"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.
The downside of venture capital, entrepreneurs need to remember that investors prefer trying for billions and failing, and consider trying for millions and succeeding a failure.
I've read a few bitter stories about people with ramen-profitable businesses who got a late-stage investment into their bootstrapped company. Basically you spend years slowly kindling a small fire, and the VC comes over a dumps a truckload of lumber on it. Might get the bonfire they're looking for, but they don't really care if they just smother your campfire instead.
There's a reason webvan was tempted into scaling too fast.
For mass market groceries, there are two virtuous cycles a retailer needs to trigger. The first is:
1. Get higher customer density
2. more deliveries per driver shift
3. reduced delivery costs
4. attract more customers with lower delivery prices
5. go to 1
The second is:
1. Get more customers
2. better economies of scale and more negotiating leverage with suppliers
3. reduced grocery costs
4. attract more customers with lower item prices
5. go to 1
Now, the first virtuous cycle only works at the city level - operating in two cities doesn't improve your customer density. But for the second virtuous cycle you need overall market share, not just local market share. To get Wal-Mart market share (~30%) and prices you need Wal-Mart buying power.
Of course, that's no excuse for building loads of warehouses full of tech that can't achieve the performance you need and to 'iterate' costs a few hundred million per warehouse! But it's understandable why the business plan would call for national expansion at some time - and I can also understand why people immersed in the SV community would find it hard to slow down and not break things :)
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"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.
The downside of venture capital, entrepreneurs need to remember that investors prefer trying for billions and failing, and consider trying for millions and succeeding a failure.
I've read a few bitter stories about people with ramen-profitable businesses who got a late-stage investment into their bootstrapped company. Basically you spend years slowly kindling a small fire, and the VC comes over a dumps a truckload of lumber on it. Might get the bonfire they're looking for, but they don't really care if they just smother your campfire instead.
There's a reason webvan was tempted into scaling too fast.
For mass market groceries, there are two virtuous cycles a retailer needs to trigger. The first is:
1. Get higher customer density
2. more deliveries per driver shift
3. reduced delivery costs
4. attract more customers with lower delivery prices
5. go to 1
The second is:
1. Get more customers
2. better economies of scale and more negotiating leverage with suppliers
3. reduced grocery costs
4. attract more customers with lower item prices
5. go to 1
Now, the first virtuous cycle only works at the city level - operating in two cities doesn't improve your customer density. But for the second virtuous cycle you need overall market share, not just local market share. To get Wal-Mart market share (~30%) and prices you need Wal-Mart buying power.
Of course, that's no excuse for building loads of warehouses full of tech that can't achieve the performance you need and to 'iterate' costs a few hundred million per warehouse! But it's understandable why the business plan would call for national expansion at some time - and I can also understand why people immersed in the SV community would find it hard to slow down and not break things :)
Heh ... I immediately thought Kozmo.com myself. History is repeating itself.