A modern tale of David and Goliath
Original version posted on February 22nd, 2023 on Medium.
“It is the cause, not the death, that makes the martyr.”
Napoleon Bonaparte
Death is inevitable. We will all succumb to it.
But for a rare few, death can immortalize. It can create legacies and change the world forever. We see this across genres, cultures, and lives.
This is one of their stories.
This is the story of Josephine.
Background
Josephine was founded in 2015 in Oakland, California by Charley Wang, Tal Safran, and Matt Jorgensen.
The initial idea for Josephine was to create a marketplace for home-cooked meals. The marketplace would help people earn extra income by enabling them to sell home-made meals to their neighbors.
Josephine would ultimately be remembered as much more than a home-made food marketplace. They would eventually become a David — representing thousands of even smaller Davids — fighting several Goliaths of decades-old legislation, government bureaucracy, and large trade associations.
While they shut down in 2018, their story, a la Napoleon, does not end with their death.
In this article, we’ll dig into that story, the movement Josephine created, and the other organizations currently working in the meal-sharing space. We’ll also look to the future and hypothesize on what models may ultimately persist in 20 years.
Let’s dig in.
Market definition
Josephine played in a market we call “Meal Sharing.” There are several different angles being taken in this market today:
- Home-cooked meals: These companies create marketplaces to allow you to buy home-made food cooked by people in your neighborhood (either in their own homes or in commercial kitchens due to regulation). This is the most common angle and where Josephine was playing.
- Private chefs: Some companies connect private chefs to cook in your kitchen. This is, again, often due to regulations. This space also includes B2B companies that allow companies to hire private chefs for events.
- Other: There’s a ton of other adjacent angles being taken in this space. Some examples include 1) meal kits cooked by local chefs, 2) chefs hosting dinners in their own homes, and 3) travelers eating local dishes in homes.
Josephine raised $3.1M between 2015 and 2016 as one of the first large attempts in this “home-cooked meals” space.
Ultimately, however, they ran into a key hurdle.
What they were doing was actually illegal.
Regulations
Every state has restrictions on what people can cook + sell from their home. These are called “cottage food” laws, and the background for their existence makes sense.
What should people be allowed to cook + sell to their neighbors without any regulation? Cookies? Probably safe. Homemade sushi? Probably not safe.
With that, cottage food laws always specify what types of foods are allowed to be sold without regulation, in accordance with their underlying safety. So sushi, and most meats in general, are no goes. Pastries, cookies, popcorn, and things of that variety are usually allowed.
But the regulations are so much more than that. There are also limits on:
- The location of consumption
- The location of sale (e.g., online, retail, from home)
- The method of sale (e.g., pickup, delivery, wholesale)
- The number of meals sold and the total sales allowed ($$$)
- The day of preparation
You also need: your house properly zoned, authorization from your HOA and landlord, and additional upfront costs of permitting, inspections, and labeling.
AND these regulations differ by state and county, and there are over 3,000 counties in the United States.
So the regulations are incredibly complex, differ from county-to-county, and are often arbitrary. For instance, you can sell jams out of your home in Georgia but not Oregon, and you can sell pickles in Texas but not Michigan.
Here’s a chart that categorizes each state by the level of regulatory freedom for home chefs (ignore the dots).
Source: Forrager. This website is great if you want to go down a rabbit hole on cottage food laws.
As Josephine began to face these legislative hurdles, they decided to fight back.
They became the primary sponsor of California AB 626, a bill aiming to decriminalize small sales of home-cooked meals in California. They also appealed to public sentiment and began telling the stories of their chefs: the Vietnamese immigrants, the local grandmothers, the Iranian refugees. It was hard to not be sympathetic to their cause.
Despite their best efforts, in 2018, Josephine ultimately shut down.
In a great article, co-CEO Matt Jorgenson describes that the pressures facing the business just became too great — near that time, an investment round for Josephine fell through and the government began to pressure Josephine to divulge the personal information of all of their cooks. After Josephine shut down, the founders pivoted to focus their efforts full-time on the policy side through their non-profit, The COOK Alliance.
Though Josephine ultimately failed, the company started a movement. AB 626 would eventually pass and go into effect in 2019, spurring calls throughout the country for looser cottage food laws.
However, it’s still an uphill battle. As much momentum as Josephine helped to generate, the movement faces significant opponents — namely, government bureaucracy and the 500k-member National Restaurant Association. While many bills have gone to a vote throughout the U.S. in the last several years, many of them have failed.
Meal sharing market layout
Now, let’s dig into the current market layout.
Shef and WoodSpoon are the two biggest companies today, having raised the most in the home-cooked meal space ($30M and $16M, respectively). However, outside and anecdotal insider information shows that these platforms may be struggling.
They are followed by a host of other companies trying different models in this space.
Here is a layout of the companies operating in the meal sharing space in the U.S., Canada, and Western Europe.
Texture of the problem
No one seems to have cracked the code in the Meal Sharing space. And while many may point to regulation, there may be some other fundamental issues these companies are running into:
- Value prop: A lot of these businesses have not clearly articulated the value prop of ordering home-cooked meals for the consumer. Is the quality that much better? Is price better? Are you just ordering to support your neighbors, and if so, how powerful is that?
- UberEats or not? Food companies can either choose to play nice with 3rd party food delivery apps or not. Ghost kitchen brands are playing nice and sacrificing margin to do so. Most companies in this space are not — they’re choosing to have their own separate ordering platforms. If you’re not going through existing channels, you need to have a remarkably strong product to divert traffic to your app. And with an unclear value prop (see above), most businesses in this space have not done that.
So what’s next in meal sharing?
Here are the approaches we think are interesting (some that are being attempted, some that are not), in and around the meal sharing space:
- Creating food brands for individual chefs: Companies like Popchew and Virtual Dining Concepts are creating food brands around creators and celebrities with built-in audiences. Could we do the same for the best local chefs in a city?
- Curation: Is curation of the best dishes in an area the key to solving the value prop problem? Could we guarantee that this dish is the “best” in your city? Plum, Locale, and Chandni Chowk Food in India have all attempted interesting things in the food curation space.
- Local chefs for coffee shops: Coffee shops struggle to stock bakery items / pastries. Could we enable a marketplace of local chefs cooking bakery items for coffee shops? Or could we do a similar model that brings upscale food to convenience stores?
- Integrating tech into meals: Tovala and Fresco have both raised strong money with their smart appliance products. One of the secret keys to Tovala may lay in the importance of a physical good as a reminder to order from a specific channel. Could a similar model somehow be done to encourage buying home-cooked food?
- Equip local chefs for success: Hotplate (a Y Combinator company) is taking a different approach in the space. They are not building the marketplace (or appear not to be) and are instead focusing on equipping home chefs with the tools to help their businesses succeed. Is there anything else that could come out of this business?
- Food as medicine: ModifyHealth in Atlanta just raised ($10M) with their belief that food is the best medicine. Could local chefs be tapped to cook food for more niche audiences of people with 1) specific medical needs, 2) certain allergens, or 3) picky preferences?
Most businesses in this space are waiting for regulations to change.
The winner in this space is not going to be one of those businesses. The winner is going to be proactively building a product that is novel and 10x better than anything else this space has seen — all while managing the regulatory issues.
It’s going to take some 3 cups of creativity, 2 tablespoons of magic, and just a pinch of luck.
It’s a tough nut to crack.
What do you think is next?
