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Why $53M Wasn't Enough to Scale Good Eggs

foodtechconnect.com

11–20 of 71 posts

Re: Why $53M Wasn't Enough to Scale Good Eggs

#11
post #2

Just two months ago, they announced expansion of delivery to Manhattan's downtown area: http://blog.goodeggs.com/post/120709577938/good-eggs-is-comi... I'm guessing the logistical and financial troubles described in the OP were pretty clear 2 months ago...was expanding service to Manhattan a Hail Mary to attract additional investment?

When it's clear at the top that core strategy needs to change (as in this case), this usually doesn't impact the company in bits and pieces — it all comes at once. That's because making a major change at a large company requires coherent planning, and you don't get coherent planning by only saying "we need to reduce opex across the board, we're running out of money". You get it by making a new top-down plan with entirely new goals and a new P&L.

As a result, 140 people got laid off all at once, rather than in waves. Had it been done in waves there would have been mass confusion, low morale, and an inability to buy into the new plan because there wouldn't have been a new plan yet.

And for the same exact reason plans to roll out to Manhattan, which were surely started many months ago and enshrined in yearly and quarterly goals, were axed abruptly.

It's possible it was a cynical ploy for fundraising, but I really doubt that. It's very hard to pull off momentum games at GoodEgg's size — investment scrutiny is much higher, and decisions are based more on spreadsheets. Not that hype doesn't factor into it, but it's not going to float you if your core economics are busted.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#12
Good luck to them. Hope they figure it out. Churn can really hurt your business and affect growth tremendously if you don't address it. I'm guessing that's the case here. It's like taking three steps forward and two step back. I'd rather take one step forward at a time.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#13
post #4

"The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain." This is a repeat of Webvan. Webvan had a good idea, but tried to "scale" fast. They had about 3% market share in 30 cities, and needed 30% market share in 3 cities.

Heh ... I immediately thought Kozmo.com myself. History is repeating itself.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#14
I live in Good Eggs central - san francisco, and I foresee problems that are still ahead for this startup. Don't get me wrong: I really want Good Eggs to succeed, but they have quality control issues that need to be addressed and scale very poorly.

Specifically, I've been a customer of theirs for years, and in the past two years in particular, I've seen prices go up pretty dramatically and quality in some cases go down.

It used to be the case that Good Eggs produce and meats were farmers-market quality at really good prices, delivered. Now it's the case that the produce feels like farmers-market seconds (the produce I get from them regularly has only a few more days of freshness left and are decidedly not the fruits or veggies I would pick if I went to the store on my own), and the meat and fish prices have gone well beyond the cost of the same meat from other sources (say a trip to a regular market). Top this all off with persistent packaging and logistics errors - my last order contained someone else's frozen lunch pies, didn't contain any of the cheese I ordered, and was delivered an hour before the actual delivery window I requested (and contained fish, so if I hadn't already been home, this would have been a problem).

Good Eggs is really good at fixing these problems - I email their customer service and they credit me for stuff I don't have and throw in a $5 off coupon for next time or whatever. If inconsistent quality or mispacks were rare, this'd be perfect. The problem is, it is not rare at all. I have definitely fallen off in my use of their service - if I'm paying the same price, I might as well just go to Andronico's, Whole Foods, or the Ferry Building (or Gus's or Rainbow, or Berkeley Bowl ... there's a lot of great grocery stores in the SF region) so I can pick out what I want, and sometimes (especially at Berkeley Bowl) get a way better price.

They need a better process for vetting the product they get from distributors (and possibly a better contract when it comes to rejecting low-quality stuff) and a better process for getting people's stuff into their bags. That's not scaling, that's core competency. It may be the case that this doesn't scale, can they deliver food that's sufficiently high quality that I could say, 'If I went to the store, I'd have chosen that tomato' at a price that's competitive with the store? That's a difficult problem to solve and requires well-established relationships with vendors.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#15
Facepalms all around. Supply chains are hard, and the idea that you can just write software to "solve" them is a level of hubris that defies description. Supply chains aren't a problem you can solve with big data. They aren't a problem that be solved with machine learning. In fact, you could combine the worlds top researchers in Computer Science, Economics, Operations Research, Mathematics, and Statistics, put them in a room together for a decade, and still not "solve" even 1% of the problems that Supply Chains face. I know the ITA presentation on Air Travel Planning Complexity[1] has been circulated here many times, but it always blows peoples minds how complex that problem space is, and that type of problem is miniscule in comparison to end to end supply chain optimization. I work in a problem space that is the combination of 9 different NP-Complete/Hard problem spaces (I've counted) on a regular basis...we are barely scraping by with millions of lines of code and entire data centers of our servers running at peak utilization 24/7, and that is with state of the art heuristics solvers and hundreds of PhD-level researchers, and that is only a subset of the Supply Chain problems that my company faces. To say that Good Eggs bit off more than they can chew is a MASSIVE understatement.

Supply Chain Management is a field that is heuristic-driven because there isn't a solution. The heuristics that drive modern food distribution are the result of a real world genetic algorithm that is already thousands of generations deep...and miniscule incremental improvements have been the subject of PhD Theses for over a hundred years now. You don't optimize on top of that by writing a web service. Supply Chain Management may not be technologically advanced in its usage of enterprise software, but that doesn't mean that their ideas and processes are stupid. At best, it means there are some annoying frictions in the industry in the way that they interact with other industries (and there are actually plenty of viable startup opportunities to fix this). The presumption of stupidity[2] regarding the existing state of logistics and supply chain management killed this company, just like how it killed Webvan, and is going to kill a whole host of startups in the distribution and delivery space within the next few years. [3]

[1] https://static.googleusercontent.com/media/www.itasoftware.c...

[2] http://www.aaronkharris.com/presumption-of-stupitidy

[3] PS: If you are in VC and have a stake in any startup that is doing last mile delivery, liquidate now. There isn't a single startup in the space, whether they are currently valued at $1 or $1B, that can sustainably provide their existing value proposition that they are promising to their customers. It is possible to force scale some of them into something sustainable, but your valuations make me believe your cash flow neutrality projections are off by more than an order of magnitude.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#16
post #6

It takes a lot more than good code, talented engineers and passionate customers to scale food tech startups that deal with getting perishable food from local farms to people’s doorsteps. It feels like some kind of tech-myopia that anyone should think code was the key to a successful food company. The old "when you're holding a hammer..."

If they had used Haskell I think things would have gone differently.

Yeah, they could've hit Monad Transformer Hell, or they could've wasted all their time learning how to write practical applications in Haskell and end up bankrupt in a very lovely ivory tower.

I've heard this argument over and over again and it never is good advice. It ignores the context completely as well as whether the developers know Haskell or not.

You can screw things up in any language, especially if a large part of your business model involves stuff not related to code, like shipping perishable food.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#17

It's a little ironic that goodeggs is considered a food technology firm, when it has nothing to do with technology, and in fact has a rejectionist approach to technology in the first place. Monsanto and Cargill are food technology firms. Advances in food technology are what allow us to feed 9 billion people with a fixed resource (arable land). There are serious innovations in food production and distribution that hav…

I'm not sure if you just have a problem with organic food, or if this is just another reiteration of the tired old "if you're not trying to solve world hunger..." argument that gets used to criticize business ideas, but none of your points are really relevant to a company whose goal is to conveniently supply food to some of the richest cities in the world.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#18
post #17

It's a little ironic that goodeggs is considered a food technology firm, when it has nothing to do with technology, and in fact has a rejectionist approach to technology in the first place. Monsanto and Cargill are food technology firms. Advances in food technology are what allow us to feed 9 billion people with a fixed resource (arable land). There are serious innovations in food production and distribution that hav…

I'm not sure if you just have a problem with organic food, or if this is just another reiteration of the tired old "if you're not trying to solve world hunger..." argument that gets used to criticize business ideas, but none of your points are really relevant to a company whose goal is to conveniently supply food to some of the richest cities in the world.

Organic food is fine. But it is, fundamentally, an anti-technology approach to growing food. You should be free to eat it if you want.

The point is simply that firms that reject technology should not be described as "tech" companies simply because they use the Internet in some way.

I'm not suggesting in any way that companies should not exist if they don't solve planet-scale problems.

Re: Why $53M Wasn't Enough to Scale Good Eggs

#19
post #17

Earlier quoted context omitted.

I'm not sure if you just have a problem with organic food, or if this is just another reiteration of the tired old "if you're not trying to solve world hunger..." argument that gets used to criticize business ideas, but none of your points are really relevant to a company whose goal is to conveniently supply food to some of the richest cities in the world.

Organic food is fine. But it is, fundamentally, an anti-technology approach to growing food. You should be free to eat it if you want. The point is simply that firms that reject technology should not be described as "tech" companies simply because they use the Internet in some way. I'm not suggesting in any way that companies should not exist if they don't solve planet-scale problems.

I think folks underestimate how much agricultural science and technology there is that doesn't fall under the very narrow categories of genetic engineering and chemical pesticides.

Modern society is built on top of the massive productivity improvements in agriculture that occurred before those were introduced, and there is plenty of room to innovate without using those methods.

GMO crops are limited[1] in Europe, yet they continue to be a leader in agricultural innovation.

[1] edited, see dragonwriter's correction

Re: Why $53M Wasn't Enough to Scale Good Eggs

#20
post #6

Earlier quoted context omitted.

If they had used Haskell I think things would have gone differently.

Yeah, they could've hit Monad Transformer Hell, or they could've wasted all their time learning how to write practical applications in Haskell and end up bankrupt in a very lovely ivory tower. I've heard this argument over and over again and it never is good advice. It ignores the context completely as well as whether the developers know Haskell or not. You can screw things up in any language, especially if a large p…

(I think your parent was being satirical)
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