Just this week, I used Instacart to order groceries, and I'll probably order dinner from Munchery tonight. But I could have also ordered food right to my door from Postmates or DoorDash, and that broad range of choices could be the sign of a bigger problem: Even venture capitalists who are fans of online food delivery say this market appears over saturated.
The latest casualty is Good Eggs, a food delivery start-up that announced this week it is closing operations in all cities except San Francisco.
What went wrong? In a blog post, CEO Rob Spiro wrote that he didn't fully appreciate the challenges of building out his business.
"The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain," he wrote.
Such stumbles haven't deterred venture capitalists from committing capital to this sector. According to CB Insights, food start-ups have raised over $750 million this year. That's after more than $1 billion in investments last year.
The food tech category includes a range of companies from food delivery such as Instacart and Postmates; food replacements like Hampton Creek Foods and Soylent; and restaurant tech like Reserve.
Some analysts argue that this market has now become crowded, and is poised for consolidation.
"Food delivery is kind of the flavor of the month right now in investment land," said Anand Sanwal, CEO of CB Insights. "In the past, it was daily deals, subscription e-commerce or whatever. I think there's definitely going to be some casualties within food delivery, without a doubt."
Still, Americans spend an estimated $70 billion a year on food takeout and delivery, with $9 billion of that total ordered online. So it's no surprise that many venture capitalists believe this is a market where they need to place strong bets.
Ajay Chopra, general partner at Trinity Ventures, says food delivery start-ups are capitalizing on pronounced changes in how consumers work and live. That's one reason he's bullish on the sector.
"Cooking and preparing food is a problem for two-income families with very busy lives," Chopra said. "The older model of going to a grocery store and cooking doesn't suit the lifestyle of many people working today. These food delivery start-ups, from Instacart to Munchery, are attempting to solve this problem."
But Chopra also said that investors need to be very selective when putting money to work in this space. The profit margins of companies working in food delivery are razor thin, so he only looks to invest in start-ups boasting smart, disciplined management teams, a strong operation and a clear pathway toward profitability.
Those start-ups concentrating on just attracting more VC funding and scaling the business as quickly as possible are poised for disappointment.
"We fund companies that are working toward a business model that gets them to profitability," Chopra told CNBC. "Even venture money will ask at some point, 'Where are the profits?'"