7 ms·

Pricing Soylent Efficiently

59 points by caublestone 11y ago

blackguardx 11y ago
Solid advice, but this part was a little cringeworthy: "At the same time, we also needed sufficient cash flows to fund our aggressive growth strategy and invest in technologies that will change the world." I hope that is tongue-in-cheek because world-changing ideas aren't a dime a dozen.
- easong 11y ago
  If any recent startups can say they're taking a go at changing the world, it's the guys trying to solve world hunger by engineering healthy food that can be mass-produced by genetically engineered algae in tanks.
  - blackguardx 11y ago
    When I last looked at them in depth, they wanted to create meal replacement shakes so busy professionals didn't have to waste mental output thinking about food. Did they pivot? Edit: I can't reply for some reason, but I applaud them if solving world hunger is their goal. I think they should have changed their marketing, though. Their original marketing seemed very niche.
    - dikaiosune 11y ago
      Why can't those be the same thing? It doesn't seem unreasonable to me to use the capital generated by the prices you can charge for a luxury good to fund the R&D necessary to bring the costs of their method low enough that it could be a significant and affordable improvement to low-income families' nutrition.
      - SyneRyder 11y ago
        It sounds like the Tesla model: first create a luxury car that you can sell to the very wealthy, and use those funds to increase production & lower costs through increased volume to produce a family car... then use the increased demand for batteries to make building a Gigafactory cost effective, so you can start producing Powerwall house batteries, so you can start taking more houses off the electricity grid & become 100% solar.
    - frakkingcylons 11y ago
      I sympathize with the position you're taking, their marketing is certainly pursuing the busy-body yuppie audience. I think if you spend some time reading comments and posts from users of Soylent online you'll see a lot of people are buying it because it is inexpensive and nutritious, while still requiring very little time to prepare. I acknowledge that, as an example, a healthy and cheap meal can be made from beans, rice, and frozen vegetables, but it takes non-trivial energy to make that every day, which is hard to find on a consistent basis after working or studying all day. I certainly see Soylent as a means to improve public health and the state of mass food production. I think if you take an honest look at Rhinehart's blog posts about Soylent and his other (somewhat radical) personal experiments you'll find that his pursuits are similarly aligned.
    - deleted 11y ago
      [deleted]
- markbao 11y ago
  I agree with you in general, but I didn't read it that way – I read it as them saying that developing world-changing technologies takes a lot of capital, not that having a lot of capital necessarily leads to world-changing technologies.
- radu_floricica 11y ago
  Well they (*joylent actually, because soylent doesn't deliver in EU yet) managed to change my life somewhat. Easier to keep a diet and I never stress about buying food anymore - I only get what I feel like eating when I feel like eating it, because I have a standard backup to go to. This goes with being the first company to make a certain kind of product. If they had opened a pizza chain they may have been more or less successful, but there would have been zero claim on changing the world.
  - DanBC 11y ago
    I'm glad that Soylent / Joylent works for you. > This goes with being the first company to make a certain kind of product. That's not accurate. They were maybe the first company to successfully market this product to the general public?
URSpider94 11y ago
I have often said, one of the worst things that can happen to a physical goods start-up is to get a huge order from a single customer. Finding the working capital to pay for millions of dollars in raw materials can be nigh on impossible. Banks won't loan you the money without a track record of delivering similarly sized orders, and raising a round is an incredibly expensive way to float your receivables.
- dogma1138 11y ago
  That's true for every type of business, the risk that is coming from such order is too big for any sensible company to take. Many businesses limit order sizes for this specific reason, and in many cases will have even stricter limits as well as invoicing terms for new B2B customers. We've seen this quite recently with GT Adv. Technologies going bankrupt when their deal with Apple pretty much took their entire pipeline. http://www.techtimes.com/articles/17677/20141011/gt-advanced-technologies-bankruptcy-what-really-happened-to-the-sapphire-glass-maker-and-why.htm http://www.techtimes.com/articles/17677/20141011/gt-advanced...
  - digi_owl 11y ago
    That seems to have been Apple's MO for some years now. I think the Palm/HP people working on the Pre lamented that whenever they found a part they wanted to use, Apple had already placed an order for the years production capacity.
- pbreit 11y ago
  Sounds like a pretty good problem to me.
  - DanBC 11y ago
    I order $400,000 of goods from you. You have to make and deliver those goods to me, and I pay you 30 days after you invoiced me. Your challenge is to come up with $X00,000 of funding at a time when it's tricky to get loans. Your other challenge is to either hope your current suppliers can suddenly increase their capacity, or that you can find a supplier who can fill your demand. If you're making the product you need to employ and train extra staff, and hope they fit in whatever building you have. And you need place to store raw material, product being built, and built product ready for shipping.
transfire 11y ago
All that analysis and they still failed to figure out their product is $0.43 too expensive (per bottle).
- frakkingcylons 11y ago
  But in reality, cost-sensitive customers will purchase the powder which is quite a good value at $1.54 for 400 nutritious calories.
  - roel_v 11y ago
    Cost-sensitive customers will make their own...
    - bryanbuckley 11y ago
      more to cost than the price tag...
  - artifaxx 11y ago
    It depends how cost sensitive you are. If you have an extra hour a month to mix the ingredients you can mix your own healthier version for half the cost. Definitely a tradeoff worth making for some people.
    - frakkingcylons 11y ago
      Buying a large enough quantity of ingredients to save money is going to cost a lot initially. Need to consider that.
      - artifaxx 11y ago
        That is an important consideration. If you are committed to doing it though, the cost savings are high. So high that unless your opportunity cost is over $100 for the hour of mixing the ingredients it will make sense.
pbreit 11y ago
What a weird post. There's no reason whatsoever for a company like Soylent to get in the cash flow weeds like that. It has plenty of growth capital. With interest rates so low, "interest-free" loans are comparably less valuable. They should be spending almost all their energy on R&D and marketing. Not financial shenanigans.
- nickff 11y ago
  Financial risks are as significant as technical and market risks for physical goods companies. Take a look at how companies like Amazon are run, and you will see that pricing, cost, and payment terms are very important.
  - azylman 11y ago
    Ironically, that's exactly what the article told you not to do You may want to be careful when someone suggests you should do X because that’s what AMZN does
  - pbreit 11y ago
    Amazon is a retailer. Soylent is a manufacturer. It has plenty of capital to not have to worry about inventory turns. Manufacturers need to worry about making a good product and getting into customer hands first and foremost. Financial shenanigans are a distraction for a budding manufacturer.
    - nickff 11y ago
      Speaking as someone who has worked at a few electronic hardware OEMs (and been involved in production), I can tell you that inventory cost and risks are a significant concern.
      - pbreit 11y ago
        How about a one-of-a-kind food that retains its value for a year or more?
JacobAldridge 11y ago
I was expecting more detail on how they found "the point where our product would deliver exceptional value relative to competing products" - that's always a tricky and important conversation, and I'd love a follow-up post on their process for doing so. Instead, this was a great explanation on cash flow and the impact of pricing (and other, more significant, factors) on that cash flow. Which is probably even more valuable a discussion for growing businesses - it doesn't feel like it in the early days (when lack of clients will kill you) but in established companies it's often accelerated growth and unexpected cash flow hits that can kill a profitable business.
brianmcconnell 11y ago
I am kind of surprised they are still in business, having missed the point that most people actually enjoy actual food and beverages, versus chugging a flavorless Ensure 2.0 slurry while staring at a monitor. It's called a lunch break for a reason. Lunch is part of it, but its mostly about the break.
- jorangreef 11y ago
  My first thought on seeing the clinical packaging in the background of the blog post was that they need to make up for the astronaut-tube-food product with colourful detailed rich drawings on the packaging. Package it like chocolate: (https://www.google.com/search?q=bahen+%26+co+chocolate+packaging https://www.google.com/search?q=bahen+%26+co+chocolate+packa...).
- XorNot 11y ago
  Yet people around me keep eating at their desks.
- corin_ 11y ago
  I haven't tried Soylent, and I probably do like food too much to try it, but there are days when I'll take a lunch break without eating, and enjoy the break part none the less. Go for a cycle, or a walk, or go sit outside a café with a pack of cigarettes, or.. I could easily add Soylent in and get both the enjoyment of the break without having to drink it at my desk.
- danneu 11y ago
  Yeah, these Soylent fadsters are really missing out on the Human Eating Experience of devouring a ham and cheese sandwich right from its tupperware.
- mcv 11y ago
  Are you claiming that despite observable reality, they can't possibly be having the success they have? There's clearly a market for it, even if you're not part of it.
- JacobAldridge 11y ago

59 points by caublestone 11y ago

Solid advice, but this part was a little cringeworthy: "At the same time, we also needed sufficient cash flows to fund our aggressive growth strategy and invest in technologies that will change the world." I hope that is tongue-in-cheek because world-changing ideas aren't a dime a dozen.

easong 11y ago
If any recent startups can say they're taking a go at changing the world, it's the guys trying to solve world hunger by engineering healthy food that can be mass-produced by genetically engineered algae in tanks.
- blackguardx 11y ago
  When I last looked at them in depth, they wanted to create meal replacement shakes so busy professionals didn't have to waste mental output thinking about food. Did they pivot? Edit: I can't reply for some reason, but I applaud them if solving world hunger is their goal. I think they should have changed their marketing, though. Their original marketing seemed very niche.
  - dikaiosune 11y ago
    Why can't those be the same thing? It doesn't seem unreasonable to me to use the capital generated by the prices you can charge for a luxury good to fund the R&D necessary to bring the costs of their method low enough that it could be a significant and affordable improvement to low-income families' nutrition.
    - SyneRyder 11y ago
      It sounds like the Tesla model: first create a luxury car that you can sell to the very wealthy, and use those funds to increase production & lower costs through increased volume to produce a family car... then use the increased demand for batteries to make building a Gigafactory cost effective, so you can start producing Powerwall house batteries, so you can start taking more houses off the electricity grid & become 100% solar.
  - frakkingcylons 11y ago
    I sympathize with the position you're taking, their marketing is certainly pursuing the busy-body yuppie audience. I think if you spend some time reading comments and posts from users of Soylent online you'll see a lot of people are buying it because it is inexpensive and nutritious, while still requiring very little time to prepare. I acknowledge that, as an example, a healthy and cheap meal can be made from beans, rice, and frozen vegetables, but it takes non-trivial energy to make that every day, which is hard to find on a consistent basis after working or studying all day. I certainly see Soylent as a means to improve public health and the state of mass food production. I think if you take an honest look at Rhinehart's blog posts about Soylent and his other (somewhat radical) personal experiments you'll find that his pursuits are similarly aligned.
  - deleted 11y ago
    [deleted]
markbao 11y ago
I agree with you in general, but I didn't read it that way – I read it as them saying that developing world-changing technologies takes a lot of capital, not that having a lot of capital necessarily leads to world-changing technologies.
radu_floricica 11y ago
Well they (*joylent actually, because soylent doesn't deliver in EU yet) managed to change my life somewhat. Easier to keep a diet and I never stress about buying food anymore - I only get what I feel like eating when I feel like eating it, because I have a standard backup to go to. This goes with being the first company to make a certain kind of product. If they had opened a pizza chain they may have been more or less successful, but there would have been zero claim on changing the world.
- DanBC 11y ago
  I'm glad that Soylent / Joylent works for you. > This goes with being the first company to make a certain kind of product. That's not accurate. They were maybe the first company to successfully market this product to the general public?

URSpider94 11y ago

I have often said, one of the worst things that can happen to a physical goods start-up is to get a huge order from a single customer. Finding the working capital to pay for millions of dollars in raw materials can be nigh on impossible. Banks won't loan you the money without a track record of delivering similarly sized orders, and raising a round is an incredibly expensive way to float your receivables.

dogma1138 11y ago
That's true for every type of business, the risk that is coming from such order is too big for any sensible company to take. Many businesses limit order sizes for this specific reason, and in many cases will have even stricter limits as well as invoicing terms for new B2B customers. We've seen this quite recently with GT Adv. Technologies going bankrupt when their deal with Apple pretty much took their entire pipeline. http://www.techtimes.com/articles/17677/20141011/gt-advanced-technologies-bankruptcy-what-really-happened-to-the-sapphire-glass-maker-and-why.htm http://www.techtimes.com/articles/17677/20141011/gt-advanced...
- digi_owl 11y ago
  That seems to have been Apple's MO for some years now. I think the Palm/HP people working on the Pre lamented that whenever they found a part they wanted to use, Apple had already placed an order for the years production capacity.
pbreit 11y ago
Sounds like a pretty good problem to me.
- DanBC 11y ago
  I order $400,000 of goods from you. You have to make and deliver those goods to me, and I pay you 30 days after you invoiced me. Your challenge is to come up with $X00,000 of funding at a time when it's tricky to get loans. Your other challenge is to either hope your current suppliers can suddenly increase their capacity, or that you can find a supplier who can fill your demand. If you're making the product you need to employ and train extra staff, and hope they fit in whatever building you have. And you need place to store raw material, product being built, and built product ready for shipping.

transfire 11y ago

All that analysis and they still failed to figure out their product is $0.43 too expensive (per bottle).

frakkingcylons 11y ago
But in reality, cost-sensitive customers will purchase the powder which is quite a good value at $1.54 for 400 nutritious calories.
- roel_v 11y ago
  Cost-sensitive customers will make their own...
  - bryanbuckley 11y ago
    more to cost than the price tag...
- artifaxx 11y ago
  It depends how cost sensitive you are. If you have an extra hour a month to mix the ingredients you can mix your own healthier version for half the cost. Definitely a tradeoff worth making for some people.
  - frakkingcylons 11y ago
    Buying a large enough quantity of ingredients to save money is going to cost a lot initially. Need to consider that.
    - artifaxx 11y ago
      That is an important consideration. If you are committed to doing it though, the cost savings are high. So high that unless your opportunity cost is over $100 for the hour of mixing the ingredients it will make sense.

pbreit 11y ago

What a weird post. There's no reason whatsoever for a company like Soylent to get in the cash flow weeds like that. It has plenty of growth capital. With interest rates so low, "interest-free" loans are comparably less valuable. They should be spending almost all their energy on R&D and marketing. Not financial shenanigans.

nickff 11y ago
Financial risks are as significant as technical and market risks for physical goods companies. Take a look at how companies like Amazon are run, and you will see that pricing, cost, and payment terms are very important.
- azylman 11y ago
  Ironically, that's exactly what the article told you not to do You may want to be careful when someone suggests you should do X because that’s what AMZN does
- pbreit 11y ago
  Amazon is a retailer. Soylent is a manufacturer. It has plenty of capital to not have to worry about inventory turns. Manufacturers need to worry about making a good product and getting into customer hands first and foremost. Financial shenanigans are a distraction for a budding manufacturer.
  - nickff 11y ago
    Speaking as someone who has worked at a few electronic hardware OEMs (and been involved in production), I can tell you that inventory cost and risks are a significant concern.
    - pbreit 11y ago
      How about a one-of-a-kind food that retains its value for a year or more?

JacobAldridge 11y ago

I was expecting more detail on how they found "the point where our product would deliver exceptional value relative to competing products" - that's always a tricky and important conversation, and I'd love a follow-up post on their process for doing so. Instead, this was a great explanation on cash flow and the impact of pricing (and other, more significant, factors) on that cash flow. Which is probably even more valuable a discussion for growing businesses - it doesn't feel like it in the early days (when lack of clients will kill you) but in established companies it's often accelerated growth and unexpected cash flow hits that can kill a profitable business.

brianmcconnell 11y ago

I am kind of surprised they are still in business, having missed the point that most people actually enjoy actual food and beverages, versus chugging a flavorless Ensure 2.0 slurry while staring at a monitor. It's called a lunch break for a reason. Lunch is part of it, but its mostly about the break.

jorangreef 11y ago
My first thought on seeing the clinical packaging in the background of the blog post was that they need to make up for the astronaut-tube-food product with colourful detailed rich drawings on the packaging. Package it like chocolate: (https://www.google.com/search?q=bahen+%26+co+chocolate+packaging https://www.google.com/search?q=bahen+%26+co+chocolate+packa...).
XorNot 11y ago
Yet people around me keep eating at their desks.
corin_ 11y ago
I haven't tried Soylent, and I probably do like food too much to try it, but there are days when I'll take a lunch break without eating, and enjoy the break part none the less. Go for a cycle, or a walk, or go sit outside a café with a pack of cigarettes, or.. I could easily add Soylent in and get both the enjoyment of the break without having to drink it at my desk.
danneu 11y ago
Yeah, these Soylent fadsters are really missing out on the Human Eating Experience of devouring a ham and cheese sandwich right from its tupperware.
mcv 11y ago
Are you claiming that despite observable reality, they can't possibly be having the success they have? There's clearly a market for it, even if you're not part of it.
JacobAldridge 11y ago