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Lately I've noticed an increase in companies that are trying to deal with the real world, instead of selling software strictly as a virtual good. TaskRabbit, Y

Lately I've noticed an increase in companies that are trying to deal with the real world, instead of selling software strictly as a virtual good. TaskRabbit, YourMechanic, Uber, Instacart, Cherry - I love all of them. But dealing with the logistics of a physical world is really really tough. I don't envy any of them. Cherry was a great idea, but a tough one to pull off. Good luck to the Cherry guys in whatever they do next.

nirvdrum 14y ago
Pardon my ignorance, but what made this a great idea? I'm not overly familiar with the company, but it seems like yet another "instead of going to place X to have service Y, X will come to you." It doesn't strike me as entirely novel. And most businesses following that pattern sputter out because they're just not scalable or there's little demand. $5.25 MM seems like an awful lot of money for something with seemingly few exit opportunities. So I assume there's something I'm missing here.
- joshfraser 14y ago
  I called it a great idea because it's actually something I could see myself using. My time is my most valuable asset and so I love the idea of having my car washed in my driveway instead of driving somewhere and waiting around. But as I learned with my last company, a good idea doesn't mean that it will be a good business. It's a rough business for the all reasons listed above. And yes, it's a shame they weren't able to figure that out on 500k instead of 5m.
  - absconditus 14y ago
    Home car detailing businesses are already successful. Basic car washes are only profitable when done at a facility designed to make them as cheap as possible. I cannot see trying to make something more convenient that takes a few minutes and can often be done at the same place where one fuels their vehicle.
  - orangethirty 14y ago
    Why would they need $500K to figure it out? Honestly, why? I did it with $600 (no zeroes missing). I dont get how people just throw around huge amounts of money like it was nothing. 500K is a huge amount of money and it should be put to work towards building wealth and not towards speculating on bad business models. And see, you just said something very important. You see yourself using them. But tell me, who washes your car right now? How much do you pay them? How come you don't have one of the local on-site car wash businesses come by and work on your car?
    - prostoalex 14y ago
      Probably marketing. You need to buy your initial leads to get the business going.
      - orangethirty 14y ago
        Not marketing. Definitely not marketing. I spent $50 on marketing and it got me about $3k worth of business on the first two weeks. Just some flyers and self-printed business cards.
        prostoalex 14y ago
        Ok, so you had 1 subcontractor (yourself). I don't know Cherry's deal, but doesn't seem unreasonable to say that they were shooting for a 1,000. Or 10,000. In geographically dispersed areas. You can see how it can start adding up.
        orangethirty 14y ago
        I never said I was the only one washing cars. I had sub-contractors that I paid on a per-car basis. Scaling an on-site car wash to 1,000 or 10,000 sub contractors is not going to happen. And here is why: Too many problems will arise. Insurance claims, theft, etc. will quickly make them raise the price to keep a healthy profit margin. Problem is, once you pass a certain price point, people will simply not buy. Thus you end up scaling for nothing. On site car washing is one of those businesses that just doesn't scale favorably.
  - artag 14y ago
    Josh - they did their series A 7 months ago. They had raised ~ $1m for seed. I am guessing they didn't burn more than $1.5-$2m to fully scale one market and test what the unit economics look like at a small scale. Since they probably had $3.5-$4m in the bank and they chose not to scale to a few more markets, my guess is that either they really found a much better business opportunity, or they discovered that even at scale retention rate/LTV was low.
  - biot 14y ago
    Webvan was a great idea too... if you were the consumer. Not such a great idea to run that money pit of a business.
orangethirty 14y ago
Cherry was not a great idea. Had they done some research (well, the people who gave them 5.25 million dollars to waste away), they would have learned some very simple things. Disclaimer: I used to own and operate (as in also wash cars) a successful on-site car wash business. Closed it down because it was a pain in the ass to run. On-site car washing (or any other type of on-site auto service (YourMechanic guys should pay attention)) is very low on margins, and competition is tough. You have to compete with every 13 year old kid who wants to buy a new playstation game and will wash cars for $5. You will also have to compete with every other joe who will basically wash a car for a couple of bucks. So creating a solid customer list is tough. There are also logistics issues. Getting a group of car washers who are not complete and total fuckheads is impossible (I'd say its easier to win the lottery twice). Cherry tried to circumvent that by having sub-contractors, which in other words means giving some random joe $5 to wash some car. They only provided them with some basic equipment. If you have ever washed a car in the cold, you know that you need more than a fucking soap sprayer and a sponge. There is a lot of equipment needed to correctly wash a car in diverse weather conditions. Sub-contractors did not buy equipment because they were being paid shit. So, getting good employees is impossible, getting good sub-contractors is like finding out you have a rich uncle who died and left you money and that suddenly, every hot celebrity out there is hot for you. There is also the issue that people dont give a shit about cancelling an appointment 30 seconds before it is due. That plus rain, shady owners trying to blame you for "missing stuff", and people who smoke. Its just a shitty business to be in. The only people who manage to do something in that market are the professional detailers. Those guys do make some good money, but have to spend a shitload of time on a single customer, and cannot (in most cases) reliably duplicate their business in order to have any horizontal growth. The high end market is also very competitive and customer loyalty is very high. No Porsche owner will have some unknown detail his baby in order to save $50. Also, I so called this. This is one of those "investments" that makes you go "huh?". Edit: And here I was feeling bummed about wasting $600 on car washing equipment. 5.25 million bucks! Hell, give me $500k and I'll make Nuuton so awesome that people will say "Google? What is that?" :)
- tptacek 14y ago
  The tone will turn some people off, but this is I think a really good comment, full of details about a specific business based on experience. Also, coming from consulting, I think I agree with you on the dynamics of subcontracting. People are going to think you're being hyperbolic, but a reliable stable of 1099 subcontractors you can bill out over cost is, fundamentally, free money. Consulting firms know this because staffing a consultancy involves accepting the sales-side risk and paying your team rain or shine. I get a little irritated every time I hear someone brag about a real-world business based on 1099 contractors working on a fixed schedule.

nirvdrum 14y ago

Pardon my ignorance, but what made this a great idea? I'm not overly familiar with the company, but it seems like yet another "instead of going to place X to have service Y, X will come to you." It doesn't strike me as entirely novel. And most businesses following that pattern sputter out because they're just not scalable or there's little demand. $5.25 MM seems like an awful lot of money for something with seemingly few exit opportunities. So I assume there's something I'm missing here.

joshfraser 14y ago
I called it a great idea because it's actually something I could see myself using. My time is my most valuable asset and so I love the idea of having my car washed in my driveway instead of driving somewhere and waiting around. But as I learned with my last company, a good idea doesn't mean that it will be a good business. It's a rough business for the all reasons listed above. And yes, it's a shame they weren't able to figure that out on 500k instead of 5m.
- absconditus 14y ago
  Home car detailing businesses are already successful. Basic car washes are only profitable when done at a facility designed to make them as cheap as possible. I cannot see trying to make something more convenient that takes a few minutes and can often be done at the same place where one fuels their vehicle.
- orangethirty 14y ago
  Why would they need $500K to figure it out? Honestly, why? I did it with $600 (no zeroes missing). I dont get how people just throw around huge amounts of money like it was nothing. 500K is a huge amount of money and it should be put to work towards building wealth and not towards speculating on bad business models. And see, you just said something very important. You see yourself using them. But tell me, who washes your car right now? How much do you pay them? How come you don't have one of the local on-site car wash businesses come by and work on your car?
  - prostoalex 14y ago
    Probably marketing. You need to buy your initial leads to get the business going.
    - orangethirty 14y ago
      Not marketing. Definitely not marketing. I spent $50 on marketing and it got me about $3k worth of business on the first two weeks. Just some flyers and self-printed business cards.
      - prostoalex 14y ago
        Ok, so you had 1 subcontractor (yourself). I don't know Cherry's deal, but doesn't seem unreasonable to say that they were shooting for a 1,000. Or 10,000. In geographically dispersed areas. You can see how it can start adding up.
        orangethirty 14y ago
        I never said I was the only one washing cars. I had sub-contractors that I paid on a per-car basis. Scaling an on-site car wash to 1,000 or 10,000 sub contractors is not going to happen. And here is why: Too many problems will arise. Insurance claims, theft, etc. will quickly make them raise the price to keep a healthy profit margin. Problem is, once you pass a certain price point, people will simply not buy. Thus you end up scaling for nothing. On site car washing is one of those businesses that just doesn't scale favorably.
- artag 14y ago
  Josh - they did their series A 7 months ago. They had raised ~ $1m for seed. I am guessing they didn't burn more than $1.5-$2m to fully scale one market and test what the unit economics look like at a small scale. Since they probably had $3.5-$4m in the bank and they chose not to scale to a few more markets, my guess is that either they really found a much better business opportunity, or they discovered that even at scale retention rate/LTV was low.
- biot 14y ago
  Webvan was a great idea too... if you were the consumer. Not such a great idea to run that money pit of a business.

orangethirty 14y ago

Cherry was not a great idea. Had they done some research (well, the people who gave them 5.25 million dollars to waste away), they would have learned some very simple things. Disclaimer: I used to own and operate (as in also wash cars) a successful on-site car wash business. Closed it down because it was a pain in the ass to run. On-site car washing (or any other type of on-site auto service (YourMechanic guys should pay attention)) is very low on margins, and competition is tough. You have to compete with every 13 year old kid who wants to buy a new playstation game and will wash cars for $5. You will also have to compete with every other joe who will basically wash a car for a couple of bucks. So creating a solid customer list is tough. There are also logistics issues. Getting a group of car washers who are not complete and total fuckheads is impossible (I'd say its easier to win the lottery twice). Cherry tried to circumvent that by having sub-contractors, which in other words means giving some random joe $5 to wash some car. They only provided them with some basic equipment. If you have ever washed a car in the cold, you know that you need more than a fucking soap sprayer and a sponge. There is a lot of equipment needed to correctly wash a car in diverse weather conditions. Sub-contractors did not buy equipment because they were being paid shit. So, getting good employees is impossible, getting good sub-contractors is like finding out you have a rich uncle who died and left you money and that suddenly, every hot celebrity out there is hot for you. There is also the issue that people dont give a shit about cancelling an appointment 30 seconds before it is due. That plus rain, shady owners trying to blame you for "missing stuff", and people who smoke. Its just a shitty business to be in. The only people who manage to do something in that market are the professional detailers. Those guys do make some good money, but have to spend a shitload of time on a single customer, and cannot (in most cases) reliably duplicate their business in order to have any horizontal growth. The high end market is also very competitive and customer loyalty is very high. No Porsche owner will have some unknown detail his baby in order to save $50. Also, I so called this. This is one of those "investments" that makes you go "huh?". Edit: And here I was feeling bummed about wasting $600 on car washing equipment. 5.25 million bucks! Hell, give me $500k and I'll make Nuuton so awesome that people will say "Google? What is that?" :)

tptacek 14y ago
The tone will turn some people off, but this is I think a really good comment, full of details about a specific business based on experience. Also, coming from consulting, I think I agree with you on the dynamics of subcontracting. People are going to think you're being hyperbolic, but a reliable stable of 1099 subcontractors you can bill out over cost is, fundamentally, free money. Consulting firms know this because staffing a consultancy involves accepting the sales-side risk and paying your team rain or shine. I get a little irritated every time I hear someone brag about a real-world business based on 1099 contractors working on a fixed schedule.