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The answer to this is fairly straightforward: VCs don't actually expect (or need) every investment to be successful, they just need it to have the potential to

The answer to this is fairly straightforward: VCs don't actually expect (or need) every investment to be successful, they just need it to have the potential to be huge if everything works out. Laypeople always seem shocked when a VC-funded company implodes. We should actually be surprised if we didn't see routine flame-outs, as that would mean VCs aren't taking on appropriate quantities of risk for the asset class. As a final aside: I've lost count of the number of times I've pulled an about-face on businesses I initially thought were stupid -- once I had a chance to talk to the founders and better understand the vision. Many of these seemingly 'dumb' ideas have surprising depth. Some, granted, are in fact dumber than a box of rocks.

yahna 9y ago
It's not that a VC company failed, it's that the entire idea looks completely ridiculous from the start.
- _jtrig 9y ago
  You could say that same about Soylent as it's simply a Pediasure/Ensure marketed towards hipster 20-somethings. People love drawing the conclusion that superior marketing/design equates to better products. Often times, if you can make a consumer happy with the experience, they don't care if they're overpaying for a terrible product. The problem with Juicero is that their user experience laid bare how futile and ridiculous their product was by having consumers manufacture the product themselves. If the Juicero simply made those juices in a bottle (EVEN IF the nutritional value was lost during bottling) I can see them succeeding based purely on their marketing and people suspending disbelief to support their idea they were being healthy while looking cool.
  - Laforet 9y ago
    >The problem with Juicero is that their user experience laid bare how futile and ridiculous their product was by having consumers manufacture the product themselves. Blue Apron and every other meal kit delivery business sits on the other end of the same road, yet they seem to be doing okay and without the same level of ridicule. I wonder whether Juicero could have avoided this outcome had they mailed their customers whole fruits and asked them to peel and fill their own juice bags, that way people will not be able to put two and two together to realise that it is just another beverage maker with DRM. P.S. I remember Juicero being rather well received by the resturant industry as it is fully automated and requires minimal cleanup, so perhaps they marketed to the wrong crowd after all.
    - _jtrig 9y ago
      I agree Blue Apron is equally ridiculous and I totally agree that Juicero marketed to the wrong crowd. Juicero was too visible in high-standard markets and thus became an easy target. Whereas Blue Apron flew under the critic radar (mostly in Facebook mom feeds) before gaining enough market share for consumers to shrug off ridicule
      - sseveran 9y ago
        As a former blue apron customer I don't think it was ridiculous. I churned when my wife was out of the country. There are still recipes that they sent that I still cook. Now as a business I don't think they will be able to compete with a hybrid solution that amazon/Whole Foods will be able to devise. But I see Juicero as completely different.
    - maxerickson 9y ago
      A bunch of fresh ingredient shut downs just this year: https://www.google.com/search?num=20&q=fresh+food+delivery+shut+down https://www.google.com/search?num=20&q=fresh+food+delivery+s...
    - twblalock 9y ago
      I expect a lot of failures and consolidation in the meal kit business soon, especially if Amazon starts delivering Whole Foods products.
  - chrischen 9y ago
    Pediasure/Ensure show that the market that Soylent enters actually exists.
    - ericd 9y ago
      Odwalla/Naked Juice?
      - ra1n85 9y ago
        For Odwalla/Naked juice: Do you pay 8 dollars per bottle, need to wait for it to arrive in the mail, pay $400 for the juice press to make it, and get locked into a single product for all of your "fruit juice needs"? The last 3 words make this all the more stupid.
        ericd 9y ago
        You don't need to convince me that juicero was stupid and unnecessary, just saying there's an analogue to gp's example in that there are already fairly expensive ($4/bottle) juices out there showing that there's a market for juice. There are also much more ridiculously priced juices, including, yes, $8 juices. I'm not the target market for those, but they exist at cafes and some other grab and go type places and have for a bit, so there must be at least a small market for overpriced juice.
        chrischen 9y ago
        I'm not sure it's analogous though. It'd be analogous if juicero were selling just another juice bottle ready to drink but maybe mailed to you instead of sold in stores. What juicero did was sell you an expensive machine to essentially squeeze odwalla bottles for you into a cup... something ludicrous like that. There may be a market for juice bottles, but juicero wasn't selling juice bottles.
- cocktailpeanuts 9y ago
  The problem is a lot of disruptive businesses initially looked "completely ridiculous from the start". VCs are not idiots, they are probably much more humble than what ordinary people think they are, because any active VC--especially if they're successful--would have run into at least several cases where they passed on a company because they "looked stupid", just to find out that they went on to become wildly successful. Once you go through this routine several times, you generally learn to appreciate and not immediately discount seemingly stupid ideas. This happens not just to VCs but overall if you live in Silicon Valley. Since ideas alone aren't enough, the only good measure in my experience is looking at the person who's working on it. And here lies a lot of mistakes VCs make, they just look at some guy who was successful in the past and just think it's safe to bet on them. To be clear, I also think Juicero was a stupid idea, and I think it was stupid of them to waste so much money upfront instead of starting scrappy, but my point is that there is no such thing as an "absolutely stupid idea". Ideas are contextual.
notalawyer 9y ago
I think people are less shocked that a VC-funded company imploded and more shocked that none of the investors seemed to see the impending implosion off on the distance.
krrrh 9y ago
The reason people are shocked isn't that VCs are willing to take a risk on an idea that appears ridiculous at first blanche, it's that Juicero had 4 rounds of investment before they launched, which amounted to $118.5M. That includes a $70M Series B in 2016-03 which was quickly followed by a $28M Series C one month later. [1] Few would be surprised by a few million being spent looking for a market fit on a wacky idea, it's the scale and obvious demand to get involved at such a late stage. [1] https://www.crunchbase.com/organization/juicero#/entity https://www.crunchbase.com/organization/juicero#/entity

yahna 9y ago

It's not that a VC company failed, it's that the entire idea looks completely ridiculous from the start.

_jtrig 9y ago
You could say that same about Soylent as it's simply a Pediasure/Ensure marketed towards hipster 20-somethings. People love drawing the conclusion that superior marketing/design equates to better products. Often times, if you can make a consumer happy with the experience, they don't care if they're overpaying for a terrible product. The problem with Juicero is that their user experience laid bare how futile and ridiculous their product was by having consumers manufacture the product themselves. If the Juicero simply made those juices in a bottle (EVEN IF the nutritional value was lost during bottling) I can see them succeeding based purely on their marketing and people suspending disbelief to support their idea they were being healthy while looking cool.
- Laforet 9y ago
  >The problem with Juicero is that their user experience laid bare how futile and ridiculous their product was by having consumers manufacture the product themselves. Blue Apron and every other meal kit delivery business sits on the other end of the same road, yet they seem to be doing okay and without the same level of ridicule. I wonder whether Juicero could have avoided this outcome had they mailed their customers whole fruits and asked them to peel and fill their own juice bags, that way people will not be able to put two and two together to realise that it is just another beverage maker with DRM. P.S. I remember Juicero being rather well received by the resturant industry as it is fully automated and requires minimal cleanup, so perhaps they marketed to the wrong crowd after all.
  - _jtrig 9y ago
    I agree Blue Apron is equally ridiculous and I totally agree that Juicero marketed to the wrong crowd. Juicero was too visible in high-standard markets and thus became an easy target. Whereas Blue Apron flew under the critic radar (mostly in Facebook mom feeds) before gaining enough market share for consumers to shrug off ridicule
    - sseveran 9y ago
      As a former blue apron customer I don't think it was ridiculous. I churned when my wife was out of the country. There are still recipes that they sent that I still cook. Now as a business I don't think they will be able to compete with a hybrid solution that amazon/Whole Foods will be able to devise. But I see Juicero as completely different.
  - maxerickson 9y ago
    A bunch of fresh ingredient shut downs just this year: https://www.google.com/search?num=20&q=fresh+food+delivery+shut+down https://www.google.com/search?num=20&q=fresh+food+delivery+s...
  - twblalock 9y ago
    I expect a lot of failures and consolidation in the meal kit business soon, especially if Amazon starts delivering Whole Foods products.
- chrischen 9y ago
  Pediasure/Ensure show that the market that Soylent enters actually exists.
  - ericd 9y ago
    Odwalla/Naked Juice?
    - ra1n85 9y ago
      For Odwalla/Naked juice: Do you pay 8 dollars per bottle, need to wait for it to arrive in the mail, pay $400 for the juice press to make it, and get locked into a single product for all of your "fruit juice needs"? The last 3 words make this all the more stupid.
      - ericd 9y ago
        You don't need to convince me that juicero was stupid and unnecessary, just saying there's an analogue to gp's example in that there are already fairly expensive ($4/bottle) juices out there showing that there's a market for juice. There are also much more ridiculously priced juices, including, yes, $8 juices. I'm not the target market for those, but they exist at cafes and some other grab and go type places and have for a bit, so there must be at least a small market for overpriced juice.
        chrischen 9y ago
        I'm not sure it's analogous though. It'd be analogous if juicero were selling just another juice bottle ready to drink but maybe mailed to you instead of sold in stores. What juicero did was sell you an expensive machine to essentially squeeze odwalla bottles for you into a cup... something ludicrous like that. There may be a market for juice bottles, but juicero wasn't selling juice bottles.
cocktailpeanuts 9y ago
The problem is a lot of disruptive businesses initially looked "completely ridiculous from the start". VCs are not idiots, they are probably much more humble than what ordinary people think they are, because any active VC--especially if they're successful--would have run into at least several cases where they passed on a company because they "looked stupid", just to find out that they went on to become wildly successful. Once you go through this routine several times, you generally learn to appreciate and not immediately discount seemingly stupid ideas. This happens not just to VCs but overall if you live in Silicon Valley. Since ideas alone aren't enough, the only good measure in my experience is looking at the person who's working on it. And here lies a lot of mistakes VCs make, they just look at some guy who was successful in the past and just think it's safe to bet on them. To be clear, I also think Juicero was a stupid idea, and I think it was stupid of them to waste so much money upfront instead of starting scrappy, but my point is that there is no such thing as an "absolutely stupid idea". Ideas are contextual.

notalawyer 9y ago

I think people are less shocked that a VC-funded company imploded and more shocked that none of the investors seemed to see the impending implosion off on the distance.

krrrh 9y ago

The reason people are shocked isn't that VCs are willing to take a risk on an idea that appears ridiculous at first blanche, it's that Juicero had 4 rounds of investment before they launched, which amounted to $118.5M. That includes a $70M Series B in 2016-03 which was quickly followed by a $28M Series C one month later. [1] Few would be surprised by a few million being spent looking for a market fit on a wacky idea, it's the scale and obvious demand to get involved at such a late stage. [1] https://www.crunchbase.com/organization/juicero#/entity https://www.crunchbase.com/organization/juicero#/entity