
Pricing Soylent Efficiently - caublestone
http://blog.soylent.com/post/133420708272/pricing-soylent-efficiently
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JacobAldridge
I was expecting more detail on how they found _" the point where our product
would deliver exceptional value relative to competing products"_ \- that's
always a tricky and important conversation, and I'd love a follow-up post on
their process for doing so.

Instead, this was a great explanation on cash flow and the impact of pricing
(and other, more significant, factors) on that cash flow. Which is probably
even more valuable a discussion for growing businesses - it doesn't feel like
it in the early days (when lack of clients will kill you) but in established
companies it's often accelerated growth and unexpected cash flow hits that can
kill a profitable business.

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URSpider94
I have often said, one of the worst things that can happen to a physical goods
start-up is to get a huge order from a single customer. Finding the working
capital to pay for millions of dollars in raw materials can be nigh on
impossible. Banks won't loan you the money without a track record of
delivering similarly sized orders, and raising a round is an incredibly
expensive way to float your receivables.

~~~
dogma1138
That's true for every type of business, the risk that is coming from such
order is too big for any sensible company to take. Many businesses limit order
sizes for this specific reason, and in many cases will have even stricter
limits as well as invoicing terms for new B2B customers. We've seen this quite
recently with GT Adv. Technologies going bankrupt when their deal with Apple
pretty much took their entire pipeline.
[http://www.techtimes.com/articles/17677/20141011/gt-
advanced...](http://www.techtimes.com/articles/17677/20141011/gt-advanced-
technologies-bankruptcy-what-really-happened-to-the-sapphire-glass-maker-and-
why.htm)

~~~
digi_owl
That seems to have been Apple's MO for some years now. I think the Palm/HP
people working on the Pre lamented that whenever they found a part they wanted
to use, Apple had already placed an order for the years production capacity.

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transfire
All that analysis and they still failed to figure out their product is $0.43
too expensive (per bottle).

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frakkingcylons
But in reality, cost-sensitive customers will purchase the powder which is
quite a good value at $1.54 for 400 nutritious calories.

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roel_v
Cost-sensitive customers will make their own...

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bryanbuckley
more to cost than the price tag...

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brianmcconnell
I am kind of surprised they are still in business, having missed the point
that most people actually enjoy actual food and beverages, versus chugging a
flavorless Ensure 2.0 slurry while staring at a monitor.

It's called a lunch break for a reason. Lunch is part of it, but its mostly
about the break.

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mcv
Are you claiming that despite observable reality, they can't possibly be
having the success they have? There's clearly a market for it, even if you're
not part of it.

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blackguardx
Solid advice, but this part was a little cringeworthy:

"At the same time, we also needed sufficient cash flows to fund our aggressive
growth strategy and invest in technologies that will change the world."

I hope that is tongue-in-cheek because world-changing ideas aren't a dime a
dozen.

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easong
If any recent startups can say they're taking a go at changing the world, it's
the guys trying to solve world hunger by engineering healthy food that can be
mass-produced by genetically engineered algae in tanks.

~~~
blackguardx
When I last looked at them in depth, they wanted to create meal replacement
shakes so busy professionals didn't have to waste mental output thinking about
food. Did they pivot?

Edit: I can't reply for some reason, but I applaud them if solving world
hunger is their goal. I think they should have changed their marketing,
though. Their original marketing seemed very niche.

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dikaiosune
Why can't those be the same thing? It doesn't seem unreasonable to me to use
the capital generated by the prices you can charge for a luxury good to fund
the R&D necessary to bring the costs of their method low enough that it could
be a significant and affordable improvement to low-income families' nutrition.

~~~
SyneRyder
It sounds like the Tesla model: first create a luxury car that you can sell to
the very wealthy, and use those funds to increase production & lower costs
through increased volume to produce a family car... then use the increased
demand for batteries to make building a Gigafactory cost effective, so you can
start producing Powerwall house batteries, so you can start taking more houses
off the electricity grid & become 100% solar.

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pbreit
What a weird post. There's no reason whatsoever for a company like Soylent to
get in the cash flow weeds like that. It has plenty of growth capital. With
interest rates so low, "interest-free" loans are comparably less valuable.
They should be spending almost all their energy on R&D and marketing. Not
financial shenanigans.

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nickff
Financial risks are as significant as technical and market risks for physical
goods companies. Take a look at how companies like Amazon are run, and you
will see that pricing, cost, and payment terms are very important.

~~~
pbreit
Amazon is a retailer. Soylent is a manufacturer. It has plenty of capital to
not have to worry about inventory turns. Manufacturers need to worry about
making a good product and getting into customer hands first and foremost.
Financial shenanigans are a distraction for a budding manufacturer.

~~~
nickff
Speaking as someone who has worked at a few electronic hardware OEMs (and been
involved in production), I can tell you that inventory cost and risks are a
significant concern.

~~~
pbreit
How about a one-of-a-kind food that retains its value for a year or more?

