Delivery startup Favor flees DC and four other ‘tier-one’ cities

Austin, Texas-based delivery startup Favor announced on June 17 that it was shutting down service in five major U.S. cities — among them Chicago, Atlanta, Miami, Philadelphia and our very own Washington, D.C. Favor initially launched in D.C. in late September 2015.

We regret to inform you that Favor is no longer operating in your market. We hope to serve you in another market!

— Favor (@Favor) June 18, 2016

In a prepared statement Favor CEO Jag Bath was careful to paint the departures as a natural part of a startup learning about its ideal market though experimentation. “At Favor, we fully embrace learning about the communities we serve,” he wrote. “After experimenting in cities of varying size, Favor is choosing to employ our smart-scaling growth plan in tier 2 markets.”
Evidently, D.C. is not a tier-two market. But what does that mean, exactly?
Favor told Technical.ly the company does not distinguish between tiers one and two (or three) based on population — rather it’s a calculation of density and, yes, competition. Tier-one cities have a lot of traffic, long restaurant wait-times and it can be difficult to find parking, Favor said. And then there’s the issue of competition: D.C. hasn’t exactly got a shortage of on-demand delivery options.
When Favor initially launched in D.C. spokeswoman Tina Heileman told The Washingtonian that “the way we’re launching is focusing on being the fastest.” Now, apparently, Favor had decided that their model works best elsewhere.
Favor declined to comment on how many delivery people (“runners”) were let go in D.C., but said given the relative youth of all the markets shut down “the impact was minimal.” Indeed, another market Favor shut down, Philly, has only been live since April. This turnaround seems especially abrupt, making us wonder why Favor bothered to launch in Philly at all.
For now its goodbye, Favor, though Bath indicated to TechCrunch he’s “not closed off to the idea of eventually trying out tier-one markets in the future.”
The news leaves us with a lot of big questions — how many on-demand delivery startups is too many on-demand delivery startups? Will the future see companies retreating to/creating niches (like Favor is arguably doing) rather then competing in the same old faster, better, cheaper game? Tweet us if you’ve got good answers.