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The issue is not that these startups fail; the whole idea is that most startups will fail. It's how much easy money they take with them. It should not require $

The issue is not that these startups fail; the whole idea is that most startups will fail. It's how much easy money they take with them. It should not require $59M to learn that delivering expensive food at a loss is a poor business idea. The easy money in tech right now is harmful, as it crowds out actual innovation. But I don't see it getting better anytime soon.

twblalock 9y ago
Is there any reason to believe that the "actual" innovators are missing out on funding because money is being given to delivery startups instead? Besides, how many "actual" innovations were profitable at an early stage? I take issue with the entire concept of splitting "actual" innovations from attempted innovations, because all successful innovations began as attempts.
- Roritharr 9y ago
  I only have anec-data, but I know several engineers who have very interesting hardware prototypes sitting on shelves or gathering dust in basements simply because they aren't the "hustlers" VCs are used to be wowed by. There's a couple of reasons people like that don't partner with someone who is able to raise the capital more easily, but the most pronounced i've heard was that they don't want to buy into the dishonest-"fake it till you make it" culture that surrounds VC.
  - Meekro 9y ago
    Even if your friends got the VC money, wouldn't the lack of "hustle" ability hurt their chances of turning the prototype into a successful company?
    - abritinthebay 9y ago
      Yes, it would. It’s an oft unacknowledged fact. Companies that don’t play the VC game are harder work but totally possible (and potentially more rewarding) but the VC game requires those “hustlers” because that’s the VC’s expectations.
    - snovv_crash 9y ago
      It depends on the industry they're trying to break into. Some industries prefer their providers to be quiet, competent and not promise things they haven't built yet. In these, the typical VC hustler would be a liability.
    - watwut 9y ago
      Yes it would. However, note that it would not hurt their ability to be chief engineer - except that is not happening either.
  - ScottBurson 9y ago
    You could suggest to your friends that they consider applying to YC :-)
- nostrademons 9y ago
  It's not funding that's the scarce resource, it's user attention. When thousands of startups with terrible ideas get funded, it floods the market with tons of new products that users don't get any value from. Eventually they get category fatigue and just start blocking out trying anything new. Even if you've got something innovative that you can build yourself, people still need to try it for it to catch on. That's easier when there are few other products vying for attention and users are actively looking for something new. Fortunately, I think the last mania ended around 2015. Trump has sucked all of the oxygen out of the collective zeitgeist since mid-2016, so hopefully by 2018 people will be sick of being angry at their leaders and looking for small, concrete ways to improve their lives.
  - timr 9y ago
    Also, it's not just user attention that's the scarce resource, it's employees, office space, food, housing, and everything else you need to actually run a business. When you have lots of unprofitable "businesses" chasing after the same limited pool of resources using their big bags of monopoly money, the business environment becomes toxic to fragile, new organisms.
tragic 9y ago
While I agree that there's a rather pathological focus of VC money on business ideas that are not especially innovative but really just bad (the whole takeout-but-without-a-profit-margin thing being a particularly absurd waste of investment), there's a problem, in that genuine innovation is not necessarily going to be more immediately sustainable as a business preposition (exhibit A: the internet, product of the grey area between the military industrial complex and academia, neither of which are spheres of human industry over-troubled by anything so vulgar as a competitive marketplace). Sometimes I wonder if the VC world is the worst possible combination, rewarding merely the false promise of short term impact, as opposed to genuinely worthwhile but perhaps completely unprofitable RnD.
dlwdlw 9y ago
I think that as initial capital requirements go down the only ideas that seek out VC investment are those that less validated. The VCs agree to invest in these "moonshots" that need to bleed for a few years maybe because there is a belief that increased difficulty means greater reward. (Like a video game) The risk may actually not be that high due to the liquidation preferences and the inflated prices and hype may actually be promoted by the VCs themselves so they can offload at high prices. The most important factor for this pump and dump is the founders personality. Crypto ICOs eliminate much of this potential as whilst in the VC model the investor needs to be thinking pump-and-dump. In crypto, every buyer must be thinking this. Ironically due to the hype in cryptocurrencies the hype may be so widespread that this does indeed happen despite it being able to completely upset the funding model. (That large capital requires impressing specific keyholders)
toomanybeersies 9y ago
I don't believe that most of these food delivery companies are actually tech companies. They are just food companies trying to leverage tech to get an edge. Food delivery has been around for decades. None of them are particularly original, they're all just variations of the same thing. Fundamentally there's little difference between Maple and Dominoes Pizza delivery.
- lobster_johnson 9y ago
  I've wondered for a while why so many restaurants on Seamless etc. have physical locations (or rather, why there are so few that don't). Surely it would be a no-brainer to do delivery only, and optimize for that. Select a few cuisines, get great chefs to develop recipes that anyone can be trained to execute flawlessly, set up locations strategically situated to minimize delivery time/distance. It might not end up being Michelin-star-quality food, but then none of the places I order deliver from are, either. As a consumer, my biggest problems with delivery are speed and quality. Places I order from routinely take 60+ minutes to deliver, even if they're close by. Quality is the bigger problem, and I suspect a lot of people feel the same.
  - ollieshmollie 9y ago
    I think that's what the guys at Maple thought. I worked there for a bit when it started, and it seemed to me like they were growing too fast. There would be some pretty serious operational issues (from my point of view), but bang, they would open another hub to serve another thousand people, thereby magnifying the issues. I'm sure they did what they had to do, but after about a year I saw the writing on the wall and left. But heck, I was just a delivery boy, and lots of people really loved the idea. I'm sure we'll see more delivery startups, and maybe they'll be great, having learned from Maple.
  - twblalock 9y ago
    It seems like a no-brainer, but the restaurant business is a cutthroat, low-margin tough slog and a lot of that comes from the cost of parts (i.e. food) and labor, not just the storefront. A delivery-only restaurant still needs to deal with hiring staff, sourcing product, health inspections, purchase and maintenance of equipment, etc. That's before the whole delivery thing comes into the picture. If you want fast service, you have to scale up the staff and get some decent logistics in place. I suspect this would only be profitable via automation. But that will probably happen soon.
dahart 9y ago
> The easy money in tech right now is harmful, as it crowds out actual innovation. But I don't see it getting better anytime soon. What would you say might put us on the path to getting better in the long term, and what does better mean exactly? The system we have right now is designed to waste large amounts of money, it will never get better by itself. Won't VCs always seek lower risk, and go for the best ideas they can find that have some chance of working? It seems we could always look at the biggest failures and call it easy money, rip the ideas apart as stupid, regardless of how much actual innovation is there. Is it fair to characterize the business plan of Maple or Sprig to deliver food at a loss? I assume the idea was to make a profit eventually, but being able to deliver quality on 15 minutes notice can only work on a huge scale.

twblalock 9y ago

Is there any reason to believe that the "actual" innovators are missing out on funding because money is being given to delivery startups instead? Besides, how many "actual" innovations were profitable at an early stage? I take issue with the entire concept of splitting "actual" innovations from attempted innovations, because all successful innovations began as attempts.

Roritharr 9y ago
I only have anec-data, but I know several engineers who have very interesting hardware prototypes sitting on shelves or gathering dust in basements simply because they aren't the "hustlers" VCs are used to be wowed by. There's a couple of reasons people like that don't partner with someone who is able to raise the capital more easily, but the most pronounced i've heard was that they don't want to buy into the dishonest-"fake it till you make it" culture that surrounds VC.
- Meekro 9y ago
  Even if your friends got the VC money, wouldn't the lack of "hustle" ability hurt their chances of turning the prototype into a successful company?
  - abritinthebay 9y ago
    Yes, it would. It’s an oft unacknowledged fact. Companies that don’t play the VC game are harder work but totally possible (and potentially more rewarding) but the VC game requires those “hustlers” because that’s the VC’s expectations.
  - snovv_crash 9y ago
    It depends on the industry they're trying to break into. Some industries prefer their providers to be quiet, competent and not promise things they haven't built yet. In these, the typical VC hustler would be a liability.
  - watwut 9y ago
    Yes it would. However, note that it would not hurt their ability to be chief engineer - except that is not happening either.
- ScottBurson 9y ago
  You could suggest to your friends that they consider applying to YC :-)
nostrademons 9y ago
It's not funding that's the scarce resource, it's user attention. When thousands of startups with terrible ideas get funded, it floods the market with tons of new products that users don't get any value from. Eventually they get category fatigue and just start blocking out trying anything new. Even if you've got something innovative that you can build yourself, people still need to try it for it to catch on. That's easier when there are few other products vying for attention and users are actively looking for something new. Fortunately, I think the last mania ended around 2015. Trump has sucked all of the oxygen out of the collective zeitgeist since mid-2016, so hopefully by 2018 people will be sick of being angry at their leaders and looking for small, concrete ways to improve their lives.
- timr 9y ago
  Also, it's not just user attention that's the scarce resource, it's employees, office space, food, housing, and everything else you need to actually run a business. When you have lots of unprofitable "businesses" chasing after the same limited pool of resources using their big bags of monopoly money, the business environment becomes toxic to fragile, new organisms.

tragic 9y ago

While I agree that there's a rather pathological focus of VC money on business ideas that are not especially innovative but really just bad (the whole takeout-but-without-a-profit-margin thing being a particularly absurd waste of investment), there's a problem, in that genuine innovation is not necessarily going to be more immediately sustainable as a business preposition (exhibit A: the internet, product of the grey area between the military industrial complex and academia, neither of which are spheres of human industry over-troubled by anything so vulgar as a competitive marketplace). Sometimes I wonder if the VC world is the worst possible combination, rewarding merely the false promise of short term impact, as opposed to genuinely worthwhile but perhaps completely unprofitable RnD.

dlwdlw 9y ago

I think that as initial capital requirements go down the only ideas that seek out VC investment are those that less validated. The VCs agree to invest in these "moonshots" that need to bleed for a few years maybe because there is a belief that increased difficulty means greater reward. (Like a video game) The risk may actually not be that high due to the liquidation preferences and the inflated prices and hype may actually be promoted by the VCs themselves so they can offload at high prices. The most important factor for this pump and dump is the founders personality. Crypto ICOs eliminate much of this potential as whilst in the VC model the investor needs to be thinking pump-and-dump. In crypto, every buyer must be thinking this. Ironically due to the hype in cryptocurrencies the hype may be so widespread that this does indeed happen despite it being able to completely upset the funding model. (That large capital requires impressing specific keyholders)

toomanybeersies 9y ago

I don't believe that most of these food delivery companies are actually tech companies. They are just food companies trying to leverage tech to get an edge. Food delivery has been around for decades. None of them are particularly original, they're all just variations of the same thing. Fundamentally there's little difference between Maple and Dominoes Pizza delivery.

lobster_johnson 9y ago
I've wondered for a while why so many restaurants on Seamless etc. have physical locations (or rather, why there are so few that don't). Surely it would be a no-brainer to do delivery only, and optimize for that. Select a few cuisines, get great chefs to develop recipes that anyone can be trained to execute flawlessly, set up locations strategically situated to minimize delivery time/distance. It might not end up being Michelin-star-quality food, but then none of the places I order deliver from are, either. As a consumer, my biggest problems with delivery are speed and quality. Places I order from routinely take 60+ minutes to deliver, even if they're close by. Quality is the bigger problem, and I suspect a lot of people feel the same.
- ollieshmollie 9y ago
  I think that's what the guys at Maple thought. I worked there for a bit when it started, and it seemed to me like they were growing too fast. There would be some pretty serious operational issues (from my point of view), but bang, they would open another hub to serve another thousand people, thereby magnifying the issues. I'm sure they did what they had to do, but after about a year I saw the writing on the wall and left. But heck, I was just a delivery boy, and lots of people really loved the idea. I'm sure we'll see more delivery startups, and maybe they'll be great, having learned from Maple.
- twblalock 9y ago
  It seems like a no-brainer, but the restaurant business is a cutthroat, low-margin tough slog and a lot of that comes from the cost of parts (i.e. food) and labor, not just the storefront. A delivery-only restaurant still needs to deal with hiring staff, sourcing product, health inspections, purchase and maintenance of equipment, etc. That's before the whole delivery thing comes into the picture. If you want fast service, you have to scale up the staff and get some decent logistics in place. I suspect this would only be profitable via automation. But that will probably happen soon.

dahart 9y ago

> The easy money in tech right now is harmful, as it crowds out actual innovation. But I don't see it getting better anytime soon. What would you say might put us on the path to getting better in the long term, and what does better mean exactly? The system we have right now is designed to waste large amounts of money, it will never get better by itself. Won't VCs always seek lower risk, and go for the best ideas they can find that have some chance of working? It seems we could always look at the biggest failures and call it easy money, rip the ideas apart as stupid, regardless of how much actual innovation is there. Is it fair to characterize the business plan of Maple or Sprig to deliver food at a loss? I assume the idea was to make a profit eventually, but being able to deliver quality on 15 minutes notice can only work on a huge scale.