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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 milli

by 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 beat 13y ago

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.