Startup Postmortem: The reason food delivery service Hubbub failed

Startup Postmortem

We’re a bit funny about failure in the UK. It’s a dirty word. It’s something to be ashamed of. In the US, however, things seem to be a little different. Create a company that ultimately fails and you’re not necessarily derided for it, you’re celebrated for giving it a shot. Pick yourself up, dust yourself off and try again and you’ll be even more respected.

It’s an attitude that’s starting to make its way over here and that’s all the better for the UK tech ecosystem. More and more founders are sticking their heads above the parapet and revealing what went wrong – the mistakes they made, hurdles they couldn’t clear and inherent business-model flaws they couldn’t overcome.

At the Startup Postmortem event hosted last week by Runway East in London’s Moorgate, four company founders and former CEOs bared all, sharing the stories of the rise and fall of their tech startups.

William Reeve was on the panel, speaking as former co-CEO and chairman of food delivery service Hubbub. Before this, he founded and served as COO of LOVEFiLM, held non-executive director roles at the likes of Zoopla, Paddy Power, Secret Escapes and Graze and he has also backed around 40 companies as an Angel investor.

Hubbub was created in 2008 by former human rights barrister Marisa Leaf and specialised in delivering quality food from local bakers, butchers and greengrocers.

“At a distance, before I met the founder, I thought ‘how’s this going to work?’” said Reeve. He questioned how a startup cold possibly compete with giants like Tesco and Ocado already operating in the grocery delivery space. There were two main ways in which Hubbub differed, though. First of all, their target customer base.

“We had zero customer overlap with Tesco. We had the type of customer that would hate Tesco and hate everything Tesco stands for. Nearly all of the products we sold were unique … [such as] wines from independent wineries that didn’t sell through supermarkets,” said Reeve.

“Of course if you’re a price-sensitive, discount-centric shopper, you were not interested because it cost more than Tesco, but if you were a discerning customer who cared about quality, supply chain provenance and understanding the story of the product, you’re not interested in Tesco and you are interested in your local shops,” he added.

The second big difference between Hubbub and the likes of Ocado was that Hubbub didn’t pay for the picking and packing of goods – the startup got the retailers themselves to manage that. On top of that, there were no big warehouses to manage, no expensive machinery to buy and maintain – no big capital investment at all. “It was much more capital efficient … [and] I thought that was a very strong competitive advantage,” Reeve explained.

Joining the team

“Hubbub had been up and running for about five years when I met the founder, who had been bootstrapping and had a lot of support from friends and family,” said Reeve.

“She had tried quite hard to get investment, but failed for a variety of reasons. But I found myself getting drawn into it. I became co-chief-exec and managed to raise from people who had previously turned her down.”

They closed the round in 2014 – a $3.4m Series A led by Forward Partners and featuring Octopus Ventures and LocalGlobe.

Reeve said they tried, and failed, to close another funding round this time last year, which led to the team restructuring the business with the view of making it profitable as soon as possible.

“The irony is that, in the very last week we actually became profitable, but by that time it was too late,” Reeve said.

Hubbub finally shut up shop in March 2017. So what, ultimately, went wrong?

Reeve said a lot of people he spoke to about Hubbub said something along the lines of: “It’s an interesting idea, but I wouldn’t use it.”

“I couldn’t easily assess whether the USP was strong enough. Local shops – is that strong enough to get enough customers? And that was ultimately the challenge that the business didn’t manage to overcome.

“At the end of the day, the proposition was too niche and we couldn’t get enough people using it,” he explained.

Lessons learned

Cathy White, founder of tech PR firm CEW Communications and the women-led meetup group GeekGirlMeetup, moderated the Startup Postmortem event and asked Reeve what one piece of advice he would give to startup founders.

“There is no single thing that everyone should do. No one key piece of advice that will guarantee success,” he said. However, founders should put themselves in their investors’ shoes and ask themselves: “What if it was my money?”

Reeve said, towards the end of Hubbub, he told his co-CEO that they both needed to put money into company. “She said no at first, but then found some money to put in and her whole mindframe changed. She stopped seeing investors as aliens from planet zog.”

Shareholders and investors want to see that founders are prepared to go all-in, he suggested. Reeve also said that if founders do find themselves in a position where it looks like they have to close their businesses, they absolutely must do so in a way that is respectful to their employees.

“I think one of the worries as a founder is ‘how can I let these people down?’. The main thing you have to think about is treating them straight and doing right by them. Closing the business down is not doing wrong by them, necessarily. Flogging a dead horse is doing wrong by them. If you close the business down cleanly, you don’t miss payroll, you don’t lie to them and you don’t lead them up a garden path, I think you’re doing pretty well,” said Reeve.

He went on to say the way insolvency and shutting down a UK limited company works is “relatively clean and painless”, so it’s not something to keep delaying if the writing is truly on the wall.

“The main thing employees are after is being treated properly. They will get new jobs and your main concern should be whether they regard their experience as a good adventure – something they’re glad they did, learned from and developed as people, or was it a complete waste of time?” Reeve added, “that is what I would encourage people to think about.”

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