VANCOUVER — A Canadian ultra-fast delivery startup laid off much of its staff earlier this month, closing its stores amid talk of a possible acquisition. The move comes as investors warn businesses like it could struggle in an ailing economy.

Ninja Delivery “is currently under consideration for an acquisition, and we will be pausing our store operations during this process,” wrote co-founder Wesley Yue in an email to staff May 2. “Unfortunately, we have had to make the difficult decision to let you go effective today.”

Ninja had more than 80 employees in three stores as of March 30 this year. It asked staff to stop coming in for scheduled shifts immediately, according to a copy of the email which The Logic obtained from two former staffers. Four former employees confirmed Ninja laid off much of its staff in early May. One said a group chat including about 25 co-workers indicated they had all been laid off.

“It came out of nowhere. There was no prior warning and no sign of it at all,” they said, adding that they believed all warehouse associates, who doubled as delivery riders, were laid off. The former employee noticed some cost-cutting measures in mid-March, like having fewer people work shifts at the same time.

The company, which started offering 10-minute deliveries in Waterloo, Ont., in 2021 and expanded to parts of Toronto earlier this year, did not immediately respond to a request for comment.

While its website is still active, it is not currently accepting orders. A pop-up message tells visitors on one part of the site that “Ninja is paused” and tells them to “have a great summer.” BlogTO first reported the service had gone offline.

Ninja is one of a slew of recent startups to launch in Canada promising to deliver groceries in less than an hour. It announced in March that it had raised $2.8-million to fund its expansion plans and secure what it saw as a first-mover advantage in rapid delivery in the country. San Francisco-based Contrary Capital, Shopify-funded global logistics platform Flexport and angel investor Lachy Groom funded the round. None of them immediately responded to a request for comment.

At the time, Ninja operated three so-called “dark stores”—two in Toronto and one in Waterloo. Not open to customers, they are sites where its workers picked and packed orders. Unlike many delivery startups, its delivery staff were salaried workers rather than independent contractors.

The company planned to add seven more stores in its existing markets and in Vancouver before the end of this year. “Our goal in the near term is to win over Canada first,” Yue said in an interview with The Logic in March. The company believed Canada could support between 200 and 400 stores, he said. “Of course, we want to be at a size where we can eventually go and tackle international markets.”

When it announced its raise in late March, Ninja Delivery lagged its Canadian ultra-fast peers in venture-capital dollars raised. Toronto’s GoodGood announced a $6.5-million round in December 2021 and Vancouver’s Tiggy completed a $6.35-million seed round that same month, according to PitchBook. 

At the time, Yue seemed unfussed. “I think first-mover advantage is more than just … launching as many stores as possible,” he said. While that’s “one significant part of it,” a company must also work out the logistics and economics before expanding too rapidly. He conceded that the competition would become “a capital race” as entrants compete to grow quickly.

But venture-capital funds are no longer as readily available amid widespread economic uncertainty. “Cheap capital is not coming to the rescue,” reads a May deck from Sequoia Capital, warning 250 founders of a “crucible moment.” Companies that burn cash quickly to support growth are likely to struggle to attract further funds during the downturn, venture capitalists told The Logic earlier this month. Version One Ventures general partner Boris Wertz said ultra-fast delivery companies would be especially vulnerable as they tend to be capital-intensive, low-margin businesses.

Several ultra-fast delivery providers in other countries have failed in recent months after a year in which investors poured billions into the sector. Others are struggling to maintain momentum. Once valued at US$15 billion, U.S.-based Gopuff couldn’t garner interest in a US$1-billion raise as investors were skeptical of its cash burn.

At the time of its $2.8-million raise, Ninja offered free delivery on orders worth more than $10. It now offers the perk for orders above $19.99. Startups have been known to subsidize unprofitable orders in the name of customer acquisition. Asked in The Logic’s March interview if that was Ninja’s strategy, Wesley said the company’s goal “is to change the fundamental habit of how people shop.” As it converted more new users into lifelong customers, he reasoned, the average order value will grow, “and we’ll have more and more profitable orders.”