Earlier quoted context omitted.
Sprig's ingredients are actually quite high quality and delicious.
Which is probably why their volume is 6x Spoonrocket's.
Edit: Meant to reply to a child comment, sorry!
SpoonRocket shuts down
81–90 of 194 posts
Re: SpoonRocket shuts down
#82Earlier quoted context omitted.
In fairness, that's because VCs can't really make money investing in companies like those.
I think it's just that the VC model is predicated on finding that fraction of a percent of investments that gives you astronomical ROI as opposed to more conservative investors seeking lower returns more often (the type of person who would invest in a restaurant just to get a check every month). They are willing to get nothing back a majority of the time while the more conservative investor would probably be bankrupt…
Right. If you're going to accept a 50% failure risk, your average return from the companies that don't fail has to be better than 2x. If 70% of them fail, even 3x isn't enough.
Re: SpoonRocket shuts down
#83Earlier quoted context omitted.
Which is probably why their volume is 6x Spoonrocket's.
can you show us something to back this statement? I'm really curious
From the article: "Sprig had looked into acquiring SpoonRocket, but decided against it and is now doing 6X the meal volume SpoonRocket did in SF."
Re: SpoonRocket shuts down
#84Re: SpoonRocket shuts down
#85Earlier quoted context omitted.
I find it strange when companies use this terminology: "We were exploring different strategic options, but deals fell through last minute." Of course deals fall trough last minute. It's not like they would fall through a few months in advance.
Why not? Deals can easily fall through in early stages. "Last minute" basically means the details were pretty much hammered out, everybody was just about ready to sign, then something happened to scuttle it.
I think he was suggesting that when something falls apart it's always at the last minute for that something. Kind of like how you always find something in the last place you look. I guess it's kind of accurate since you wouldn't describe an early stage deal as having "fell through".
Re: SpoonRocket shuts down
#86Makes me wonder about Gobble. We've used it a couple of times and the food is awesome. Healthy, attractive. Very much enjoyed it.
But we only tried it because they offered a Groupon that put the price where we thought it should be. I've heard that in fact, they are doing very well, and I hope that is the case.
Re: SpoonRocket shuts down
#87Earlier quoted context omitted.
In fairness, that's because VCs can't really make money investing in companies like those.
They could (and do), but the prospect is longer-term and riskier, which makes it far less appealing.
Even with as risky as opening a restaurant is I think getting VC-level returns out of a startup if far riskier.
Re: SpoonRocket shuts down
#88Earlier quoted context omitted.
Are you suggesting that my read was incorrect, and that they are cash flow positive after not just food costs but logistics as well?
From wikipedia: >> Contribution margin, or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. “Contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. So, positive contribution margin should imply they covered all the fixed and variable costs, the way I read it. But then, why do they need…
Fixed no, variable yes (or else they would just be profitable).
An explanation with an example can be found here[0].
But let's throw out some easy (but completely false numbers).
Assume:
The fixed cost for the entire operation for one month is $1000.
The operation makes 1000 widgets in one month.
A widget can be sold for $2.
Analysis:
If the company sells all 1000 widgets that it made in a month, then it will have revenue of $2000. If each widget had no variable costs, then each widget sold 'contributes' $2 to paying off the fixed costs of the company. $2 is greater than zero, so the company has a positive contribution margin.
Take the same assumptions as listed above, but the variable costs for each widget is $3. If the company sells all 1000 widgets, then it will have a revenue of $2000. However, each sale of the widget contributes -$1 towards the fixed costs of the company. Thus the company has a negative contribution margin.
So the first situation boils down to "we sold a widget for more than it costs to make", and the second situation boils down to "we sold a widget for less than it costs to make". Where "costs to make" includes just the variable costs. Which is what the article implies, "SpoonRocket had reached a positive contribution margin — it was selling meals for more than it cost to cook them."
Note also having a positive contribution margin also doesn't mean the company will ever realistically be profitable. Imagine a scenario where the fixed costs are $100.000 per month, and the contribution margin of each widget was $0.01 (ex: variable costs per widget $9.99, sale price $10). Each widget has a positive contribution margin, but the company would need to sell 10.000.000 per month to actually cover the fixed costs and become profitable.
Edit: had fixed/variable backwards on the first line.
[0] - http://www.accountingcoach.com/break-even-point/explanation/...
Re: SpoonRocket shuts down
#89Earlier quoted context omitted.
Are you suggesting that my read was incorrect, and that they are cash flow positive after not just food costs but logistics as well?
From wikipedia: >> Contribution margin, or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. “Contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. So, positive contribution margin should imply they covered all the fixed and variable costs, the way I read it. But then, why do they need…
Interesting. I stand corrected, thanks to HN for teaching me something. Contribution margin is only for variable costs, it doesn't cover fixed costs -- so it doesn't mean positive CM goes to free cash flow, only to fixed cost coverage.
Which brings up another interesting point...I'm not sure how companies like this do cost accounting. When running a traditional business, say, a restaurant, variable costs (labor, food inputs) dominate vs. fixed costs. On the other hand, places like Microsoft spend a ton of cash to build a huge fixed asset (Windows) that gets sold to millions of people over time without any depletion, practically the very definition of a "fixed asset".
I wonder how Spoonrocket allocates their platform R&D in unit economics; how they do this will make all the difference in whether their "contribution margin" is in fact, positive, or not.
It's important to realize that even if a business is, strictly speaking, "profitable", it doesn't mean it's a good business. I don't stand on the corner selling newspapers because it's not a valuable use of my time vs. other pursuits, and a comparable argument can be made for use of shareholder capital, too.
Re: SpoonRocket shuts down
#90As someone who's ordered from spoon rocket dozens of times over the past two years, I'm definitely sad to see it go. A quick timeline (from what I can remember): - Initially started out in Berkeley / Emeryville area by a couple of Berkeley alumni who had previously launched a food delivery startup focused on midnight munchies (aka, unhealthy food for college-type students). Each meal was initially only $6, tasted qui…
We tried a variant of this with Mise very early on but we've since pivoted to a much more stable model with massively improved results & proper regulation.
There are some highlights from what we learned trying "Airbnb for food."
1. Our target was not home chefs, but instead professional chefs. We worked in the industry for several months and identified how difficult being a chef. Lack of progression, opportunity, and a chance to showcase your skill.
2. We rented out a commercial kitchen for chefs, let them work their own hours, and cook the things that they wanted. We took on amateur chefs as an experiment, using their passion and food samples as determinant/predictor of success.
3. We wrote stories for every chef and dish. We'd even take photos of the chefs and edit those to make sure that they looked just as respectable as they sounded.
The Findings:
1. Food quality was inconsistent, ranging from inedible to passable. Because most professional chefs (professional doesn't mean much) and home cooks don't have any experience running a business of their own, their ability to scale and cost-control is poor.
2. That resulted in not only inconsistent food, but insanely overpriced meals ($15 for a bowl of chili, $16 for shrimp & pesto pasta).
3. The amateur chefs we worked with did not understand how to cook outside of recipes and/or they'd cut corners in production. Resulting in some shockingly bad food or overpriced mediocre meals.
4. Because there is no one checking over the food during production, you can't catch people cutting corners. If any of our chefs woke up on the wrong side of the bed that day, one of these things would happen (shitty food, tiny portions, unfulfilled orders).
5. No rational user is going to stick around and experiment their way around a Wild West marketplace that has such a wide range of quality and price. And no amount of "humanization" with stories, photos is going to save the fact that the food sucks.
6. Chefs are really good at pumping up their own food. "Best in the Bay Area", "everyone tells me they love it", "people ask me to open my own restaurant all the time", "there's so much love in this", or "I cooked for X person for Y years". (None of this means anything.)
7. Poor retention (and deservedly so from shitty product) and declining sales. With small orders, our chefs earned minimum wage or worse, which either drove them away ("I quit, fuck you!") or encouraged them to cut even more corners (smaller portions, terrible inedible quality).
8. We experienced ridiculous turnover (someone would quit every week, mad rush to find someone else to replace, unconsciously lowering standards in desperation).
9. At the end of the day, if the food sucks, it sucks. Doesn't matter if it's coming from your "neighbors" or "supporting the local chef down the street".
We've now partner with the best Bay Area mobile food businesses and sell their most popular items. Mise is now sustainable, food quality is consistent/high, customers are really happy (feels awesome whenever we have power users). And we've been able to offer more affordable and better-tasting meals week over week.
Ben (my awesome cofounder) and I take a lot of pride in what we do now, because we know it's awesome food going out to awesome people at affordable prices.
Order for the week ahead, get it all delivered to your door on Saturday, and enjoy a meal on your own schedule. :)
www.eatmise.com