The article is a little misleading. I too operate without VC funding and behave in a ways similar to the small business owner -- because I am one. But to apply the philosophy of a small business to a startup would be a big mistake. Startup founders and their VCs behave the way they do, because they are optimising for different things than a small business owner like me. I am optimising for survival, a startup founder is optimising for the expected size of the outcome. The possibility of ruin in that expected outcome is taken into account in the VCs calculation. As long as one is clear about what one is optimising for, both strategies are fine. Problems only begin when you take VC money and behave like a small business owner. Or behave like you have VC money when you are, in fact, a small business owner.
The article is pretty clear about the dynamic you bring up. The first subhed is, “A Different Business Philosophy.”
At the same time, there is a valid critique from this small business veteran. She points out that startup founders tend to hire people from their startup world, even for specialized positions where much more experienced talent is readily available from within the food world. She also indicates they do not listen to input from others in the industry.
> As long as one is clear about what one is optimising for, both strategies are fine.
I know this is HN orthodoxy, considering the audience and our beneficent hosts.
But I think this assumption bears questioning. Is the startup model really morally equivalent? Clearly we wouldn't say that all cost functions a business could optimize are all equivalent. So why should the traditional small business and startup model be assumed to be equivalent?
And moreover, even if it is morally equivalent... is it really that good of a strategy? By which I mean two things: 1) is it a fit strategy in of itself, and 2) is it good for the entire business ecosystem?
As food for thought... why hasn't Silicon Valley adequately considered a "slow-up" model that combines the traditional survival and sustainable growth focuses with the advantages of massive cash influxes and rapid iteration towards a viable product (even if that means pivoting)?
I think the answer is clear: venture capitalists want a return, and a large one, before they die. Is a business model optimized for generating returns before investors die really a healthy strategy to have so much capital allocated towards? Especially when these businesses in particular (tech startups) can often have such a large impact on culture and society.
I have a startup to sell you on. It's called Brydge. We have a radically non-linear revenue model which resembles a perpendicular hockey stick. We currently have no revenue, but revenues will quintuple each year until you die, at which point we expect to make ten billion dollars per year. We are looking for a 10 million dollar investment for a 30% stake. You are also entitled to 100% of our revenues until you die. In expected value terms, that's a great deal.
> As food for thought... why hasn't Silicon Valley adequately considered a "slow-up" model that combines the traditional survival and sustainable growth focuses with the advantages of massive cash influxes and rapid iteration towards a viable product (even if that means pivoting)?
> I think the answer is clear: venture capitalists want a return, and a large one, before they die. Is a business model optimized for generating returns before investors die really a healthy strategy to have so much capital allocated towards? Especially when these businesses in particular (tech startups) can often have such a large impact on culture and society.
I think the answer is simpler than that: the VC investment model is predicated on jackpot payouts. Anything less than that is a failed bet from their perspective. That mentality permeates the businesses they invest in and pressures them to take risks they otherwise wouldn't, thereby increasing the odds of becoming such a jackpot. Even if the "slow-up" model was a net win for everyone involved, it's not the jackpot the VC was after. And the sheer existence of it being an acceptable outcome would act as a relief valve for that pressure and lower the odds of a jackpot payout for the VC.
I wouldn't call it misleading; VC-funded startups (and the decisions they make) can be incredibly unintuitive for someone who has no understanding of the VC funding model itself. There's even an entire section titled Difference in Business Philosophy, where the person being interviewed recognizes the VC-funded startups are operating under a different philosophy and towards distinctly different goals:
> Albrecht says she she quickly realized her tenants weren’t trying to build a sustainable business like her. They were swinging for the moon.
and
> Albrecht says most of the people she has met at these companies are very different from her and owners of other local food businesses. She struggled to characterize the difference, but it was more than just their corporate philosophy.
The article seems fairly balanced in that it includes examples of behaviors and seemingly illogical decisions characteristic of VC-funded startups, while also including an entire section expressing that there does seem to be something deeper at play driving this behavior, she can't rationalize what it is from her experience.
The article does feel incomplete though, as it never actually attempts to address what that fundamental difference is that Albrecht struggles to characterize. Which is the fact that VCs and VC-funded startups are gamblers with distinctly different risk profiles from traditional businesses and financiers:
- A typical small business owner is gambling with a finite bankroll, based on whatever capital they have or are able to acquire in the form of guaranteed debt. Going bust is a catastrophic outcome that they will personally bear the consequences of. So their betting strategy optimizes against going bust, resulting in a conservative play style of short odd bets of moderate value.
- The financiers those business owners have access to operate under similar dynamics, just with far larger bankrolls. This reinforces a typical business owner's behavior, as they understand their access to capital is dependent on not being seen as a long odd bet by their potential financier.
- A founder with VC-funding is similarly gambling with a limited bankroll, but well funded by someone else with no guarantees attached and an express mandate of spending it with a "go big or go home" mindset. Going bust is pretty inconsequential for this gambler - the worst outcome is that they can't get their bankroll topped up and walk away having wasted a bunch of their time gambling. So their play style is super aggressive, solely consisting of large bets on long-odd plays. Small business owners can recognize these players when they show up at the table, based on their reckless yet distinctive play style and propensity to go bust in the end. But these players defy logic to small business owners - they someone convinced someone to bankroll them despite being such obviously risky bets, their play style has absolutely no sense of self-preservation to it (ignoring safe bets even as their bankroll dwindles), and show far too little distress when they go bust. There's absolutely nothing about these players in and of themselves that allow their existence to be rationalized.
- Then you have VCs, the deep pocketed financiers that create and fuel these incomprehensible players that are flooding the gaming floor. Their gambling strategy is both elegantly simple and fundamentally different than all three of the above. They walk right past all the table games, pick a slot machine, and pull the handle. Then keep pulling it again and again until one of their spins eventually lands a jackpot. They fully know the odds of a jackpot going in, and come prepared with a bankroll to play those odds. So the only criteria they evaluate with any given bet is whether a particular machine's jackpot payout and cost to spin is a match for them.
Once you understand the gambling strategy of VCs, everything else falls into place and makes a ton of sense. But if you're missing that piece of the puzzle, it all just seems bonkers.
Notice that the article never tells you what advice they didn't listen to, and mentions a single mistake by a single company. The only general principle that's useful (as opposed to the obligatory observations on age and race) is hiring people with food industry experience.
> Her tenants included companies like the pizza-delivery app called Easy as Pi, a meal delivery service called Din and a ready-made meal kit company called Sprig.
> far different than the food tech would-be entrepreneurs. “They are young, white,” she says, “the kind of people you see in a J. Crew catalog.”
This isn't even true. Easy as Pi is founded by Evan Kuo, who's Asian. Sprig is founded by Gagan Biyani, who is Indian. Din seems to have the only white founder, Emily Olson LaFave.
Indians and Asians are basically considered white in tech, especially if they're male. And white women have so much white privilege, they're practically men. So you see, all those founders were pretty much white men. /s
I really thought you were serious until I saw the /s. I wonder - Is there an onion version for comments? Can people really tell the difference anymore?
Silicon valley startups ignore established industry expertise, burn cash in silly ways, dont prioritise business sustainability and try to reinvent the wheel with a strange mixture of ignorance and arrogance? No, never happened before!
> Silicon valley startups ignore established industry expertise
The challenge is that if you can actually find some established industry expertise that is merely "we have always done it this way" , you make a lot of money.
Attempts at innovation are always going to lead to a certain number of dead ends that end up being "stupid wastes of money."
This is just confirmation bias without supporting evidence. It may or may not be true, but we can't glean that from the article, because it says very little.
Sometimes you lose. Sometimes you invent the modern consumer electric car and the modern commercial space program. The beauty of SV startups is just that - high variance.
The modern consumer electric car did not come by throwing darts at a board and hoping for a bullseye. It was planned on scientific principles and took decades of precursor work.
Amusingly enough, until Tesla was successful, HN was all ablaze with why they shouldn't try new things. Tesla should just hire all the experts from Ford et. al. and do the same thing as everyone else, except electric. In fact, they were going to fail because they didn't understand "automotive grade". Touchscreens? Psh, guaranteed product failure.
SpaceX was going to fail because they didn't use conventional wisdom building their stuff. They used Electron for their UI (my god! guaranteed product failure! astronauts will hate them!). Their stuff exploded when they tried it out. Classic, should've done what ULA did. ULA are the experts.
"They don't listen". That was always the theme. They don't listen. That's why they win.
I don’t remember hearing those complaints about SpaceX. Nobody has anything good to say about ULA — it’s a joint venture of defense contractors.
Tesla makes a lot of stupid choices and are an example of survivorship bias in many ways. They make opinionated products and Musk has the instinct to play chicken and attract investors to keep the thing alive.
>>That was always the theme. They don't listen. That's why they win.
You forget about tons of startup and business that failed spectacularly because they think they know better than those "old fools" (also, they usually comes up with arrogant attitude to change the world for some reason)
Tesla is one of a very very few outlier. I have to give them credit for that.
Edit: To clarify things up. I didn't mean that old way is always better, some people I've work with are just too stubborn with their old-school thinking and led to lack of innovation to the point of annoying. But I'm also sure that there are also good old wisdom in different perspective that younger generation can learn from, and not just discard it completely.
I don't think anyone forgot about them. It's just... that's how innovation happens. Most big, established companies you see were once young upstarts who arrogantly thought they knew better than everyone else how to run a business.
No, no one forgot those guys. It's a necessary but not sufficient condition if you want to make a highly disruptive startup. You don't win by repeating the status quo. But you can most definitely lose by not repeating the status quo.
That I wholeheartedly agreed. I just felt that some people just discard the old way completely, seeing it as outdated(which is true in certain aspect) I personally think that there are always old wisdom that younger business owner can revisit, to learn from.
Oh no, it's the opposite. Established companies could be established for no good reason. ULA was in space, they're the experts, but they could be beaten. The incumbent could be just a result of survivorship bias. That's what presents an opportunity. If the incumbent is just very good at the product, the only part you can disrupt is margin (or verticalize or something, but lets set aside that) and you don't want to be in a price war unless you're uniquely suited to it. So you don't fight those guys.
So you count on the market leader being disruptable, which is often because they're just there as accidental survivors.
What you write makes a lot of sense in terms of successful startup strategy. It doesn’t detract from the vacuity of your original statement on “high variance“. When you cherry-pick two data points- from the same founder, even- while ignoring the high rate of failed startups, it makes for quite an empty fallacious statement indeed. One might as well argue for the merits of big government statism by singing the praises of the Manhattan Project and the Apollo program, while contrasting them with the DMV.
Well, yes, you can and you'd be right. That's how existence proofs work. State funded projects make great moonshots, yes, and you have some great examples.
It's a great argument for Big Government statists that governments are capable of large scale technological progress out of the reach of common corporations.
But no one was disputing the existence of successful, even wildly successful startups. People are criticizing startups that behave ignorantly and arrogantly. (And quite frankly, give the entire scene a bad name.) You are attempting to play devil's advocate by pointing out that some flout conventional wisdom and established practices and succeed. Very well, we can all agree that those enterprises exist. The question is if they exist in any appreciable number, which is very debatable- again, due to the simple arithmetic of very low startup success rates.
You are celebrating lottery winners. The existence of that very few does not justify bad behavior from (some of) the rest. Your proof is facile.
It isn't bad behaviour. It's just a failure. No harm in trying things that don't work. It doesn't look anyone misrepresented themselves. They came in, sucked, and got taken out by the market. The fact that they didn't listen hardly matters. It's not bad behaviour to not listen to advice from your landlord.
I'm not playing Devil's Advocate. I genuinely think it is good that people are trying different things. They're exploring the state space and I enjoy that.
If they were actually misrepresenting themselves or their ability to pay, or reneged on their debts without going out of business (which is a well-understood way to renege), or something like that, sure. But it looks like everything is on the level and the article is just saying that all of these guys who tried it weren't good at it. That's not a crime or even morally problematic.
People aren't saying they're behaving criminally. If anything, their behavior is both mockable and foolish- out-of-touch, operating in an SV bubble, detached from the needs of real-world people would their businesses ostensibly serve, and perhaps representative of the excess that dumb money empowers. They're gauche.
(And yes, during times of mass unemployment and rising economic uncertainty, moralizing does start to creep in; when mom and pop stores are dying by the tens of thousands, VC-funded fail does seem like bad taste, at least. Fair's got nothing to do with the creation of this perception; but optics are optics.)
Is it wrong to have higher standards for this industry? Less sloppy business practices, more empathy for the world at large? More curiosity and respect for established wisdom? What's the point of learning from "fail fast, fail often" if the failures are just going be the same mistakes over and over again, caused by foolhardy founders and negligent investors? Infinite samsara wheels, doomed by hubris.
No, that's the point. You aim at the guys for whom, if they're lucky, they can win and win big. Then you attempt to cover as much of that space as efficiently with your money as possible.
That's what the VC world is about. Luck is factored in. You don't make the waves, but you do need to be out there on your surfboard if you want to catch one.
Nothing wrong with trying to disrupt some industry - but I think the way too many startups handle it is, well, almost arrogant.
Traditionally, businesses grow very incrementally - in almost all aspects of the business. From the product itself, to infrastructure, etc. It's all mostly done on a need basis.
When demand ramps up, you expand. But at the very core, there's a product/products which have been developed probably since before the company itself. It's the secret sauce, if you want. Of course, later down the road, some products unfortunately take the backseat in a business - but that's another story.
With a lot of disruptive tech-fueled startups, it's a bit different - you start with some idea or desire of disrupting something, or identifying inefficiencies in traditional systems, through use and/or observation, or through surveying people.
So too often, you get people / entrepreneurs with limited domain knowledge, that try to learn and solve/improve some complex business or field.
Again - there's nothing wrong with trying to improve something, but throwing cash at something you may not know too well, can be a quick way to just wasting money.
A lot of energy and resources are going towards trying to engineer some system which is ready to scale, IF demand explodes. It's the software engineering equivalent of writing "enterprise" software from the go, pouring cash on ridiculous servers, and hiring a team of expensive sales engineers - even though you barely have a MVP. You're still in the early stages where you need to direct most of your focus on creating a great product.
I've recently been watching a lot of the Y-Combinator YouTube videos. One idea that comes up a lot is that you should listen to the problems that users have but not their solutions. It's an idea along the line of "If I'd asked what they wanted, they would've said 'A faster horse'." In other words, you would take away "Faster transportation" and discard "Faster horse".
I can see how, from the perspective of this article, people who talked to you and listened to what you were saying and then never implemented or tried your suggestions would seem like negligent fools who never listened. The reality might just be that they are trying to do something very different.
I get the sense that this article is scorning the VC backed food companies but I don't know why. They are spending their time and money working on hard and valuable problems. Scorning them is easy, since they'll probably fail, but it also strikes me cynical and soulless. Better, in my view, to wish them luck and to realize that a VC backed food tech start up probably will have different hiring patterns and employees than a small food business.
She is a professional, with years of experience in the space that various startups are trying to "disrupt".
That's years of hard-won, hands-on experience that would benefit anybody trying to enter the market.
Which the average San Francisco startup -- both the founder and employees -- totally ignore, because (a) she's over thirty-five years of age; and (b) she doesn't have a degree from Stanford/Berkeley/Harvard.
We see this a lot in Japan when SV startups open shop here.
There are a variety of food tech startups, some of them would see her as a (potential) user.
"User" maybe isn't the best word, but she's definitely the kind of person who has problems that food tech startups would care about solving. If people are ignoring her, they shouldn't be. But neither should they (according to my interpretation of Y-Combinator advice) be following her solutions. If Hyunjoo knew how to solve these problems, they wouldn't be unsolved problems and there would be no startup in solving them.
My point was that if people are listening to your problems and not solutions, it may feel like they're ignoring you, even if they aren't.
What problems are you talking about that she doesn't know how to solve? Many of these startups seem to be the lack of a solution in search of a problem.
I don't know enough about food tech to say what their problems are. I think, generally, the problem is that food service doesn't scale that well. Food service scales linearly for employees and space and cost. If you could figure out how to scale it better you could feed many more people for less money and solve a huge problem for the world.
> I think, generally, the problem is that food service doesn't scale that well.
Maybe?
First and foremost: my knowledge of the industry is limited to a passing interest. I've investigated opening a restaurant, have worked in precisely one professional kitchen, and worked in front-of-house as well.
That said, it depends on what you mean by "food service" and "scale".
Fresh ingredients, prepared with great care, served by a professional staff... yeah, that doesn't scale. It takes years to learn to work with "whatever is available in-season", and finding good people is hard in any industry -- waiters at high-end restaurants do not make minimum wage, I assure you.
But the price is too high for most people, other than as perhaps a special occasion. The French Laundry isn't about to open up in rural Alaska.
Reasonably nutritious food that is both fast and cheap? We have that. Your choice between canned or frozen.
American processed food tends to go nuts on the additives, but that isn't a requirement, and I'd say the Europeans overall do a much better job on this front.
You get a lot less variety, but more quality.
Likely this is an artifact of our history -- preservatives were a godsend before the logistics revolution of WWII made its way into civilian life. American food scientists also went vitamin-crazy early in the 20th century, which combined with the introduction of convenience meals (TV dinners) and fast food, transformed the American culinary landscape into enriched breads, artificially-colored drinks, and "low-fat" snacks (which are horribly unhealthy).
China has a similar problem, funnily enough.
Communism is all about stamping out the slightest differences between people, so during the cultural revolution, preparing and eating your own food was viewed as "counter-revolutionary", and thus banned. Everybody ate in communal kitchens, and never learned to cook with their parents and grandparents.
Killed millennia of culinary history, and is partially why there's so much processed food and so many restaurants in China today.
Anyhow, there are restaurant chains here in Japan that literally serve up nothing but reheated frozen food -- Saizeriya is a good example. It's basically the Japanese answer to Olive Garden (which I believe does the same thing!)
So, you've got options from fresh and gourmet, all the way down to Chef Boyardee served on a posh plate.
Prepared food at restaurants doesn't scale. If you want to serve X customers it takes Y employees and Z space, or N cost. If you want to serve 2X customers it takes 2N cost, and if you want to serve KX customers it takes KN cost. This is what I mean by not scaling.
If deliveries worked better, maybe you could reduce the space you needed. If robots worked better then maybe you could reduce the number of employees. If there was some other solution, perhaps you could do better in all sorts of ways.
I don't know much about food tech, but I assume this is the kind of problem that food tech startups are trying to solve. Either way, food tech startups are trying to solve a problem and do something that Albrecht is not. Albrecht is, presumably, not trying to build food automation or work out a new way to deliveries, but is rather selling Kimchi. I'm not writing that to diminish her work, just to point out that she is in a different field than the food tech companies.
Albrecht may have problems that food tech companies would like to solve (e.g. "It's a burden to have to have so much kitchen space when I have relatively low demand") but she doesn't have solutions that are applicable to the food tech companies, because if she had those solutions then she wouldn't have the problems.
The food-tech startups that would see her as a potential user likely wouldn't be renting out her kitchen space.
Instead, they'd be trying to give her equipment, courses, software, or whathave you to solve her problems -- probably for free -- both for user research, and to gain marketshare.
The food tech startups she talks about in the parent article were not in that category.
I've recently been watching a lot of the Y-Combinator YouTube videos. One idea that comes up a lot is that you should listen to the problems that users have but not their solutions. It's an idea along the line of "If I'd asked what they wanted, they would've said 'A faster horse'." In other words, you would take away "Faster transportation" and discard "Faster horse".
There's a subtle but important distinction.
When you're trying to figure out what to build, and you ask your users, they'll tell you they want a faster horse, but really they want faster transportation.
When you're trying to figure out how to build faster transportation, now you've got a very different dilemma: is your daring new idea daring and new because nobody has tried it before due to technological changes, market structures, etc.? Or is it just daring because it's been tried before, and you're about to learn things that experts already knew? There's no easy formula to answering this question.
I've heard that's why so many supplies are willing to work with Walmart despite the lower prices: Walmart doesn't mess with them, and they don't artificially hold the money till some date (NET 90 or the like).
I loved contracting for Sun - you had to give them a discount if they paid early, and they always paid like net-5, so bump your rate a little and everyone is happy
There is an entire software company dedicated towards optimizing around this.
Like, if you invoice net-90, then they will wait, and there is software that lets you compete with others to minimize the discount to get money now versus later. It's a crazy world.
Really? Can you name the company? I had some "is this a good idea for a start up" conversations with someone like 5 years ago who had a similar idea but didn't pursue it and I'd love to be able to point to a company that was actually doing it.
What ever happened to the "do things that don't scale" saying? Every time I see a food tech startup, flush with automation tech, I cannot help but wonder who has the money to throw away on such obviously flawed plans.
People are willing to question the "obviously flawed" part. Lots of logistics people said that that Amazon was "obviously flawed" because you can't move goods independently to the consumer cheaper than you can move them in a truck to a store.
But that was always the case? At least as late as 2001, they had weekly milk delivery in Moncton, New Brunswick. It cost the same as milk in a store. You put your order in an envelope with some cash for next week. It wasn't just milk, you could get most non-frozen dairy that way.
Is it at all the same as Amazon? No. But it shows that you can be profitable delivering low value items right to peoples doorstep.
It certainly was not always the case, but I think people assumed that it would be the case going forward (and given that grocery delivery has not recovered, it probably still is the case in grocery).
Walmart was the established model for "best practices" in selling general goods for a long time. Now, the Walmart model is showing its weaknesses, which people assumed did not exist.
Logistics people don’t manage retail or grok overhead.
The part about Amazon that was questionable was the massive capital investments in infrastructure to facilitate 2 day delivery. LL Bean, Sears, HSN, etc all demonstrated that mail order was a thing. Prodigy (aka Sears) demonstrated Amazon like e-commerce in 1990.
Even so, they had to do things like FBA to make money. Walmart is a less sexy but much more efficient business.
If we are talking restaurants, human costs are around 1/3 of the total expense- the rest being rent and food.
I don't see how splurging on massive capital investments like machines winds up being cheaper than having a human do the food prep- humans are remarkably efficient at quality control, repetitive but flexible tasks (I.e. dealing with imperfect non-manufactured things like food items) and require little capital to get going (just basic training).
The only thing machines beat humans at in food is volume of high precision, highly controlled tasks- think producing bags of chips rather than prepared meals.
It seems like food startups are trying to jump straight to scale, hoping to prove out that eliminating some human jobs works- saving maybe 1/6 of their costs at best, rather than proving that a market exists for whatever product they are selling.
Amazon realized early on that technical excellence supports business excellence. Most businesses and governments have not yet come to that conclusion.
Cloud services should have come from HP, Oracle, Google, Yahoo, or any number of actual tech companies. It is an absurdity really that Amazon won the space.
All of those companies except Google listened to their dopey customers.
I remember playing with S3 and pitching early EC2 after reading a story about how the New York Times digitized their archives, a project my then employer was doing for our records at ridiculous expense. My director loved it, but legal shot it down for 100 reasons that turned out to be nonsense.
It really is weird. Granted I am very much a layman and have no true understanding behind cloud infrastructures, I've always find it really weird that Amazon of all companies won that race over more intertwined players.
My theory is that everyone is afraid of doing 'old' business practises because doing something that someone else is already doing is bad and wont make you a billion dollars (not true btw). California startup culture is a victim of its own ego.
You mean startup culture is a victim of its own ego. By that, you mean entrepreneurs are victims of their own ego. That's the gamble, though. You don't take risks if you don't have an ego and starting a business is a risk (well, to most).
Are California startups any different than other places? Besides being more popularized and having easier access to capital I see dumb ideas everywhere I go. I also see amazing ideas.
I seriously wonder if these guys (and they are mainly guys) have ever cooked before. Seriously, you go from upper-middle class+ upbringing to 4-10 years at Stanford to eating every single meal out because no time working on startup... like literally every twentysomething "founder type" I ever met lived on takeout and couldn't cook for shit. Cooking is so obviously the absolute last thing that's ever going to get automated, as anybody that's spent appreciable amounts of time in the kitchen can tell you. I can only assume the disrupters are drawn to this industry because they suppose, wrongly, that everyone hates to cook as much as they do.
A lot of cooking has been automated, though. Consider an industrial bakery, or frozen pizza factory, or your favorite candy. We just don't normally call automated food production "cooking".
But those aren't cooking, they're pastry, basically pastry, and confection (aka pastry), respectively. You literally attend a different program in culinary academy to learn these skills. Show me any place that mass produces actual meals and I guarantee you it looks like this photo of SkyChef I found online:
Granted, and I suppose the nature of the craft does inherently lend itself to better automation. (For anyone who doesn't know, much of what makes pastries good boils down to precise measurements and temperature controls, which even unsophisticated machines can beat human chefs on.)
There's a theory we're in another tech bubble and people are just throwing money at everything hoping they pick a winner... if you look around, it's probably true.
> I cannot help but wonder who has the money to throw away on such obviously flawed plans.
I've enviously pondered that very same topic ever since I stumbled on HN 8 years ago and became enlightened to the existence of a whole new world I never even dreamed existed.
I've never witnessed the funny money leprechauns myself, but stories like this keep my dream alive that I still may some day.
I think some investors are naive about the food cultures. Here's some advice for you. Food is personal. It's extremely hard to change the way people eat. Most of you are busy changing the world. You like the convenience of tapping a button and get what you want in a few minutes. You'd think that everyone would like to enjoy the same convenience.
Food is personal. Name a favorite dish. You'd not know who invented it. Nobody knows how we got Chicken Tikka Masala. Food is decentralized. Attempts to centralize food cultures will fail. Conscious people are careful about what they eat. They'll end up cooking their own food. They're suspicious of the big food companies.
Don't think about simplifying food, cutting down time. If you go down that path, you'd end up with another junk food company. Think about how to get people to eat healthier. That's the only thing I care about. I think many people will eventually realize this.
> Many of the people she knows trying to make a living selling food are immigrants, women and people of color — far different than the food tech would-be entrepreneurs. “They are young, white,” she says, “the kind of people you see in a J. Crew catalog.”
> There is also a big difference in who they bring in to work at their companies. Albrecht hires local workers to make her kimchi, many of whom have worked preparing and handling food for years. They look very different from the workers at the food tech companies.
> “All these people they hire are also from Silicon Valley companies who have no experience in a food manufacturing company,” Albrecht says. “Often these positions are for logistics, operations, marketing, all those people. Those are the people they hire.”
Amazing what is an acceptable thing to be upset about these days.
I don't see the article being "upset" about anything? If anything Albrecht seems to mostly find the startups comical, at least until they stop paying her bills.
I don't interpret that as being upset, just pointing out the stark contrast in solutions and people involved in (ultimately) trying to make a living selling food.
Or you could see it as the often-overlooked perspective of an immigrant with a successful business in a traditional industry who is witnessing and exposing the absurdity of the valley capital bubble.
I didn't really see it as trashing but a real person running a real business in a real world, who just can't believe these young people who live in a fantasy world that is funded by VC.
Seems like disrupting the food business is fraught with risk. Most restaurants work in pretty small margins. I guess using machines to eliminate labor is one way. One easy way to increase profits is to sell alcohol. Much better profits and if done right, easy to stop waste.
I'm a musician, so I spend a lot of time in restaurants. ;-) I was chatting with the chef / owner of a fairly successful restaurant, and he told me: "Every chef dreams of making their living selling food, but quickly learns that their income comes from the bar."
There seems to be an agenda here. But juat because a few companies failed (and in venture it’s 65% - 90%) not all fail. That’s the venture capital business model and it’s given us Google, Apple, Netflix, Amazon, Instacart, Impossible Foods, and probably a dozen goods and services we use every day. You don’t build these kinds of businesses as a lifestyle business.
The majority of those companies you listed were not VC funded, or at least they were not the same sort of hyper-growth-chasing unprofitable unicorns that are the modern startup poster children.
"A tenant with a meal kit company wanted to automate filling a container with a few ounces of sauce, so Albrecht says they bought a giant machine to squeeze sauce into cups. It came in on a big pallet, and it was a huge operation to assemble. Albrecht says they were really excited about this machine.
But when they finally got it hooked up, it didn’t work as expected. She can’t help laughing while she tells the story. “When the sauce comes out of this machine and lands into the little saucer cup it doesn’t land 'pretty' enough. So they just stopped using it. They just left it there.” The giant machine sat hulking on a pallet, unused, for months."
You can't make this stuff up. Silicon Valley season 8 material right there.
It's such an ignorant, yet arrogant way to run a business, especially considering many of these startup founders were likely pretty young with little to no industry experience.
Having an experienced business owner running an actual, profitable business in your midst should be treated as a gold mine of information.
I have actually seen an attitude of "don't listen to or hire industry veterans because they are stuck in the old way of doing things and if they knew any better, they would have already disrupted the industry."
Few if any highly successful "disruptive" companies completely reinvented their segment.
Uber wasn't the first taxi company, it wasn't even the first ride sharing company. Heck, they weren't even the first app based taxi service. Airbnb was preceded by VRBO by about 15 or 20 years.
The people with current industry experience have techniques and knowledge about running a profitable and sustainable business. That doesn’t get you hyper growth. That gets you a solid business.
You get this kind of growth from accidentally finding the magic formula that creates massive growth. You actually want someone that doesn’t know what they are doing because they are more likely to trip over the answer that most people were smart enough to avoid.
You want people that will make mistakes. Successful startups are as much happy accidents as they are talented people performing hard work.
When I read you're comment, I am not getting many positive vibes about those startups.
Contrast the language. With traditional businesses you have positive terms like profitable, sustainable, and solid. With the startups you evoke terms like hyper growth, magic formula, and (from other people's posts in a similar vein) disruptive. It makes the traditional businesses sound like they are directed towards long term objectives as well as societal needs like stable employment and viable products. It also makes the startups sound self-serving. These are people who take a gamble for a disproportionate return. They are primarily interested in the short term, so they end up being parasitic. They aren't providing society with things like stable jobs or products that will have a lasting impact. Claiming that a business is disruptive does not really fix that, since a business can only be disruptive if the gamble pays off.
Perhaps society should be looking towards more traditional approaches to entrepreneurship if we are to have a chance to fix our woes. Yes, I understand that it had its issues. On the other hand, these gambles on hyper growth are consuming a significant amount of investment dollars for outcomes that are of dubious merit.
Edit: made the second half of the second paragraph less of a grammatical mess.
Couchsurfing was a completely different arrangement though and that's why it was free. It's like comparing staying at your aunt's house for a weekend to booking a room at a motel, the expectations are just a lot different.
i mean somebody has to hire minimum wage worker for 1000+ hours before it probably breaks even with equipment cost. It seems like the business is in scamming everyone with the skyrocket valuations and pocketing the salary. Then rinse and repeat.
Who did the business scam? The investors not doing their due diligence? I invest in businesses, and my responsibilities go further than signing a check.
Maybe it's your responsibility to not get scammed, but if you get scammed the fact remains that there was scamming going on, regardless of whether or not you were to blame.
This word "scam" gets thrown around so much these days that it's basically meaningless.
It's really unlikely that the failing startups described in TFA developed a food tech idea, pitched it to investors, rented space in a kitchen, etc just to scam people. It's far more likely that they were just clueless.
Be that as it may, I was addressing the curious "if it was my fault, then it wasn't a scam" logic.
If scamming isn't scamming when you to it to clueless investors, does that mean Elizabeth Holmes should be a free woman? The people she scammed didn't do any due diligence, but that doesn't make her scam any less a scam.
Elizabeth Holmes falsified data and made false representations. That is a scam. Buying a machine that turns out to not do what you need it to do is not a scam.
I would prefer if Silicon Valley went back to creating new technology instead of forcing themselves into established markets where their main advantage is that they can burn a lot of money and underprice ("disrupt") the competition.
It's very important to make fun of people who are trying to make something work and making mistakes. It's a lot easier and more comfortable than trying to do something myself. My intellectual curiousity is truly satisfied.
In the past stock market existed to provide capital for business. Now the stock market is the business for many startups they are not listing to get capital rather to make profit for it's stake holders.
