Doughbies, an on-demand cookie delivery startup, closed down overnight after the business failed to cook up hot enough returns for its investors.
The brand wasn’t just popular, it was also profitable — Doughbies made 36% gross margins and 12% net profits. So why did they close?
It’s hard to run a bakery like a tech company
Daniel Conway, who co-founded Doughbies with Mariam Khan in 2014, left his venture capital firm to start the cookie company.
The duo launched the business like a tech startup, putting the company through the ‘500 Startups’ accelerator and raising $670k from investors. But several startup investors and advisors publicly questioned the company’s ability to scale.
Conway and Co. remained confident, insisting that “[compared to] cooking on stovetops, we can do thousands of cookies in one oven per hour.”
Cookies make profits, but not 10x returns
Doughbies’ revenue and cult following would have been a huge success for any other bakery — but hungry investors didn’t want bigger batches, they wanted broader business models.
The company created an app to boost sales, but it turned out that people only needed so many cookies a week.
Since the size and success of Instacart, Seamless, and other competitors made expansion into other types of food delivery nearly impossible, Doughbies execs chose to go out on top and “move on to something new.”