The fast delivery company MilkRun will close this week and all staff will be made redundant after the much-hyped startup failed in its quest to change the way people receive their groceries. The Australian Financial Review first reported on Tuesday that one of the local pioneers of the ultra-fast delivery model would shut down after its founder, Dany Milham, blamed worsening economic conditions. “I’m writing to let you know that we have made the difficult decision to wind down the business, and as a result, MilkRun will cease trading this Friday,” he said in an email to staff. Milham said that while the business had performed well, market conditions had deteriorated. More than 400 employees will be made redundant. Rapid grocery delivery companies gained popularity around the world during the early pandemic years, with venture capitalists ploughing cash into a sector promising to get groceries to their urban customers often within 10 to 20 minutes. Backed by fleets of either push bikes, electric bicycles or mopeds, the startups are now collapsing in large numbers after funding ran dry in a global economy grappling with high inflation. Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundup Milham, who formerly headed mattress and furniture company Koala, helped secure a $75m investment in the company early last year, which included backing from the billionaire Atlassian founders, Scott Farquhar and Mike Cannon-Brookes. MilkRun launched in Sydney before expanding to Melbourne, using a network of warehouses to store groceries near customers. The company began significant job layoffs in February as financial pressures mounted, just months before announcing its plans to shut down entirely. It told staff they would receive their pay entitlements and ongoing support including access to redeployment services. Local rivals Voly and Send closed last year, as have numerous similar businesses in the US and UK. Another popular pandemic-era business sector, fast meal delivery services, has also struggled to create a profitable model, with Deliveroo among those to have closed in Australia. The closure of MilkRun is another indirect casualty of surging inflation that hit many economies last year, prompting central banks to raise interest rates. The rapid increase in borrowing costs prompted many venture capitalists, who finance startups, to preserve cash, giving new companies less time to turn a profit. “Since we announced our structural changes in February, economic and capital market conditions have continued to deteriorate, and while the business has continued to perform well, we feel strongly that this is the right decision in the current environment,” Milham told employees.