4 ms·

You totally missed the point of the article. The lunch that guy described is impossible to deliver for $8 in the US, and especially in SF. That business makes

by jbooth 13y ago

You totally missed the point of the article. The lunch that guy described is impossible to deliver for $8 in the US, and especially in SF. That business makes no sense, ever. Losing money while making a unit profit on that lunch, ok, let's see where that goes. Getting my business by selling to me below cost? I'll do business with you all day but as soon as you raise the price, I'll switch to the next startup offering me a subsidized lunch. There's nothing 'long view' about that. No vision there. This trend, if it's as big as the article makes it seem, is way more worrying to me in a 'bubble' sense than the color.com thing.

beat 13y ago
No, I got that. You missed the point of my critique. It is impossible to scale that $8 delivery lunch large enough to provide any significant threat to local business. There simply isn't enough VC money for the hundreds of millions that would take. The scruffy little startup trying that model will either raise prices long before profitability, or will run out of money and disappear. But a standardized delivery model that is a straightforward service charge, made possible by modern tech? Hell yeah, that's a good business model - and it's good for the mom and pop restaurants too. Now, if you can point me to the mom and pop food delivery service...
- jbooth 13y ago
  Whether or not you want to call it 'significant', every $15 meal they sell for $8 is either $15 or $8 in revenue that a legitimate business didn't get. This phenomenon literally breaks capitalism, by routing money from those who can create a product for that price to those who are subsidized, because they're 'innovative' enough to make a cookie cutter mobile app and wear skinny jeans with fashionable glasses. Now, a standardized delivery model, with a straightforward service charge, and all that? Yeah, great business model. Seamless web is around. They're doing great, and add value to the economy. What value do these clowns add? You don't seem to disagree with any of this.. your position is that since they'll be out of business soon, the damage is limited? It's still damage, and still stupid.
  - beat 13y ago
    By the same token, you could argue that investment screws up the software market, because companies operating at a loss hire employees they couldn't otherwise afford. Again, a: they cannot sell at a loss at scale, and b: venture capital is invested with the expectation of building business model infrastructure, not being a fly trying to beat whales on cost. If they're actually blowing VC money on underpricing commodities like food rather than hiring programmers and marketing, their VCs should be ripping them a new one.
    - jbooth 13y ago
      No, you can't make that same argument. Software is fundamentally scalable, due to incremental copies being free after the first copy costs a lot of money to produce. Food service is about as far towards the other end of the scale as you can get. Like I said, if they were making a unit profit and an overall loss due to building out their infrastructure, that would be fine and normal capitalism. They're not. I agree that their VCs should be ripping them a new one, or should not have invested in this plan in the first place. It's one thing for a 22yo to think you can make easy money in food service, the VCs should know better. What's next, the VCs investing in kids starting a bar with their friends?
      - beat 13y ago
        Look at their business model (at least for SpoonRocket). They're directly addressing the production cost of food - limited menu (two choices a day), menu driven by availability (seasonalize ingredient cost), highly automated delivery (meals loaded in car before sale - use the car as the warming bin). Limiting to two meal choices a day isn't an option for most restaurants. This is a significant efficiency optimization in manufacturing that also drives significant optimization in delivery. This doesn't strike me as a dumb hack at all. Quite the contrary, I'm very impressed. I wouldn't be surprised at all if they're actually profitable from a production/delivery standpoint, and the losses are just software and market development. (I have many years of restaurant experience in addition to software experience. I see the optimizations. Wow!)
beat 13y ago
Out of curiosity, I did some research on SpoonRocket. First, I caught the article author deliberately misrepresenting the Series A: "it’s just raised $10 million in venture capital expressly so it can keep its prices low". The linked article said nothing of the sort. It said Series A, yes, but not that it was to subsidize pricing. Second, that Series A just happened on April 9 - this week. They haven't had time to even cash the checks yet! (they had a $2.5M seed in 2013, per Crunchbase. If VC thought that money was wasted on cost-cutting, they wouldn't be paying Series A) Second, SpoonRocket differs in a couple of ways. First, they're a food+delivery service. They don't drive for other restaurants, and they don't have a restaurant space (and associated costs for service and location-driven rent). They only do two meal choices a day, and those are driven by ingredient availability. They're much more like a wholesale bakery than a restaurant. Their technical edge isn't just communication, either. They have heating systems built into the cars. So I'm assuming they simply fill the cars with meals and send them out, using software to track closest car to the customers, in a high-density urban area. When a car runs out of meals, just come back for a refill. This is an extremely efficient model, for both food production and delivery, outstripping the benefits of restaurants that have to offer a diverse choice-driven menu, and delivery services that have to do one-off deliveries to support that consumer customization of their food. So I think it is absolutely reasonable that they could profitably deliver $8 meals.
- jbooth 13y ago
  Once they've built the app, almost every one of their costs aside from executive salaries (!) is a recurring per-unit cost -- paying the drivers, buying the food, the gas, etc. Still sounds more like 100k bank-loan material than 10M VC material to me. The only way that 10M makes sense is if they're running a per-unit loss. Doesn't cost 10M to build that app.
  - beat 13y ago
    They were a Y Combinator company. They're drinking the kool-aid, for sure. But seriously, this sounds much more like a VC play than a bank play to me. There are real cost/performance advantages to their model. This could scale to a billion dollar company. That's the sort of thing that attracts VC, which is much easier and more flexible than a bank loan - IF you're talking about real scale potential.

by jbooth 13y ago

beat 13y ago

No, I got that. You missed the point of my critique. It is impossible to scale that $8 delivery lunch large enough to provide any significant threat to local business. There simply isn't enough VC money for the hundreds of millions that would take. The scruffy little startup trying that model will either raise prices long before profitability, or will run out of money and disappear. But a standardized delivery model that is a straightforward service charge, made possible by modern tech? Hell yeah, that's a good business model - and it's good for the mom and pop restaurants too. Now, if you can point me to the mom and pop food delivery service...

jbooth 13y ago
Whether or not you want to call it 'significant', every $15 meal they sell for $8 is either $15 or $8 in revenue that a legitimate business didn't get. This phenomenon literally breaks capitalism, by routing money from those who can create a product for that price to those who are subsidized, because they're 'innovative' enough to make a cookie cutter mobile app and wear skinny jeans with fashionable glasses. Now, a standardized delivery model, with a straightforward service charge, and all that? Yeah, great business model. Seamless web is around. They're doing great, and add value to the economy. What value do these clowns add? You don't seem to disagree with any of this.. your position is that since they'll be out of business soon, the damage is limited? It's still damage, and still stupid.
- beat 13y ago
  By the same token, you could argue that investment screws up the software market, because companies operating at a loss hire employees they couldn't otherwise afford. Again, a: they cannot sell at a loss at scale, and b: venture capital is invested with the expectation of building business model infrastructure, not being a fly trying to beat whales on cost. If they're actually blowing VC money on underpricing commodities like food rather than hiring programmers and marketing, their VCs should be ripping them a new one.
  - jbooth 13y ago
    No, you can't make that same argument. Software is fundamentally scalable, due to incremental copies being free after the first copy costs a lot of money to produce. Food service is about as far towards the other end of the scale as you can get. Like I said, if they were making a unit profit and an overall loss due to building out their infrastructure, that would be fine and normal capitalism. They're not. I agree that their VCs should be ripping them a new one, or should not have invested in this plan in the first place. It's one thing for a 22yo to think you can make easy money in food service, the VCs should know better. What's next, the VCs investing in kids starting a bar with their friends?
    - beat 13y ago
      Look at their business model (at least for SpoonRocket). They're directly addressing the production cost of food - limited menu (two choices a day), menu driven by availability (seasonalize ingredient cost), highly automated delivery (meals loaded in car before sale - use the car as the warming bin). Limiting to two meal choices a day isn't an option for most restaurants. This is a significant efficiency optimization in manufacturing that also drives significant optimization in delivery. This doesn't strike me as a dumb hack at all. Quite the contrary, I'm very impressed. I wouldn't be surprised at all if they're actually profitable from a production/delivery standpoint, and the losses are just software and market development. (I have many years of restaurant experience in addition to software experience. I see the optimizations. Wow!)

beat 13y ago

Out of curiosity, I did some research on SpoonRocket. First, I caught the article author deliberately misrepresenting the Series A: "it’s just raised $10 million in venture capital expressly so it can keep its prices low". The linked article said nothing of the sort. It said Series A, yes, but not that it was to subsidize pricing. Second, that Series A just happened on April 9 - this week. They haven't had time to even cash the checks yet! (they had a $2.5M seed in 2013, per Crunchbase. If VC thought that money was wasted on cost-cutting, they wouldn't be paying Series A) Second, SpoonRocket differs in a couple of ways. First, they're a food+delivery service. They don't drive for other restaurants, and they don't have a restaurant space (and associated costs for service and location-driven rent). They only do two meal choices a day, and those are driven by ingredient availability. They're much more like a wholesale bakery than a restaurant. Their technical edge isn't just communication, either. They have heating systems built into the cars. So I'm assuming they simply fill the cars with meals and send them out, using software to track closest car to the customers, in a high-density urban area. When a car runs out of meals, just come back for a refill. This is an extremely efficient model, for both food production and delivery, outstripping the benefits of restaurants that have to offer a diverse choice-driven menu, and delivery services that have to do one-off deliveries to support that consumer customization of their food. So I think it is absolutely reasonable that they could profitably deliver $8 meals.

jbooth 13y ago
Once they've built the app, almost every one of their costs aside from executive salaries (!) is a recurring per-unit cost -- paying the drivers, buying the food, the gas, etc. Still sounds more like 100k bank-loan material than 10M VC material to me. The only way that 10M makes sense is if they're running a per-unit loss. Doesn't cost 10M to build that app.
- beat 13y ago
  They were a Y Combinator company. They're drinking the kool-aid, for sure. But seriously, this sounds much more like a VC play than a bank play to me. There are real cost/performance advantages to their model. This could scale to a billion dollar company. That's the sort of thing that attracts VC, which is much easier and more flexible than a bank loan - IF you're talking about real scale potential.