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Munchery Stiffs Early Backers and Cuts Staff in a Bid for Survival

The food delivery startup is recapitalizing, devaluing the stakes of many early investors.
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Photographer: Jason Henry for Bloomberg Businessweek
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The food delivery startup Munchery Inc. has raised more than $5 million to stay afloat, practically eliminating the stakes of the company's founders and departed employees, according to a person familiar with the matter. Menlo Ventures and Sherpa Capital, the company's biggest backers, are among the latest investors, said two people familiar with the deal, who were not authorized to speak publicly.

The company is seeking to raise up to $15 million, two people said. The new financing, which is known as recapitalization, is a decision of last resort for many startups, typically reserved for circumstances when companies want to attract investment by rejiggering ownership.