
Why $53M Wasn't Enough to Scale Good Eggs - dhgisme
http://www.foodtechconnect.com/foodtechconnect/2015/08/10/why-53m-wasnt-enough-to-scale-good-eggs/
======
ucaetano
"Scaling Food Distribution Is Really, Really Hard"

No, it isn't. It is fairly straightforward and thousands of companies have
scaled across the world.

Scaling a two-sided network focusing on providing a niche seasonal product to
a niche audience is really, really hard. It wasn't the food distribution that
wasn't scalable, it was the business model.

"We were motivated by enthusiasm for our mission and eagerness to bring Good
Eggs to more people. But the best of intentions were not enough to overcome
the complexity."

No, you were motivated by aggressive expansion targets to provide returns for
the dozens of millions of dollars you took as investment and to make a lot of
money.

~~~
davidu
As blunt as this is, it's right.

C&S Grocer does $22 Billion per year in revenue, and is profitable, doing just
food distribution.

[http://www.cswg.com/](http://www.cswg.com/) and
[https://en.wikipedia.org/wiki/C%26S_Wholesale_Grocers](https://en.wikipedia.org/wiki/C%26S_Wholesale_Grocers)

Every one of us in the USA probably ate C&S distributed food today.

------
Animats
_" 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.

~~~
nikanj
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.

------
pfooti
I live in Good Eggs central - san francisco, and I foresee problems that are
still ahead for this startup. Don't get me wrong: I really want Good Eggs to
succeed, but they have quality control issues that need to be addressed and
scale _very_ poorly.

Specifically, I've been a customer of theirs for years, and in the past two
years in particular, I've seen prices go up pretty dramatically and quality in
some cases go down.

It used to be the case that Good Eggs produce and meats were farmers-market
quality at really good prices, delivered. Now it's the case that the produce
feels like farmers-market seconds (the produce I get from them regularly has
only a few more days of freshness left and are decidedly _not_ the fruits or
veggies I would pick if I went to the store on my own), and the meat and fish
prices have gone well beyond the cost of the same meat from other sources (say
a trip to a regular market). Top this all off with persistent packaging and
logistics errors - my last order contained someone else's frozen lunch pies,
didn't contain any of the cheese I ordered, and was delivered an hour before
the actual delivery window I requested (and contained fish, so if I hadn't
already been home, this would have been a problem).

Good Eggs is really good at fixing these problems - I email their customer
service and they credit me for stuff I don't have and throw in a $5 off coupon
for next time or whatever. If inconsistent quality or mispacks were rare,
this'd be perfect. The problem is, it is not rare at all. I have definitely
fallen off in my use of their service - if I'm paying the same price, I might
as well just go to Andronico's, Whole Foods, or the Ferry Building (or Gus's
or Rainbow, or Berkeley Bowl ... there's a lot of great grocery stores in the
SF region) so I can pick out what I want, and sometimes (especially at
Berkeley Bowl) get a way better price.

They need a better process for vetting the product they get from distributors
(and possibly a better contract when it comes to rejecting low-quality stuff)
and a better process for getting people's stuff into their bags. That's not
scaling, that's core competency. It may be the case that this _doesn 't_
scale, can they deliver food that's sufficiently high quality that I could
say, 'If I went to the store, I'd have chosen that tomato' at a price that's
competitive with the store? That's a difficult problem to solve and requires
well-established relationships with vendors.

------
sliverstorm
_It takes a lot more than good code, talented engineers and passionate
customers to scale food tech startups that deal with getting perishable food
from local farms to people’s doorsteps._

It feels like some kind of tech-myopia that anyone should think code was the
key to a successful food company. The old "when you're holding a hammer..."

~~~
woah
If they had used Haskell I think things would have gone differently.

~~~
jeremiep
Yeah, they could've hit Monad Transformer Hell, or they could've wasted all
their time learning how to write practical applications in Haskell and end up
bankrupt in a very lovely ivory tower.

I've heard this argument over and over again and it never is good advice. It
ignores the context completely as well as whether the developers know Haskell
or not.

You can screw things up in any language, especially if a large part of your
business model involves stuff not related to code, like shipping perishable
food.

~~~
sliverstorm
(I think your parent was being satirical)

------
danso
Just two months ago, they announced expansion of delivery to Manhattan's
downtown area: [http://blog.goodeggs.com/post/120709577938/good-eggs-is-
comi...](http://blog.goodeggs.com/post/120709577938/good-eggs-is-coming-to-
manhattan)

I'm guessing the logistical and financial troubles described in the OP were
pretty clear 2 months ago...was expanding service to Manhattan a Hail Mary to
attract additional investment?

~~~
jforman
When it's clear at the top that core strategy needs to change (as in this
case), this usually doesn't impact the company in bits and pieces — it all
comes at once. That's because making a major change at a large company
requires coherent planning, and you don't get coherent planning by _only_
saying "we need to reduce opex across the board, we're running out of money".
You get it by making a new top-down plan with entirely new goals and a new
P&L.

As a result, 140 people got laid off all at once, rather than in waves. Had it
been done in waves there would have been mass confusion, low morale, and an
inability to buy into the new plan because there wouldn't have _been_ a new
plan yet.

And for the same exact reason plans to roll out to Manhattan, which were
surely started many months ago and enshrined in yearly and quarterly goals,
were axed abruptly.

It's possible it was a cynical ploy for fundraising, but I really doubt that.
It's very hard to pull off momentum games at GoodEgg's size — investment
scrutiny is much higher, and decisions are based more on spreadsheets. Not
that hype doesn't factor into it, but it's not going to float you if your core
economics are busted.

------
subpixel
Part of their operation was driving a truck up to Fishkill, NY and filling it
with goods from Hudson Valley producers, many of who are too small to be
commercially distributed already. I bet someone could keep doing that and make
good money. But probably not enough money to make VC's happy.

------
saosebastiao
Facepalms all around. Supply chains are hard, and the idea that you can just
write software to "solve" them is a level of hubris that defies description.
Supply chains aren't a problem you can solve with big data. They aren't a
problem that be solved with machine learning. In fact, you could combine the
worlds top researchers in Computer Science, Economics, Operations Research,
Mathematics, and Statistics, put them in a room together for a decade, and
still not "solve" even 1% of the problems that Supply Chains face. I know the
ITA presentation on Air Travel Planning Complexity[1] has been circulated here
many times, but it always blows peoples minds how complex that problem space
is, and that type of problem is miniscule in comparison to end to end supply
chain optimization. I work in a problem space that is the combination of 9
different NP-Complete/Hard problem spaces (I've counted) on a regular
basis...we are barely scraping by with millions of lines of code and entire
data centers of our servers running at peak utilization 24/7, and that is with
state of the art heuristics solvers and hundreds of PhD-level researchers, and
that is only a subset of the Supply Chain problems that my company faces. To
say that Good Eggs bit off more than they can chew is a MASSIVE
understatement.

Supply Chain Management is a field that is heuristic-driven because there
isn't a solution. The heuristics that drive modern food distribution are the
result of a real world genetic algorithm that is already thousands of
generations deep...and miniscule incremental improvements have been the
subject of PhD Theses for over a hundred years now. You don't optimize on top
of that by writing a web service. Supply Chain Management _may not be
technologically advanced_ in its usage of enterprise software, but that
doesn't mean that their ideas and processes are stupid. At best, it means
there are some annoying frictions in the industry in the way that they
interact with other industries (and there are actually plenty of viable
startup opportunities to fix this). The presumption of stupidity[2] regarding
the existing state of logistics and supply chain management killed this
company, just like how it killed Webvan, and is going to kill a whole host of
startups in the distribution and delivery space within the next few years. [3]

[1]
[https://static.googleusercontent.com/media/www.itasoftware.c...](https://static.googleusercontent.com/media/www.itasoftware.com/en//pdf/ComplexityofArlineTravelPlanning_Carl_Sep-03.pdf)

[2] [http://www.aaronkharris.com/presumption-of-
stupitidy](http://www.aaronkharris.com/presumption-of-stupitidy)

[3] PS: If you are in VC and have a stake in any startup that is doing last
mile delivery, liquidate now. There isn't a single startup in the space,
whether they are currently valued at $1 or $1B, that can sustainably provide
their existing value proposition that they are promising to their customers.
It _is_ possible to force scale some of them into something sustainable, but
your valuations make me believe your cash flow neutrality projections are off
by more than an order of magnitude.

~~~
forgetsusername
> _The presumption of stupidity[2]_

That's an interesting post.

I notice the presumption of stupidity on Hacker News is very strong in the
fields of auto manufacturing and banking.

~~~
levity
Also see Chesterton's Fence:
[https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence](https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence)

------
exelius
Sometimes "do things that don't scale" is bad advice. It's great advice when
starting out (because you should be focused on building an appealing product
before you worry about scaling it), but you need to be using your scale-up to
test ways of breaking out of doing the "things that don't scale". The idea is
to turn it into a forcing function for the company: if you can't find a better
way to scale, you're done.

Disruptive innovation is about ripping out the assumptions that incumbents
made and operating under a new set of assumptions that may not have been
possible when the incumbents started. But sometimes, the incumbents'
assumptions/constraints are still valid, and new entrants don't have as much
of an advantage (or the new entrants' advantage is easily copied).

~~~
CPLX
I think it's basically a contraction for "do things that don't scale until you
get $50MM or whatever and then stop doing that."

------
pbreit
I think the sweet spot is going to be a Trader Joe's-like online brand. Good
quality, organic options, low prices, curated selection. Instacart, GoodEggs
and others are missing the mark.

------
jordank
A couple more points here:

1\. A lot of people who care about organic and farm-to-table ethos already
live in areas with significant market coverage. Those people will tend to have
existing behaviors — GoodEggs sought to displace these. This can be hard if
existing players do good-enough job.

2\. The paradox of some delivery services is that the people who need them
most are sometimes the most economically unviable customers (because they are
geographically spread out, because they are lacking in funds or both).

------
pbreit
I wonder if the problem has to do with providing a desirable product? It's
already pretty easy to get good food, good organic food and good organic
locally grown food from a variety of vendors. With GoodEggs it seems you're
getting a clunky ordering experience, inability to select produce, an extra
shipping charge, moderate/high prices, etc.

------
asah
Bummer - I was rooting for Good Eggs!

re: software and food. The truth is nuanced:

\- obviously, code won't overcome the challenges of immature, lower-scale
logistics and business operations. Roll up your sleeves like everyone else!

\- no, it's not about "big data" as much as business process software.

\- but yes, code can help in some ways: \- analytics/BI/decision-support:
smarter decisions, fewer meetings. \- running ops: fewer managers, automated
monitoring and project followup. \- use code to help manage your supply chain.

\- but yes, "tech thinking" does help: \- faster, safer process change \-
remote monitoring \- application of classic compsci algorithms vs reinventing
wheels.

cheers! adam

Buyer's Best Friend leading provider of office snacks to silicon valley
[http://bbf.io/snacks](http://bbf.io/snacks)

------
Axsuul
Good luck to them. Hope they figure it out. Churn can really hurt your
business and affect growth tremendously if you don't address it. I'm guessing
that's the case here. It's like taking three steps forward and two step back.
I'd rather take one step forward at a time.

------
Paul_Dessert
$200M Wouldn't be enough. They are trying to solve a problem that doesn't
exist for 95% of the country. Sure, there is a market for this, it's just not
the size they are thinking.

As the article says, "Figure Out Your Model Before Scaling".

------
kra34
The first time around it was called "The New Economy"
[https://en.wikipedia.org/wiki/New_economy](https://en.wikipedia.org/wiki/New_economy)

------
griffinmb
I really liked Good Eggs, and their customer support always seemed great.
Unfortunately, my last order came an item short so they gave me a $5 credit on
my next order. A day or two later, they close down in NY and now I won't be
able to redeem the credit.

Not a big deal, but it was a bit annoying coming from a company I'd always
used specifically for their great customer service.

------
searine
Wait, you're telling me a perishable luxury product is a tough market?

------
pbreit
What is the deal with those ridiculous social share bars that cover up so much
of the page's content??

------
zenbowman
It's a little ironic that goodeggs is considered a food technology firm, when
it has nothing to do with technology, and in fact has a rejectionist approach
to technology in the first place.

Monsanto and Cargill are food technology firms. Advances in food technology
are what allow us to feed 9 billion people with a fixed resource (arable
land). There are serious innovations in food production and distribution that
have saved millions of lives in the last half century (Norman Borlaug and the
Green Revolution).

An online seller of local produce is not "food tech". It is simply using the
web to sell food. Add to that their dislike of synthetic pesticide/fertilizer
and other real advances in food technology (advances that in the developing
world mean a real reduction in deadly diseases that spread through the use of
animal manure [natural fertilizer]), and it makes them just another anti-tech
firm that happens to peddle goods on the Internet.

~~~
akamaka
I'm not sure if you just have a problem with organic food, or if this is just
another reiteration of the tired old "if you're not trying to solve world
hunger..." argument that gets used to criticize business ideas, but none of
your points are really relevant to a company whose goal is to conveniently
supply food to some of the richest cities in the world.

~~~
zenbowman
Organic food is fine. But it is, fundamentally, an anti-technology approach to
growing food. You should be free to eat it if you want.

The point is simply that firms that reject technology should not be described
as "tech" companies simply because they use the Internet in some way.

I'm not suggesting in any way that companies should not exist if they don't
solve planet-scale problems.

~~~
akamaka
I think folks underestimate how much agricultural science and technology there
is that doesn't fall under the very narrow categories of genetic engineering
and chemical pesticides.

Modern society is built on top of the massive productivity improvements in
agriculture that occurred before those were introduced, and there is plenty of
room to innovate without using those methods.

GMO crops are limited[1] in Europe, yet they continue to be a leader in
agricultural innovation.

[1] edited, see dragonwriter's correction

~~~
dragonwriter
> GMO crops are banned in Europe

No, they aren't.

[https://en.wikipedia.org/wiki/Regulation_of_genetically_modi...](https://en.wikipedia.org/wiki/Regulation_of_genetically_modified_organisms_in_the_European_Union)

~~~
technotony
They are 'effectively' banned in Europe though. As you can see from this
infographic[1] approval of a GMO requires a political vote in the European
Commission. This takes place after a very expensive risk assessment, and you
can't get that money back. It's a tough business case to spend a ton of money
on the risk assessment and then be at the whim of politicians who are publicly
against the technology and know they win votes by being against it. My company
makes GMO plants and until the situation changes there's no way we'd
considered trying to get approval.

I conjecture they setup this system because an outright ban, which would be
unscientific, would violate international trade treaties, instead they just
use this process.

[1]
[http://ec.europa.eu/food/plant/docs/decision_making_process....](http://ec.europa.eu/food/plant/docs/decision_making_process.pdf)

~~~
dragonwriter
> They are 'effectively' banned in Europe though.

There quite a number specifically approved, which is inconsistent with an
"effective" ban.

> My company makes GMO plants and until the situation changes there's no way
> we'd considered trying to get approval.

Demonstrably -- that is, from the list of products that are approved -- that's
not true of the major players in the industry (e.g., Monsanto, Bayer, Dow,
Syngenta) and even some smaller players.

Your company not having the resources to compete in a given market doesn't
mean that that market has banned GMOs.

~~~
technotony
Even Monsanto is giving up: [http://www.euronews.com/2013/07/18/monsanto-re-
thinks-its-gm...](http://www.euronews.com/2013/07/18/monsanto-re-thinks-its-
gmo-strategy-in-europe/)

[http://www.gmeducation.org/government-and-
corporations/p2134...](http://www.gmeducation.org/government-and-
corporations/p213451-monsanto-s-gm-retreat-from-europe:-don-t-believe-a-
word.html)

~~~
dragonwriter
Those 2013 articles are outdated, Monsanto had a number of permitted approved
this year. They either never withdrew their pending applications as those
articles stated they intended to, or they got new applications approved in
less than two years start to finish.

[http://europa.eu/rapid/press-
release_IP-15-4843_en.htm](http://europa.eu/rapid/press-
release_IP-15-4843_en.htm)

~~~
technotony
These aren't approvals to grow the crops in the EU, which is the core issue,
they are approvals to import products grown elsewhere.

------
wahsd
When I first heard of this company I thought it was some kind of joke. Turns
out I should really learn how to bamboozle investors into handing me $53M for
shitty ideas that don't make even basic logic sense.

