sales. He joined the company in late 2013 after quickly rising through the sales organization at EchoSign, a software startup that was sold to Adobe in 2011. Many of the apparently unlicensed insurance sales occurred in Zenefits’ big satellite office in Scottsdale, Arizona, which opened in the fall of last year and quickly filled up with hundreds of employees. But there is evidence of unlicensed selling of insurance in Zenefits’ San Francisco headquarters as well.

One Zenefits sales rep who didn’t have a license in any state closed insurance deals with at least 27 companies, starting in February and continuing through June, an internal document shows. The sales rep, who was based in Scottsdale and left Zenefits this summer, convinced eight of the companies to enroll in new health insurance, according to the document. He convinced 19 companies to make Zenefits their broker of record, the document shows. The states where he closed deals included Arizona, California, Massachusetts, Michigan, Nevada, and New Jersey.

In San Francisco, a different sales rep, who started in June 2014, sold a health insurance policy to a New York-based startup called Goodsie during her first months on the job. Conrad had personally reached out several times to woo Goodsie, which provides e-commerce software to businesses, but he bowed out and let the rep take over, emails show. This sales rep, however, lacked a New York broker license until June of this year, state records show.

Among the 22 Zenefits employees who got insurance licenses in Washington on the Monday after being warned about the regulatory inquiry, nine were based in Scottsdale, state records and their LinkedIn profiles show. The other 13 were in San Francisco.

Three of the former Zenefits employees interviewed by BuzzFeed News, refusing to speak on the record for fear of professional or legal consequences, acknowledged that they routinely pitched or sold health insurance policies without adequate licensing. Three others said they supervised the sale of health insurance by unlicensed sales reps.

“I made like $ 15,000 in the time I was there, just on commissions. And I never got my license,” said an insurance salesperson who left Zenefits this summer. She estimated she had more than 100 conversations with different customers about insurance. “I took my test three times in a row, and I failed. They still let me work.”

Without her license, she had to improvise on calls with customers.

When faced with a tricky question, “I would just Google it,” she said. She would tell the customer, “hold on one second, let me email the expert, he's on the line, hold on one second, I'll get back to you.” But in reality, “I would pick one of the first three links and I would just go off of that.”

A large number of the new hires in the Scottsdale office came from other technology companies, with experience in sales but little familiarity with health insurance. Zenefits offered to pick up the cost of studying for and taking the broker test, several former employees said. But new sales reps there soon discovered that getting licensed wasn’t seen as an urgent priority. More important was hitting sales quotas, which initially would increase each month.

Those who hit the quotas, even if they lacked broker licenses, were rewarded, the former employees said. One of the earliest hires for the Scottsdale office started as a health insurance sales rep in September 2014, according to his LinkedIn profile and interviews with two former colleagues. He was promoted in January to a sales manager job, which would not necessarily require a broker license, and he was promoted again last month.

This sales rep had no broker license until September of this year, when he got a license in California, according to a search of every state insurance database for his name. After BuzzFeed News first attempted to contact him for this article, he got licenses in states including Arizona, Connecticut, Illinois, Louisiana, Nevada, Oregon, and Virginia, state records show.

Once an insurance broker gets a license in one state, they can pay a fee and fill out information online to have the credential replicated in other states where they do business. But even this simple task eluded many sales reps. One former sales rep who started in the Scottsdale office last fall said he had an Arizona license but didn’t bother to get licenses in the other states where he was selling insurance until January, when Blond instructed sales reps to focus on particular states.

Even after that instruction, sales reps had a relaxed attitude toward the licensing requirements, former employees said. Another former sales rep said he procrastinated after passing his broker exam, waiting two months before filling out the paperwork to get his first license this spring. In the meantime, he sold insurance.

Washington state regulators delivered a jolt to Zenefits, however. On April 2, just after 2 p.m., Stephens, the senior sales operations analyst, sent an email to sales reps who had “closed business in Washington in 2014 or 2015 without providing your licensing information to the sales operations team (thus, Zenefits at large.)”

She said Zenefits faced “an inquiry” from Washington's insurance regulator into the company's business practices. “As part of the response,” she said, “we must list out every broker who deals with Washington clients and their WA license number. This requires that we gather all licensing information from individual reps” — this part was underlined and in red lettering — “TODAY by 4:00 PM.”

“If you are not licensed in Washington, take 5 minutes to complete the process on NIPR,” Stephens added, referring to the website that lets people apply to transfer their credentials to other states. She told sales reps to add their confirmation numbers to a Google doc after completing online applications.

Not everyone who received the email appeared to grasp its urgency.

“Drop what you are doing and submit the application to get licensed in WA,” read a bolded sentence in a follow-up email, sent just after 6 p.m. by Sabharwal, the senior sales operations manager.

“This is the third communication on this. It takes less than 10 mins,” he continued. “You are putting the company at risk by not doing this immediately.”

Months later, in July, unlicensed insurance sales were apparently still a problem. In the July 6 email announcing the license management system, Sabharwal said Zenefits would “now be able to prevent a rep from closing a deal if they are not licensed to sell into that state.”

“This is an area of great concern as the consequences of breaking these rules can be detrimental to our ability to operate in that state,” he continued.

In its written statement, Zenefits said, “As we have grown, so have our compliance procedures.” Zenefits said job offer letters to sales reps now specify licensing requirements, and that the company’s internal software systems now include licensing checks as part of the sales process.

A week after Sabharwal’s email, licensing information for a number of sales reps still hadn’t been entered into the new system, according to another email from him. The email, which Sabharwal sent to sales managers on July 13, contained a chart showing “Incomplete Resident Licenses by Manager.” The 16 managers listed by name in the chart corresponded to a combined 33 incomplete records for sales reps.

“A valid license means that they have their license number and expiration date,” Sabharwal reminded the managers. “Just passing the insurance test does not constitute a license.”

The former sales rep who closed at least 27 deals without a broker license appeared to shift his strategy toward the middle of the year, emails to his customers show. In a February email to one small business CEO he was courting, he said, “I primarily am a broker and obtain the responsibility to work with our clients in that capacity.”

Later, in interactions with a different company, he appeared to take a more conservative approach. The customer, Defib This, a small company in Santa Cruz, Calif. that runs emergency response training courses, had been “desperately searching for insurance,” according to Aki Williams, the chief operating officer.

But Williams was a “little peeved,” when the sales rep refused to have any meaningful discussions about insurance policies. “He sent us emails that had multiple options, but we really couldn't pin him down to say, 'This is what's going to work best for your company,'” Williams said.

Williams ended up buying an insurance policy through the sales rep that took effect in July. She said she had no idea that he lacked a broker license.

When Zenefits sought to fix this issue, it declined to pull unlicensed sales reps off the phones entirely, the July 6 email from Sabharwal shows. For new hires going forward, Sabharwal told sales managers, the company would start “requiring reps to have passed their license exams before starting boot camp, which will ensure that they have a license by the time they get on the phones.” But the policy for current sales reps was apparently different.

“There [are] still, however, a few reps who have passed the test, submitted the application, and are awaiting their license number but are currently working deals,” he continued. “We are going to make an exception for these reps and allow them to close deals as long as their manager is on the phone with them.”

Sabharwal emphasized this instruction in his follow-up email on July 13.

“A reminder that if any of your reps do not have a valid license in hand for their resident state (usually CA or AZ), YOU MUST be on every call where insurance is discussed,” he told sales managers.

Two former employees said they participated in such phone calls, in which an unlicensed rep would be supervised by a more senior employee with a broker license. Such a solution, however, falls into a legal gray area, according to William Gausewitz, a Sacramento-based partner at the law firm Michelman & Robinson who formerly was a deputy insurance commissioner at the California Department of Insurance.

“I don't think it complies technically with the licensing laws,” Gausewitz said, commenting in general on the practice. “But if the unlicensed people are supervised by a licensed broker, the department is not going to be as suspicious that the agency is engaged in flagrant lawbreaking violations.”

BuzzFeed – Tech

Weed Startup Hosts Movie Screening for High People

“Whatever we can do sober or with a beer, we should be able to do with cannabis.”

Nitasha Tiku / Buzzfeed

The cannabis-infused hazelnut spread started to kick in a few minutes before the movie started.

It was Wednesday night and I was at a movie screening hosted by a medical marijuana delivery startup named Flow Kana. Forty or so guests paid $ 45 to sample some weed and then watch a movie high. The screening room was located on the first floor of the Hobart Building, an office tower in San Francisco's Financial District, and the sweet, fruity smell of sativa wafted almost all the way out to the lobby.

CEO Michael Steinmetz told Buzzfeed News this was the first in a series of “culture shifting cannabis events” to help foster the idea that Flow Kana is about transforming society, not just getting baked.

Inside the reception area, guests were greeted with a banquet of options, artfully arranged on a burlap cloth. Flow Kana works directly with farmers in Northern California and likes to call their concept farm-to-table. For this event, the table was covered with containers of Kanatella (house-made chocolate-hazelnut spread infused with 10 mg of medical marijuana) and Kanabees (same deal, but with honey) that could be sampled with tiny wooden spoons. There were also bowls of different strains of weed that could be sampled using an assortment of vaporizers, including a handful of Pax 2s and one Volcano vaporizer (the kind with the plastic bag that inflates like balloon people outside a car dealership).

Nitasha Tiku / Buzzfeed

Nitasha Tiku/Buzzfeed


View Entire List ›

BuzzFeed – Tech

Can An On-Demand Startup Survive Without Contract Labor?

Munchery is one of many companies that want to change the way we eat by selling cheap, nutritious, pre-made meals — and it wants to do so paying its employee a living wage. It won’t be easy.

Via Munchery

These days, especially in San Francisco, it seems like you can get pretty much anything delivered at the push of a button: Whether it's a ride or a hairdresser or a house-cleaner or coffee or weed, the on-demand economy can have it on your door almost instantly.

The same goes for dinner. Don't want to cook, don't want to go out, don't want to order in? Munchery has a solution for that: fresh-cooked, refrigerated food, prepared by professional, pedigreed restaurant-quality chefs, delivered to your door for a reasonable price.

But there's something that sets Munchery apart from the rest: While companies such as Uber, Instacart, and Homejoy rely on contract labor to make the seeming magic of the on-demand economy happen, Munchery has committed to treating its employees like, well, you know, employees — that is, salaried workers with benefits. That's an expensive business model and a tough road to hoe, however — and it's not Munchery's only challenge.

Munchery faces plentiful competition, high labor costs, angry neighbors, and the challenges associated with making dinner for thousands of people a night. Now poised to enter its fifth year and its fourth city, it's a parable for the challenges a young, ambitious, well-meaning startup faces on the path to scale in the 1099 economy.

Tri Tran co-founded Munchery to solve a relatively specific problem: Weekday dinners are stressful — especially for families, especially for those trying to eat healthfully and on a budget. He set out to create a delivery option that was easier than cooking, more healthful than standard delivery fare, and cheaper than eating out.

And it's worked out pretty well. According to Tran, Munchery now serves “many thousands” of meals a day, operates in San Francisco, Seattle, New York City, and, soon, Los Angeles, and has raised nearly $ 40 million, including investments from high-profile venture capital firms such as SherpaVentures and Menlo Ventures.

But Tran isn't the only founder who predicted that busy urbanites would thrill at the prospect of hand-delivered, partially cooked, relatively nutritious meals, and Munchery is but one of many startups eyeing the busy American's dinner table. Sprig, SpoonRocket, and Zesty are all rolling up on your door with similar concepts: meals at various stages of preparedness. Meanwhile companies such as Blue Apron and Plated have both found success delivering ingredients to customers who want to cook for themselves, but don't know how, or don't have the time to shop. And of course, there's also more traditional takeout, now facilitated by websites like Grubhub and Seamless. All of these companies cut into Munchery's potential customer base: people too busy or too lazy to cook dinner for themselves from scratch.

For now, Munchery is the biggest, at least among its immediate competitors: Sprig, which claims to have served more than 300,000 meals since launch and has raised $ 11.7 million, has a kitchen staff of 50 in San Francisco. SpoonRocket, meanwhile, has raised $ 11 million. (SpoonRocket didn't respond to request for comment for this story.)

But to stay on top, Munchery needs to expand with the kind of market-owning aggression shown by fellow on-demand labor companies such as Uber. Every city has an untapped market of potential Munchery customers; if the company doesn't capture that revenue, someone else will, and Munchery investors will be disappointed. That pressure can be hard to live up to without having to sideline some of the core principles of a business along the way.

Tran said it's important to him that everyone who works for him to feel that Munchery is “something they can believe in.” To that end, Munchery matches the cost of every meal it sells in donations to local food banks (Marin Food Bank in the Bay Area, City Harvest in New York).

Donations aren't the only thing cutting into Munchery's bottom line: Unlike some other Bay Area startups, which are being taken to court over potentially misclassifying workers as contractors — thereby cutting them out of benefits, overtime, and other compensation — Munchery offers both drivers and kitchen workers employee status, including benefits.

This is an ethical decision for Tran, but it's also a savvy business move. The higher compensation that comes with employee status may help with retention for drivers, many of whom Tran said are students or ride-hail drivers by day. From a consumer relations standpoint, it behooves Munchery to have happy workers showing up at customers' doorsteps every night. And from a management perspective, classifying workers as full employees, rather than contractors, allows Munchery to exert a higher level of control over them in the name of efficiency. (For example, Munchery drivers use an internal app to plot the most efficient drop-off route and communicate with customers.)

Hunter Walk is a venture capitalist and co-founder of Homebrew venture fund, which funds a number of early stage startups including a few in the on-demand services space. He agrees that the long-term benefits of making an investment in labor can easily outweigh the short-term benefits of relying on contract labor. “Why would you give up customer-facing innovation opportunity by treating the folks that interact with your customers as low-quality, disposable resources?” he told BuzzFeed News. “That just doesn't make sense to me.”

Moreover, classifying employees as contractors may well be illegal — and many have wondered whether these on-demand labor companies can continue to grow, or survive at all, if the courts force them to reclassify the cheap labor their business models depend upon.

Other on-demand delivery companies say they can't afford the labor cost of hiring workers as employees, but Tran doesn't think that's a good enough reason.

“If you look at labor law, and all the 25 tests the IRS has about what makes an employee or contractor, these folks are clearly employees,” Tran said.

But Munchery's success — if it continues — might suggest that it's possible to offer workers full compensation, and even benefits, without going under. Still, financially, the difference has to be made up somehow; like so many startup founders, Tran is also hoping scaling rapidly will close the gap.

Munchery's sheer size brings perks, such as bulk discounts on ingredients. As the company continues to expand across the nation (Tran suggested Boston and D.C. as possible next locations), its potential market share seems almost limitless. Said Tran, “We don't have a ceiling in terms of revenue.”

But the business model nonetheless faces challenges, even beyond Munchery's unusually high labor costs. Efficiently delivering thousands of meals a day means operating a large commercial kitchen in a central location from which residential neighborhoods can be reached with relative ease. In San Francisco, that's the Mission District. Ingredients from storage facilities located elsewhere are delivered every morning; trucks and delivery cars are loaded and unloaded all day as ingredients come in and chilled meals in insulated bags go out.

This has, somewhat inevitably, resulted in complaints about parking, noise, and general disorder caused by Munchery's ever-quickening business. After local news outlets picked up on reporting by neighborhood blog Uptown Almanac regarding engines left running on refrigerated trucks outside the facility, Tran moved the kitchen, at no small cost to the company. But similar problems arose at the new location.


View Entire List ›

BuzzFeed – Tech