genic local employee as a co-founder. In the U.K., Patrick Drake,
an English friend of Richter’s, appeared on a BBC broadcast as
HelloFresh’s co-founder and “head chef.” (Drake had previously
been a lawyer at Goldman Sachs and never worked full time in a
kitchen or restaurant.) When the service arrived in Pittsburgh, the
Post-Gazette reported that Marushka Bland, a young mergers and
acquisitions lawyer who had gone to culinary school, “helped
co-found HelloFresh.” In reality, she’d been hired as an intern,
although by then she had the title chief brand o;cer. “They had a
pretty relaxed view of what founder meant,” says Bland, who left
the company in May 2013, after
being in that post for three months.
These far-flung teams all ran on
tight budgets at breakneck speed.
The U.S. team, already months
behind the others, scrambled to
catch up. Every Tuesday, they
woke before dawn to drive a rental
car to the New Jersey warehouse
and pack meals for the weekly shipment. By the end of the summer, they were delivering food to New York City, and then the
Tri-State area, and then to the whole Eastern Seaboard the
following year. It was hard and unglamorous work. Later, one
intern sued, likening his internship to little more than manual
labor for a $1,000 stipend per month, far less than minimum
wage. (The case was settled out of court for an undisclosed sum.)
This was Rocket’s culture, say former employees. When I ask
ex-U.S. CEO Schmincke about the lawsuit by the intern—who
started shortly after Schmincke left—he starts flipping through
pictures on his phone. “If he’s complaining about work condi-
tions, I’ll show you the Rocket o;ce in Southeast Asia that we
were running,” he says. He slid the device across the table, reveal-
ing a photo of a sweaty, crowded workroom. “That’s 320 people
in a 60-people room. And, yes, I was working there too.”
Employees within the Rocket system were swapped out like
tires on a Formula 1 racecar. Nine months into the job, Schmincke
himself ran into a visa issue; he was dismissed as CEO of U.S.
HelloFresh and replaced by a British Rocket executive who had
recently joined from UBS.
Meanwhile, in Germany, Richter and Griesel oversaw the local
sales e;ort. (Nilsson, their third co-founder, left in 2014.) Believing their best potential customers were busy white-collar professionals, the teams packed bags with prepared HelloFresh food
and headed for o;ce buildings, talking their way past security.
Once they got upstairs, they’d find a break room, unpack their
wares, and start pitching.
Richter and Griesel pushed their sta; to beat the previous
week’s result, and then beat it again. They had to prove there was
demand for meal kits—that HelloFresh was primed for the kind
of wildfire growth venture capitalists loved.
“We were burning the cash. Everything that was in our pockets, we were burning,” says Vincent Thuilot, who helped start the
French unit of HelloFresh. When HelloFresh France struggled
and was shut down later in the year (unionized truckers
increased shipping costs, and many of the customers quit during
August, when much of the nation goes on vacation), Thuilot
was named HelloFresh’s head of business intelligence.
It was during that time, he says, he got the sense Richter and
Griesel didn’t want to share bad news with Samwer or other
investors for fear they might be cut o;. “I was polishing the
numbers for them, so I know what we were doing,” says Thuilot.
“From an ethical point of view, it was very—we were on the edge.
Anything that was not looking good, we were not communicating
it. If we talked about the number of issues we had with boxes”—
like those arriving with spoiled food—“I don’t think they would
have invested much further.” Other times, they’d cherry-pick
figures to share, according to Thuilot, who didn’t deal directly
with investors. “It’s not that we were manipulating or tampering
with the data. It was just ‘This
week was bad—so I’ll take the
average of the last 12 months.’ ”
(Richter says this is a mischarac-
terization, by an ex-employee, of
how the company reported to
investors. “We have always been
transparent and consistent with
investors with respect to surfacing
issues and sharing our financials,” he says.)
By the end of 2012, the global operation of HelloFresh had
posted considerable progress—signing up enough customers to
generate some $3 million in revenue. However, it was nowhere
near the $5 million to $10 million Samwer liked to see from his
first-year companies, says Jonas Larsson, Rocket’s former CFO.
“I didn’t think HelloFresh was going to survive for a while,” he
says. “Even Oli [Samwer] thought: We’re done; we’re not going
to support it.”
“This Spanish-style powdered red pepper is proof
that where there’s smoke, there’s flavor.”
—From “Smoky Stuffed Mushrooms WithTomato Quinoa
and Cheesey Breadcrumbs,” HelloFresh recipe WK 12 NJ- 10
B;y 2014, Richter and Griesel were trapped between their investors’ ambitious expec- tations and the meager economics of meal kits. Shipping fresh groceries was expensive, requiring refrigerated ware- houses, hundreds of laborers to pack boxes, and insulated containers. From 2012 until 2014, the company’s cost of
goods and fulfillment expenses made up 81 percent of annual
revenue, leaving little behind to cover overhead or other costs.
Then there was the price tag for finding customers. The
spawning of the meal-kit category was fueled, in large part, by
VCs rushing to bring subscriptions to all kinds of product categories. It began with software, but soon there were shoes (
Shoe-Dazzle), cosmetics (Birchbox), dog toys (BarkBox)—the list went
on. Investors liked subscriptions because they appeared predic-tive: They could input certain assumptions—customer acquisition costs, margins, the number of subscribers who would likely
quit over time—and then model their return on investment.
Within this framework, all marketing expenses, from social
media ads to direct mail to salespeople stalking people on street
corners, were the price of buying customers. And in its first three
years of business, HelloFresh went on a customer shopping
“I was polishing the numbers for them, so I know what we were doing. From an ethical point of view, we were on the edge.”