After Russian entrepreneurs asserted themselves last year as chief disruptors in the global food delivery industry – fulfilling orders in around 15 minutes in a variety of Western cities – some of them are now falling as collateral victims of Putin’s war on Ukraine, reports East-West Digital News (EWDN).

In early March Buyk – a fresh food delivery service with sizeable operations in New York and Chicago – abruptly laid off the 98% of its staff and was seeking short-term funding to avoid bankruptcy.

 “We have made the tough decision to temporarily furlough our employees until we are able to secure more funding sources in the US,” Buyk’s CEO James Walker told the New York Post.

“Our founders Slava [Vyacheslav] Bocharov and Rodion Shishkov have been providing bridge financing to Buyk until we close our next investment round. However, the sanctions against Russian banks have now made this bridge financing setup untenable, despite neither of our founders being sanctioned,” the executive added.

Buyk was created less than a year ago, raising $46mn to launch its services on the US market. The new company uses a technology developed in Russia by Samokat, an affiliate of Mail.ru Group (now VK company) and Sber, the Russian state-controlled financial and digital giant.

Buyk’s investors include Fort Ross Ventures, Citius, CM Ventures and LVL1 Group – which all have Russian connections. Among Fort Ross’s backers is Sber, while LVL1 is the investment arm of Lev Leviev, an Israeli-Russian entrepreneur who co-founded Russia’s leading social network VK.com and the Selectel.ru data centre network.

“Last-second” deal cancellation

On the road to bankruptcy, Buyk was quickly followed by Fridge No More. Last week, this Russian-founded ultrafast delivery startup operating in New York and Boston stopped accepting orders and sent its 600 employees home.

“All of company’s investors refused to invest into the company,” a company manager wrote in a Slack channel on Wednesday evening, as reported by New York Post.

According to the news outlet, US food delivery platform Doordash had funded Fridge No More for more than a month while considering the acquisition of a stake in it – but “pulled out at the last second.”

This “important strategic partner […] unexpectedly cancelled the deal and stopped financing” without providing a specific reason, Fridge No More’s founder Pavel Danilov wrote to his employees.

Cited by New York Post from various sources, these reasons might range from “operational issues” which arose in the due diligence process to the fact that Danilov and co-founder Anton Gladkoborodov are from Russia – “even though the source familiar said the founders did not support Vladimir Putin’s invasion of Ukraine,” notes the news outlet.

The sudden failure of Buyk and Fridge No More might also reflect a business issue. In an exchange with CNN Business, food supply chain consultant Brittain Ladd called rapid grocery delivery “the worst business model ever created.” These loss-making startups are entirely dependent upon capital injection, which are “the only reason [they’re] able to exist,” he believes.

Russian oligarch next in sanction list?

Winter Capital, a Moscow-based international fund backed, in particular, by billionaire Vladimir Potanin, might also be caught in the turmoil. Earlier this week Turkish rapid grocer Getir, in which the fund invested an undisclosed amount last year, said that “adjustments” would be needed should Potanin be targeted by international sanctions.

Earlier this month, as reported by UK industry publication The Grocer, Potanin was named as a “crony of Putin” and one of several oligarchs who were “propping [Putin] up and allowing him to create havoc in Europe”.

Getir told the media that Winter Capital was only one of the 17 investors that funded it with a 0.45% stake in the company.

The Turkish company told The Grocer it “undoubtedly support[ed] the people of Ukraine,” sending five truckloads of essential supplies to the Ukrainian Red Cross to help with relief efforts.

This article first appeared in East-West Digital News (EWDN), a bne IntelliNews partner publication.