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SpoonRocket shuts down

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Re: SpoonRocket shuts down

#151

Post by drone »

ruddct wrote: post #119
tptacek wrote: post #2

The company had actually reached contribution margin positive — it was selling meals for more than it cost to cook them. But due to other costs and the frosty fundraising climate, wasn’t able to get the money it needed to continue operating. Am I reading this correctly, and the business metric this company managed to achieve is simply "selling food above cost", like every deli and diner in the country does? Or is the…

Reminds me of recent Instacart news. http://www.bloomberg.com/news/articles/2016-03-11/instacart-... Here's the money quote: "[Instacart] said 40% of the company's volume is profitable - meaning most orders still lose money. It also said that it will be profitable globally by summer. However, its calculation for profitability doesn't include the cost of office space, the cost of acquiring shopper workers, or the sala…

I think part of the problem here is failing to use correct terminology. We might say, in GAAP terms:

* For 40% of the orders, they achieve a positive gross margin * We anticipate reaching positive gross margin on 100% of orders by the end of year * Even after reaching positive gross margins, non-COGS operating costs are sufficiently high to result in a negative EBITDA

Re: SpoonRocket shuts down

#152

Post by yishanl »

prawn wrote: post #140
empath75 wrote: post #76

Earlier quoted context omitted.

Yeah I don't get how you brand restaurant delivery is a tech startup. Absurd. I can understand a 'meal sharing' service like airbnb or uber, but not this.

Meal sharing concept is too finicky IMO. These places doing pre-made, delivered food are on the right track but I imagine the delivery component is a heavy cost. I'd be curious to know if any of the food delivery apps have incentivised delivery to grouped buyers. e.g., $10 if someone buys, $8 if 5+ people in the same street buy, etc. Encourage delivery efficiency and also delegate marketing to word of mouth.

Delivery is not as heavy as a cost as running the kitchen itself. I think food production is so overlooked in these discussions. The operating cost for a kitchen is insane, labor, ingredients, storage, inventory, etc...

Peter Thiel always uses restaurants as a good example of a business model that is so costly that there's no margin left, combined with the impossibility of a monopoly. So you take something that's already tight on margins and you make that even tighter with delivery.

Re: SpoonRocket shuts down

#153

Post by timr »

tikhonj wrote: post #75
anexprogrammer wrote: post #22

Earlier quoted context omitted.

Ignoring the app, and disruptive gimmick, I have to wonder what your average diner could have achieved with $13.5m in funding. You could build a small, well branded chain. Probably selling food above cost to boot! :)

Food service has a terrifying reputation as a business sector—restaurants routinely go out of business in their first year. Deep funding would create a buffer and help it grow, of course, but I still wouldn't want to bet on a restaurant.

One of the amusing ironies of the food-delivery bubble for me was that you're taking the crappiest part of a crappy industry's economics, and scaling it.

It's all of the costs and logistical pain of running a restaurant, with none of the margins. Brilliant!

Re: SpoonRocket shuts down

#154

Post by tptacek »

timr wrote: post #143
JoeAltmaier wrote: post #121

Earlier quoted context omitted.

That sounds taken out of context, or misquoted. Its reasonable to talk about the marginal profitability of an activity. E.g. Given employee base (shopper workers already hired), current app and backend (no marginal cost for developers/executives) then the sales price minus cost-of-sale was positive. Very important number! Means the company would be profitable after scaling that part of the business enough to cover fi…

Doesn't look like a misquote to me. And while, yes, unit economics are a thing, there can be a huge gap between being unit profitable and profitable as an organization. A bunch of delivery companies flew into the ground during the first crash under the same circumstances (including a few grocery delivery companies). If you're running a company with 500 employees an a big office in San Francisco (where employees avera…

$100K fully loaded sounds low for SF.

Re: SpoonRocket shuts down

#155

Post by tptacek »

bazqux2 wrote: post #125
bdcravens wrote: post #107

Earlier quoted context omitted.

Are they really? The high failure, high return model has allowed many programmers (and others within VC-backed companies) to have employment that wouldn't otherwise exist. I'm happy to be outside of SV, doing well in a 100% bootstrapped company, but I think VC culture has had the opposite effect of a parasite (or at worst, I'd call it a symbiote)

Yes, in many many ways. They are money losers. It only looks like they are not because of a temporary bubble. This bubble is popping and their losses are becoming clearer. There are many that will personally make money despite running a fund that loses money. Their culture is steeped in groupthink. Which by definition results in malinvestment and destruction of wealth. This wealth comes from pensioners who can't get…

Pension funds invest tiny, tiny portions of their portfolios in venture capital, and they do it deliberately, as part of a strategy to diversify asset classes. Venture capital is probably not going to mess with too many people's pensions.

The Kaufmann report on venture capital (which is not, to put it charitably, aggressively pro-venture-capital) is a good place to start on this.

As for bootstrappers (I am one of those, and have been for ~12 years now), I think @Pinboard has a thing or two to say about the VC threat/menace.

Re: SpoonRocket shuts down

#156

Post by timr »

tptacek wrote: post #154
timr wrote: post #143

Earlier quoted context omitted.

Doesn't look like a misquote to me. And while, yes, unit economics are a thing, there can be a huge gap between being unit profitable and profitable as an organization. A bunch of delivery companies flew into the ground during the first crash under the same circumstances (including a few grocery delivery companies). If you're running a company with 500 employees an a big office in San Francisco (where employees avera…

$100K fully loaded sounds low for SF.

Agreed. I was trying to low-ball it, just to head off the criticism that I'm exaggerating.

Re: SpoonRocket shuts down

#157

Post by pbreit »

goodJobWalrus wrote: post #99
pbreit wrote: post #97

Earlier quoted context omitted.

"So, positive contribution margin should imply they covered all the fixed and variable costs, the way I read it." That's not what the passage you included says. It says it only covers variable costs.

Passage no, but TC report says they were contribution margin "positive", which, they way I understood it, implies it should cover fixed costs, otherwise it is still contribution margin-negative (vis-a-vis fixed costs) So, the passage explains what contribution margin is, but TC is talking about being "contribution margin positive". How would you understand the second term?

Negative contribution margin would be if your sales did not even cover your variable costs.

Re: SpoonRocket shuts down

#158

Post by JoeAltmaier »

adevine wrote: post #147
JoeAltmaier wrote: post #121

Earlier quoted context omitted.

That sounds taken out of context, or misquoted. Its reasonable to talk about the marginal profitability of an activity. E.g. Given employee base (shopper workers already hired), current app and backend (no marginal cost for developers/executives) then the sales price minus cost-of-sale was positive. Very important number! Means the company would be profitable after scaling that part of the business enough to cover fi…

While I agree that marginal probability is important, I think it is a fallacy to assume all of those other costs don't have some variable component as well. There will always be shopper worker churn that will grow as the business grows, additional (albeit low) costs in software to scale and add new regions, etc. In a business with sizable margins, it may be OK to discount some of these other things, but in a business…

Yeah their story was a pretty big stretch.

Re: SpoonRocket shuts down

#159

Post by choward »

They sound like these guys who I am afraid are going to end up the same way: https://foodjets.com/

They only operate in Sacramento. The main things I liked are that it takes usually under 10 minutes and there was no tipping or delivery fee. The price you saw is what you paid. However, they just added tipping to their app which isn't a good sign. On top of that, it asks you to tip before you even get your food and there is no option to tip later that I know of. I haven't ordered from them since I was first prompted to tip.

Older article that discusses them: http://www.bizjournals.com/sacramento/news/2015/10/30/what-s...

Re: SpoonRocket shuts down

#160

Post by majani »

S_A_P wrote: post #129

Why would a business like this get funding and ultimately be viewed differently than any other restaurant? It looks like the pizza delivery model to me, so why is the funding so much higher?(serious question)

reminds me of the time in the 90s when literally just adding .com to a company's name and having a website made its valuation jump
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