
We shut down our startup - hunvreus
https://entrepreneurs.maqtoob.com/my-cofounder-said-i-love-what-were-doing-and-we-shut-down-our-startup-80d5e710c2b2#.fpa1bd25p
======
NaOH
I’ve worked in the food industry for about 20 years now. For the last 3+ years
my business has done nothing but sell to restaurants. I sell them food.
Perishable food with a short shelf life. The most common responses to our
products by people who have eaten them are. “I love them” and “That’s the best
I’ve ever had.”

On average, my customers resell my products for about 2.5 times what they pay
me. Depending on the customer, my products requires anywhere from no labor to
20 seconds of labor from restaurant staff.

The business was profitable its first month and has shown year-over-year
growth every year in both product sales and revenue. Everything is done by
myself and one other person (who joined after two years). We’ve spent $40 on
marketing from that time I had business cards printed. We have higher per-
month revenue than Dishero and there’s never been a monthly loss.

As food industry people, we use our understanding of the food environment to
help our customers. We know the awfulness that is restaurant life and we
accommodate our customers’ needs using what we know, what customers tell us,
and what we see that isn’t stated.

Probably my favorite action is when I show up delivering what my customer has
ordered, only to cancel the order because I know the customer does not need
the items. These are not products I can simply sell some other day. When that
happens—and it always does—my customers know our focus is taking care of them,
not making every possible sale.

In short: We have relationships with customers, and relationships are always
give-and-take arrangements. I’ve found that focusing on the giving ensures we
make enough to keep giving.

All those self-congratulatory things said, I have no doubt that our success
thus far can be attributed to customer service. No, that’s not saying anything
novel, but—as always—it requires listening, watching, adaptability,
frustration, flexibility, and a host of other behaviors/actions. It’s hard
work and it’s not easy to get out of my own head to get inside someone else’s
head.

The economic and non-economic results have been good. We haven’t lost any
customers. The majority of our customers have found ways to get more products
from us. All new business has come from word of mouth.

But I don’t think there’s anything novel in what we’ve done. I say that
because I believe the success of every business come down to three factors:
cash flow, logistics, and people skills. I don’t know of an instance in any
industry where a great product overcame deficiency in those areas.

I was unfamiliar with Dishero prior to this piece. From what was shared, it’s
hard to see if they did well with logistics or people skills (the author says
they missed on cash flow). The author noted they had trouble overcoming the
logistics of interacting with restaurant staff. If so, it’s difficult then to
build relationships, so there goes people skills.

It certainly sounds, though, like the people behind Dishero had some good
product-making skills. And I have nothing but respect for the decision to cut
their losses. I can’t imagine the difficulty of that choice, and the
accompanying pain, despite the apparent wisdom of that decision. My best to
those people in their next pursuits.

~~~
ams6110
You are describing a traditional, organically grown local business. And
absoulutely nothing wrong with that, but quite different from the Dishero
situation of needing to find a viable path to an exit or at least the next
round.

~~~
jacquesm
I don't think it is possible to scale a business before you've validated the
concept on a smaller scale. Validation _really_ should come first and that
includes the business model.

------
cwilkes
They went from a company trying to sell to restaurants to one that will sell
to developers?

Developers are some of the cheapest people I know. Many refuse to even pay for
tools that save them a lot of hours per month (i.e. PyCharm). They don't know
how to value their own time.

So unless they start targeting the C level management this product is probably
doomed.

~~~
the_watcher
Developers are cheap in that they won't pay for something themselves if they
have a remotely functional workaround. Development teams, however, are much
less frugal about spending their employer's money to save them time and pain,
and it's pretty easy to get management to sign off on purchasing something
that will save their developers time, pain, or just plain make them happier.

~~~
JetSpiegel
> and it's pretty easy to get management to sign off on purchasing something

Whooa, where is this mythical land of milk and honey, and can I but tickets to
get there?

~~~
rhizome
Do you work someplace that won't pay for Photoshop or even SublimeText (et
al)?

~~~
hudell
I worked in companies that would try to avoid paying for those and companies
that would never pay for those no matter what.

~~~
the_watcher
I've worked for companies that would never pay for those, companies that would
pay for pretty much anything if we made a case that it would help us, and my
current employer, who will pay for things that we can prove delivers value,
but don't default to saying "yes, we'll pay for," and who also audit every
subscription they're paying for quarterly.

------
jacquesm
I'm missing the bit where there was a word of appreciation for the paying
customers and I suspect that they didn't rate a mention is a factor in why
this company was unsuccessful.

~~~
rpgmaker
He also kind of shittalked his cofounder. Implicit in the setup of the piece
is the fact that his cofounder was essentially clueless about everything.

 _" I asked my close friend of 20 years how he was doing. Dmitry answered,
“Awesome! I love what we’re doing these days!” ... It was obvious that my most
sarcastic friend genuinely meant every word. Little did we know then, that
Dishero, the company we had co-founded a year and a half ago, would be shut
down within the next 72 hours as a direct result of his answer."_

------
pbreit
If they don't want to work on a restaurant service, that's fine. But I'm not
sure their learnings are spot-on. Looks to me like the raised a lot of money
which wouldn't be a problem unless they started over-spending (which they did;
17 people & 3 countries???).

For an offering like that, get out of SF and find a "small" city like Des
Moines or Tallahassee that has 1,000 restaurants but not a million Silicon
Valley sales bros calling them every 5 minutes. Prove the business with a lean
team before opening up the purse strings.

~~~
jacquesm
> sales bros

Can we please get rid of the word 'bros'? It's quite annoying.

~~~
beerbajay
Do you have a better term for young, white, arrogant, entitled young men?

~~~
MikeNomad
Yes, but it would violate HN policy/use guidelines...

------
seibelj
There are many options for mobile app debugging / analytics already, I feel
like these founders just want to start something... anything... Maybe it's
time to take some time off and reflect? I've never started a company so I
don't know these things, but it seems like a desperate move to me.

~~~
melvinmt
> I feel like these founders just want to start something... anything...

Wantrepreneurship... I've been there too. Taking some time off is definitely
the best cure but $1.8M in the bank is very tempting to keep diving into
anything as long as you can keep deluding yourself you're working on the next
big thing.

~~~
ams6110
I don't understand why the investors would not take the $1.8M back once the
idea they invested in was shut down.

~~~
brianwawok
I guess they value the founder more than the money? Their lottery ticket
already failed, this is a pure free bonus round.

------
the_rosentotter
> selling to restaurants is a dead end.

I can expand on that: Selling to small-to-medium-enterprises is a dead end.
They are entirely focused on the near-term, and usually their finances are
hand-to-mouth each month. Unless you can demonstrate that they will be making
real, actual money with your product from day one, without any extra effort,
save yourself the bother.

~~~
shostack
Can you expand on your experiences, and why you think they are a trend?

------
cityzen
"the goal to replace the paper menus and give restaurants full control over
their online presence."

"Our business was seemingly working and from 30K feet — it looked great:"

"We had had happy customers and revenue almost from day one. Our revenue grew
continuously for 11 months in a row."

"Despite of all of the above, Dishero was still in a mediocre category: we
were burning $100K/m and making $9K/m in revenue. The revenue continued to
grow, but the growth was painfully slow and unpredictable."

We're not in a bubble....

~~~
dohertyjf
Right! I'm sorry, but $9k/mo in revenue with 45 sales people and $100k in
expenses??

Definitely not in a bubble. I run my own bootstrapped company that does $5k/mo
recurring and my expenses are sub $750 a month.

~~~
powera
If you have no employees and don't consider your own salary an expense, you're
not comparable as a business.

------
ageofwant
The core take away here is that unless you are one of the top 3 employees in a
start-up, or even moderately successful business, you are trivially
expendable. No matter if you put in hours of overtime, poured your hart and
soul into your job, all of that is null and void on the whim of the owners. Of
course they will have a rational justification why you lost your job. Unless
you control your destiny you will forever be subject to the destiny of others.

Take all of this into consideration when next interviewing and negotiate for
the best possible deal, knowing that no amount of possible "future" prospects
is a solid as hard cash in the bank now, be as predatory and hard nosed as you
can possibly be. You are working for Me(Inc) and its dependants, you are
morally obliged to extract every last drop of value you can from your current
employment relationship, because, as you can see from this example, the
converse is a given.

~~~
ams6110
_No matter if you put in hours of overtime, poured your hart and soul into
your job, all of that is null and void on the whim of the owners._

Well presumably you got paid. I'm not sure what else an employee has a right
to expect beyond that.

------
Rezo
Restaurants have terrible margins (in the 3% range [1]) and high failure rates
themselves. Selling to them as a startup is like playing on ultrahard mode
difficulty, unless you're solving a hair-on-fire level pain point. The total
neglect most restaurants show towards their websites and menus would indicate
it's actually not a very high priority problem.

Startups are already hard just by themselves. If you want to increase your
chances, pick a industry with healthy margins.

[1] [http://smallbusiness.chron.com/average-profit-margin-
restaur...](http://smallbusiness.chron.com/average-profit-margin-
restaurant-13477.html)

------
pedalpete
Interestingly, I found this post to be full of answers and opportunities in
the restaurant space.

-> "replace the paper menus and give restaurants full control over their online presence"

This isn't a task of selling to a restaurant. Restaurants don't make their own
menus, they go to designers. Designers are the customer for new paper menus.
They are currently being threatened by Canva, which is making it easier for
non-designers to get a better product.

->"[restaurant owner] doesn’t have a spreadsheet estimating how many people show up on a Tuesday night"

Uh, HUGE opportunity. Machine learning across what is going on in a city and
how that would affect restuarant sales. Network effects (if you're getting
data as well as selling answers) and you get to sell the same product again
and again and again.

I'm maybe not so sure they were looking at the opportunities enough.

------
chlestakoff
It would be really interesting to see long-term stats on success rates of
founders who pivoted vs those who persevered with the original idea.

~~~
konradb
I can't figure out what this would tell you. Would it tell you that initial
ideas were often better or worse than subsequent ideas? The sensitivity of
teams to how product market fit occurred? I can't figure out how it would be
actionable, due to the wide gamut of ideas and execution.

------
parsnips
>Here’s our big insight / little secret — selling to restaurants is a dead
end.

But fantastic if you can make it work a la Grubhub and Seamless who got $360
million in revenues primarily by selling to restaurants.

The restaurant business is indeed hard, but lucky (or good) sales people have
had tremendous success and profitability tackling it.

~~~
hkmurakami
I think the key difference is that Grubhub and Seamless offer restaurants an
additional revenue stream without the overhead or operational headaches of
doing in themselves.

~~~
parsnips
SinglePlatform did _exactly_ what this business did (centralized menu mgmt),
but was profitable and sold for $100million.

~~~
xivzgrev
"SinglePlatform is your connection to the top search engines, travel and
review sites, online listing directories and mobile apps used by over 200
million people to find local businesses." (from website)

Sounds more like digital facing store front management, way beyond centralized
menu management, which would be a clear value add for local restauraunts.

~~~
robbiemitchell
Isn't that Locu?

------
draw_down
Yeah, don't try to sell to restaurants. I'm not sure if that, or running a
restaurant, is the worse idea.

~~~
danieltillett
Worse to sell to a restaurant since if you have a chance of success if you are
running a restaurant.

There whole SMB market is a death trap for technology companies. It looks so
attractive on the surface; great demand and no competition, but the reason
there is no competition is the cost of acquiring a customer in this market is
greater than the lifetime customer value.

~~~
mahyarm
So how does slack, square and shopify do it with their SMB products?

~~~
vacri
'traps' don't necessarily have a 100% capture rate.

~~~
danieltillett
Exactly. People see the few companies that manage to succeed in this market
and assume it is easier than it really is - the few survivors hide the
thousands of companies that tried and failed.

------
ggggtez
How is spending 100k/m, while only bringing in 9k/m is a "moderate success"?
Their lessons learned is basically "tech startups in the restaurant space is a
stupid idea"!

------
univalent
Shouldn't there be a lower cost way to figure out WTP, CAC, churn rate,
customer purchase journey map, etc. etc. before starting a company and having
a large-ish sales/marketing team?

------
ultim8k
IMHO the wrong thing about most startups (no offence), is that they all want
to change the world. Everyone wants to redefine an existing market as that all
previous guys who tried to do it were idiots or didn't know a thing about what
they were doing. It's not a bad thing to be ambitious but don't think you are
the only special in the universe.

~~~
rpgmaker
I agree. I mean, Dishero was very young. I doubt that in a market as
conservative as the one they were in they'd find the magic bullet in less than
two years.

------
ilyaeck
Very good read, but at the end, there is no universal recipe for either
success or failure.

------
hrkdndkd
What exactly did Dishero do? I don't understand from the article.

------
alexfishman
Thanks for sharing

------
smaili
A lot of what's said is very similar in the education space as well so I can
somewhat understand. Great writeup!

------
mkhait
good read

------
kinai
"We had raised a total of $2.8M (2 rounds)" "we were burning $100K/m and
making $9K/m in revenue"

That is how startups in America work: a) take any idea b) find enough
believers c) throw money at the problem until it either works out or fails.

I mean are those people for real? It's like watching 5y olds playing monopoly

How about: If you need millions investment for your idea then your idea is
just BAD (except you are building Teslas maybe)

~~~
dang
We're going to add the Principle of Charity
([http://philosophy.lander.edu/oriental/charity.html](http://philosophy.lander.edu/oriental/charity.html))
to the HN guidelines as a way of emphasizing how badly comments like this
break them.

If you assume that other people are stupid, nothing is easier than to conclude
that they're stupid as well. This is good for attracting upvotes from others
who feel the same way you do in the first place. But it's deeply bad for
thoughtful discussion.

~~~
tptacek
1\. You've been saying that for a long time. Do it! Is this a trickier task
than I think it is? Can I do it for you?

2\. Consider adding AGF at the same time:

[https://en.wikipedia.org/wiki/Wikipedia:Assume_good_faith](https://en.wikipedia.org/wiki/Wikipedia:Assume_good_faith)

Not all of WP's idioms are valuable, but there aren't many community
management problems they haven't engaged with (and none of the ones they've
missed apply to HN) and this is one of their better results.

Post-Dang HN has been pretty great. Thanks! Level it up again. :)

------
empressplay
> we were burning $100K/m and making $9K/m in revenue

There's all that needed to be said, right there.

~~~
joemi
I like how he specifically called that "mediocre success"...

~~~
antisthenes
Even worse, he contrasted "mediocre success" against "failure", whereas anyone
outside of the tech bubble would have looked at the numbers and rightly called
it a failure outright.

The bubble is not in valuations, the bubble is in people's heads - the naive
delusion that you can disrupt all aspects of human nature by applying enough
technology and holistic ideology.

~~~
onion2k
_The bubble is not in valuations, the bubble is in people 's heads - the naive
delusion that you can disrupt all aspects of human nature by applying enough
technology and holistic ideology._

It may be true that there are aspects of human nature that can't be disrupted
by technology, but the problem is recognising which can and which can't. Often
when something fails you don't actually know because it may succeed under
slightly different circumstances. The failure of a startup is evidence that
there may not be a market for "disrupting human nature" in that domain, but it
definitely isn't proof.

------
throwaway5752
Every time I read one of these (less and less frequently) I find that the core
problem is the management writing the article.

None of the insights they talk about are particularly noteworthy or trade
secrets. They could have been discovered as part of coming up with their
business plan. It's more than fair to assume they'll make the mistake again.

~~~
dang
We detached this subthread from
[https://news.ycombinator.com/item?id=11925924](https://news.ycombinator.com/item?id=11925924)
and downweighted it.

It's not strictly off-topic, but it's a nasty, generic dismissal. Piling onto
other people's mistakes ("They could have been discovered as part of coming up
with their business plan") is a lousy thing to do, and if you're going to do
it here (though please don't), your comment should have at least have some
other redeeming quality. Instead you draw contemptuous conclusions about
someone's character, kicking them when they're down.

This is the sort of comment that, even assuming it's 100% correct, says more
about the commenter than its subject. I'm ashamed to see things like this on
HN and particularly ashamed that they routinely attract upvotes.

~~~
throwaway5752
This was a hurtful response.

I am a single poster/person, not a group of people or a pattern of commenting.

------
thebladerunner
Gotta love hacker news: I think I just lost half my karma points near me for
asking a question, suggesting that maybe, just maybe we shouldn't rush to
judge people so negatively. Haters gonna hate...

~~~
dang
Please don't violate the HN guidelines by going on about downvotes
([https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)).

I agree with you that the comment you replied to was unduly negative. It was
probably unfair to downvote yours, though it wasn't particularly substantive.

We detached this comment from
[https://news.ycombinator.com/item?id=11926020](https://news.ycombinator.com/item?id=11926020)
and marked it off-topic.

------
BuckRogers
Another one of these posts? When will they end.

"We shut down our startup"

Thanks for letting us know.

~~~
mads
I thought it was pretty interesting. Also the related comments here.

