I appreciate the honesty of this article but I just don’t quite understand why you’d need to burn $300K to learn these lessons: Small receipts, keeping drinks warm, staffing issues and daily order seasonality.
At the risk of being naive, couldn’t you work out the margins of this business on a napkin, or by asking a few local coffee shops? Or by running a subscription pilot with an existing shop? It just feels like this endeavor was tech first and business second. Shiny apps don’t solve any of the above problems.
There are some parallels between your critique of this startup and what educators critique about ed tech startups. Mainly that the tech comes first and the context that tech is supposed to be nested in is unacknowledged, leading to failure or other issues. I’ve been starting to wonder if incubators and CS programs need to teach units on founder humility, domain context, and social context so we stop wasting so much cash on reinventing wheels.
It's a human problem, not a technologist problem. I've often been asked by a business manager to create a website or other software in support of a new business process that is still in what I'd call the hypothesis testing phase. I encourage them to create content for it, first, and if they take my advice, half the time they realize the process won't have enough throughput to justify it.
Funnily enough, having humility is one of the best ways to remain teachable and perhaps one of the fastest ways to grow and continue to have a growth mindset
I consider 'reinventing wheels' to be a valuable educational experience, I often wonder about how could educational 'enterprises' (universities, and education companies?) leverage this to improve what they do, but then I remember that it doesn't matter what I think, just what I do, and I sure do not work for any such companies.
But it's kind of silly that "we" (as a society) are spending 300k USD to teach some of this "obvious" things to some random group of well connected americans.
then again, the dollar is made up so long as 'the future' pays back these money-creation loans we may as well spend the money this way. the alternative is going back to corporate backed research, instead of this strange contemporary VC-backed research
Reinventing wheels is good, ignoring any kind of domain knowledge/expertise is not.
If you’re running into problems that someone with a year or less experience in the area can point out and you don’t have good reason to do different then that’s incompetence not ingenuity.
Humility is the key trait that many CS grads are lacking. Personally, I attribute it to the explosion of CS popularity since ~2010. Most bio majors are still nerds (and I assume the same is true for education), whereas I think a minority of CS grads these days are motivated by passion and curiosity.
I think broadly their team was just too big for the stage of the company they were at. It probably would have made more sense to have perhaps one engineer, one operations / business person, and a few part time delivery drivers / baristas. Ideally the first two would be founders who don't need a salary in this early stage. With those economics they wouldn't be printing money with ~150 orders a day, but they would be solvent.
This seems to be the classic case of building much more than the stage of the company demands, and then not having the business-side be ready to bring in the revenue that level of commitment demands.
Ideally the last 2 would be the founders and they could invent orders or delivery coffee for free to even avoid the trouble of getting customers. We all know if we build it they will come, so the problem is always going to be operational.
The story of the Crave cookie company is the exact opposite of this one. They had a perfect product in cookies, super high margins, easy to transport and make, not perishable and easy to market through social media. Their tech was abysmal, I recall the founder saying customer orders through the website would get written to a text file that people would open and read. There wasn't a database.
I like the contrast between great tech with no market fit and comically bad tech with great product market fit. I think Crave cookies is worth quite a bit now.
Just asking any mildly serious barista would have got this answer: «I do not want the coffe I prepare be delivered more than a minute after i prepare it, and i do not want it to be bashed around inside a bag!»
You assumed the risk of naivety. $300k is a drop in the bucket for tech investment. That shiny app is representative of a business model that isn't based on retail coffee shop margins napkin math.
Semi-related: my apartment arranged a setup a coffee delivery service.
You ordered the night before, and then between 6-8am a thermos would show up in the lobby labeled with your name. Once done with the thermos, you would leave it at the pickup spot for the next day
We got a month of this for free (!!) and it was great. The thermos was reasonably good at keeping coffee warm, there was actually a good variety of coffee drinks to order, the delivery window was not a big deal (I could wander down at the end of the delivery window and it was always there).
That setup seems to lower the logistical challenges- you know all orders ahead of time, can brew in bulk, can deliver in extreme bulk. I'm not sure how/if they tracked thermos returns though.
But even that failed, the prices were quite steep (~200/month). After the free trial, I stopped using it, and I just checked and it seems like they are out of business. It seems like a difficult, low margin business to be in, in general
I don't even know where to start with this. $200/month to receive a "warm" thermos of coffee every morning just sounds crazy to me.
First, even at an outrageous $5/day, Starbucks or any other coffee chain is significantly cheaper - especially if you are someone who travels or can't be in the same place at the same time every day.
Second, you can get set up with everything you need to brew coffee at pretty much any budget, depending on your needs, level of interest and palette.
Third, this is not the sort of product where you should offer a free month up front. I can't blame anyone for taking a free month offered to them without obligation any more than I can blame them for not wanting to spend $200/month on delivered coffee.
If you have the capital to start this company, you would be far better off taking it to Vegas and putting it all on red.
If someone can spend $200/m on a warm coffee in a thermos then they surely can spend $25 on a drip coffee maker, a set of filters and whatever exotic ground coffee from Starbucks or just any other place, including Walmart.
And then just throw it in the bin when they need to move on.
Hell, they could even get a cloud controlled robot coffee machine and the requisite bean subscription, now with Coffee Authenticator™, and save a few bucks.
Fourth, one of the big reasons I love coffee is spending 15 minutes getting some fresh air, in a different place (not the office) chatting to my colleagues.
From $2 to $5, possibly more if you add a bunch of sweeteners or alternative milks. Even at 1/day every day of the month the expensive Starbucks is substantially cheaper than the above offering.
As a failed solopreneur myself, I appreciate the candor of this article. But I think the author skipped over the two most important reasons he failed!
#1. There was no need for the service. Don't make up things you like or want. Deliver on things that customers are hankering for. He skipped this step.
#2. Don't become a software company! Unless your business is software, stay out of the software business. This person built lovely software for... delivering coffee? That's expensive, not necessary, and puts you in the software development and maintenance business forever.
There's no mention of any prior industry experience by anyone on their team. They seem to be a digital agency with an expensive coffee habit.
They signed an expensive lease for office space before having any paying customers or other market validation of any kind?
They started with their chosen solution (pre-made gourmet coffee delivered in 15 minutes) before demonstrating that this was a problem their customers even had. Office managers and event planners all have a coffee budget, but rarely need anything with such immediacy. Their job is predicting demand and planning ahead so there's always coffee available, but it never has to be ordered at a moment's notice. There's no mention of talking to these potential buyers before investing in sunk costs like real estate, equipment, a bespoke software platform (!), payroll, etc.
They set their prices way too low. By anchoring to the cost of a takeaway coffee from a cafe, instead of to an on-demand delivered hot food/beverage (much more expensive!) they weren't able to cover their much higher overhead. Their insufficient margins lead them to be understaffed and unable to absorb any unplanned absences. Any amount of experience managing employees at this pay scale would have made it obvious that you can't expect military precision and perfectly consistent output.
>Don't become a software company!
They had six software engineers on staff! For a coffee delivery company! The (10+ year old) company that services my office employs zero software engineers. Their website is outsourced to a local web dev.
They seemed to have no financial projections whatsoever showing that this was a sustainable business at any level.
>#2. Don't become a software company! Unless your business is software, stay out of the software business. This person built lovely software for... delivering coffee? That's expensive, not necessary, and puts you in the software development and maintenance business forever.
The shared experience seems to lead to the opposite, making money brewing and delivering coffee doesn't work, but the software can be re-purposed and re-sold (hopefully with some margin), so maybe it was a software company with a side-activity useful for field testing since the beginning.
But, honest question, aren't the resources used (and connected costs) too much?
6 or 7 programmers/engineers (including the post author) for three months (a part of them 24/7) to build the app and site?
Maybe it is ready to scale and what not, but it sounds (to me) like a pretty simple kind of software.
In general, it takes about 3 months to make a decent mobile app. That assumes you have a graphics person, a decent backend person, and a decent mobile developer. And a design.
You can probably skip the backend person and just use firebase or app sync.
If you're doing order processing you need that backend/integration person.
The less platform integration you do the faster it'll go. If you use react native or flutter you can get that down to maybe 2 months for the three big platforms (web/iOS/android).
Their app is really nice, and they had an app on the barista side, so more people and more time.
They also had an admin dashboard = more time.
Three months is actually pretty good for everything they built. That means they had a designer on-staff, pretty good developers, and a product manager who could communicate. And it's true, their end-to-end system might actually be worth something.
Yep. The most amusing one is "Unfortunately, we didn’t figure out how to deal with slowdowns".
Come on, you would see it if you just get to any other coffee point and sit for a day looking at how it works. Like, you know, the old, pre-Google way.
Or use that Google to find out the challenges in running a coffee point. It's not like they were the first one ever doing that.
I remember reading the Starbucks book by Howard Shultz many years ago. In it, he talks about how Starbucks grew by offering a "superior experience". That is pretty instructive here. Coffee is, by itself, not a luxury item. Not even the best coffee in the world. It's just liquid in a cup.
If you want to sell premium coffee, you have to create a premium experience. If you're doing it online, you need a website/app that feels premium - whatever that means!
I had an idea for a coffee business. it was a drive up coffee vending machine with good but not over the top coffee. kind of like a drive up ATM. I was thinking like at the edge of a lowes or home depot parking lot.
maybe if you were feeling ambitious add a krsipy cream knock off donut.
like the redbox of coffee except won't get disrupted by digital anytime soon
put the cost you would spend on labor into the product.
if you made a deal with one of those companies you could have a 1000 locations out in no time.
> a drive up coffee vending machine with good but not over the top coffee.
Nice idea. I have seen a novel (to me at least) system when visiting Boston, a city of traffic jams:
People wearing a metal contraption on their backs that makes them look like ghostbusters. In one hand is a hose from which they can fill your cup; on the other side is a tube of paper cups if you don’t have one. They just walk through the traffic jam (I saw this at the end of the tunnel leading to East Boston) and driver would wind down their windows.
On one hand your scheme has much less labor, but this approach can serve many more, and captive, customers at a high density time of day.
I hate starbucks and most coffee places, it's so expensive, usually tastes bad, and making coffee at home is quick and painless.
But I would definitely buy coffee from a vendor like this. What other captive markets could you sell coffee to ? Where do people wait in line a lot ... Texas DPS would be a gold mine.
> What other captive markets could you sell coffee to ?
Train stations and airports. Onboard trains. Amusement parks. Maybe not a lineup, but anywhere people gather, such as city parks and tourist attractions.
The first time I saw this setup was actually in the 80s. I was skiing and one of the hot chocolate companies was sampling a new product. There was a guy, on skis, at the entrance to the lift line handing out samples using one of these thermos backpacks. It was styrofoam cups in the cup dispenser back then of course too.
Either way, there is something really compelling about having a hot beverage brought to you right when you need something. I can see the appeal of having this service in a traffic jam, now only if they could figure out something similar for bathrooms.
> They just walk through the traffic jam (I saw this at the end of the tunnel leading to East Boston) and driver would wind down their windows.
Either someone would get hit by a car and the resulting lawsuit would end it, or the city/police would end it. While "it is done" as far as traffic vendors, it isn't done for very long for the forementioned reasons.
This sounds exactly like the kind of idea mentioned in the article. It's extremely obvious and sounds really good, so the conclusion that should be drawn is "there is some confounding factor that would only be obvious to domain experts", but because interests rates have been kept low by our wack government instead of telling people to do more research I bet you could actually get several thousand dollars of VC money to burn before figuring out what the issues in the space are.
I think this could work, but the problem is that your industrial-size Keurig/Nespresso machine is competing against the Starbucks/Dunkin/McCafes drive thrus. IMO they're not acquiring customers with price or convenience but variety and customization.
There might be a bit of a convenience angle since these other competitors are often extremely busy, which can reduce their convenience. If you had one machine where 3 sides could be used simultaneously by different customers, that would improve throughput. You could also have a dedicated side for just plain old coffee (no steamed milk drinks).
Because labor costs would be far lower than these competitors, prices could be very competitive and you could offer monthly passes and other loyalty programs.
I would consider office buildings where there is no onsite cafe. They would be relatively secure there and you could make them look really high end, for example having visible copper components like those high end Starbucks percolators that some cafes have. This might be important in selling the "quality" benefit over what people can get for free (or cheaper) in their office kitchen upstairs.
My point is that people don't go to these places because they're convenient - if you're trying to compete on convenience then you're going against the Keurig on someone's countertop.
My guess is the market of people who want better coffee than a kcup/nespresso pod, are willing to drive to get it, and don't want to wait in line is quite small with low margins.
I'm not able to read the article. The website must be getting overloaded with HN traffic.
But it seems like a simple purchase of a big bag of coffee would trounce any delivery service. All the extra human labor costs are removed. No logistics issues. No timing issues on the delivery.
Yes you need to brew yourself, but that's pretty much a solved problem. You can make a high quality cup of coffee with a small upfront cost in equipment. The few minutes of time spent grinding/brewing might be less than the time spent looking for the delivery to arrive.
So, what I'm trying to say is.... yeah it sounds like a tough business to break into. You'd need to be Walmart-huge to make slim margins worth it.
Before opening the article I already knew what is in there, and I proved to be correct. We have already seen all of it in Luckin coffee in China.
So many tech startups think they are going to "disrupt the industry", never actually try to understand why the market is what it is today, why there are no major disruptors and if any such efforts succeeded, but instead go ahead with whatever plan they have. It turns out, unsurprisingly, that there isn't a big enough market or margin to make the business sustainable or survive, and the entire idea is a solution looking for a problem.
A classic tale of building it before even knowing they would come…
This makes me appreciate services like Cometeer.com - high quality coffee delivered frozen for a little over $2/cup. I’m not affiliated, just a very happy customer. They address the two most important pain points for me in regards to coffee drinking: time and quality.
I’m too lazy to make my own (high quality) coffee. And I don’t have the patience, or frankly the counter space, for a grinder/roasting machine. Enter a service like Cometeer, one that immediately addressed my issues, and now I can’t fathom sustaining my addiction any other way.
Interesting. How good is the coffee? I was about to come at you for being too lazy to fill up a coffee pot with some water and grounds and hit "Brew" but then I read again and you're talking about _good_ coffee. Yeah, that takes effort. Need a scale, fancy setup, etc.
I've had coffee concentrate before and it's been mixed results for me. What makes Cometeer great?
Cometeer is much, much better than any home brewed coffee I've ever made (I've used drip machines, pour overs, french presses, fancy grinders, hand crank grinders, etc.). Will it beat a cup of coffee from a local fancy brewer? Probably not. But I can confidently say that their variety ranges from decent to really freaking good (e.g. Onyx Southern Weather, George Howell Alchemy, to name a couple of favorites).
If I remember correctly, they brew and freeze the coffee quickly with liquid nitrogen to keep everything incredibly fresh. I believe James Hoffman took a tour of their facility and has a good video on what makes them different. I was a subscriber for a bit, but it personally is bit more expensive if you do have the equipment and the time.
The overlap between people who need speciality coffee, don’t want to take a coffee shop break from work, and can pay for overpriced coffee delivery seems obviously low. In the home market, you’d probably see a parallel phenomenon where people that love coffee also likely enjoy the ritual of home brewing.
> In the home market, you’d probably see a parallel phenomenon where people that love coffee also likely enjoy the ritual of home brewing.
I don’t know. I love my morning espresso but it’s really fussy to make.
The issue is that I can’t get the same quality reasonably close by and speciality coffee shops charge extortionate prices anyway. So I’m stuck dealing with my scale and adjusting my grinder.
Why not deliver freshly roasted beans after it has aired for 2 days, but before 2 weeks pass. With Specialty beans then you can allow the office to brew their own coffee on the spot.
My wife is a serious coffee drinker so I got her a nice grinder, espresso machine, and Blue Bottle Coffee subscription in 2021. We canceled the subscription after a few months because it was hard to tune the deliveries just right. We either ended up with too many beans still on-hand when the next delivery arrived (and you don't want them to just sit there, because the whole point is freshness) or we'd run out a day or two before the next delivery, especially when the delivery arrived a day or two later than promised. It was easier to just pick up another bag of beans at a local store on the day when we needed them. My wife also said the beans at the local store were better, fresher, etc.
If you already have a nice grinder and espresso machine, may I introduce you to the wonderful world of diy coffee roasting?! Sweet Maria's[sweetmarias.com] sells green coffee beans and nice roasters. I use a Fresh Roast SR800, which roasts 1/2 lb at a time. During the pandemic I purchased a 50lb bag of green coffee beans for $225 and never had to worry about running out of coffee for the rest of the year.
The honest answer is, DIY coffee roasting isn't really going to be as good as a good professional roaster unless you get into frankly unreasonable cost equipment.
I've owned various home roasting equipment, and until I bought an Aillio Bullet (which, is a $3500 roaster nowadays) matching good professional roasters was not possible. You could get close, but consistency and quality was not quite there.
Also, home roasting is basically impossible in an apartment setting. The smoke is not great, and unless you have a balcony/porch it's going to be an issue.
Does it bother you to consume the exact same bean every day? My favorite part of coffee is contrasting one origin/process/roast to another, so I often have multiple bags from various sources going in parallel.
I can comment since I roast significant amounts of coffee as a hobby.
Long story short: no, at least not for me. You can play around with roast level and get a variety of different flavors, depending on the bean. And at least for me, I keep a few large batches on hand (2-3 bags that are 65 lbs each). That's enough variety to keep me sated.
Also, for most folks, if you have a brand new bean, you need a few roasts (or maybe, many roasts) to actually dial in a good roast profile. If you only buy a few pounds, you will run out of coffee before you roast it well enough to fully enjoy it. Then you start over again with a new bean.
I thought it would, but I actually like knowing my beans, and that takes some dialing in. I used to only purchase small batches because I wanted to try a variety. I found that I never knew if something was bad or good due to my technique or the beans themselves. It was also rare to find what I really wanted.
Alternatively I found a local roastery that would deliver by mail. It appears that they primarily sell to local coffee shops. I found it the cheapest way to get specialty coffee. It gets roasted day of, and arrives in a day or two, so I just order when we have a couple days of coffee left. https://fortunacoffee.com/collections
I can’t read the article because a 500 error but my local coffee roaster is world class, Handlebar if you’re in the Santa Barbara area, and they don’t use freshly roasted beans. They age them at least two weeks before using them. Now I always buy two bags and have one aging on hand.
And the postal service should work ok for that too. I find I buy most coffee online these days, just about every roastery will post cheaply, and they seem to ensure the beans are fresh.
There are also services that will ship the same (or different based on you preferences) coffee beans to you every week or two.
It doesn't matter how better the equipment and barristas are compared with what the office has, coffee and frothed milk don't travel well in cardboard cup shipped on a bike.
Yeah I always buy a couple of bags of beans to bring the total above the $40-50 threshold they have for free shipping. Then I vacuum seal all but one bag and chuck them in the freezer. Frozen, vacuum-sealed coffee keeps fresh really nicely. I get lots of crema out of it even after a month or two in the freezer.
Great article, I and many other founders I know have had a version of this idea (fast, high quality coffee, delivered) and no one I know has made it work.
Since you lived this journey I'm curious about your pricing: I always imagined that I'd be willing to pay a pretty huge premium for this kind of a service if it felt "luxury" enough. Kind of like how Uber started off at the high end with $18 minimums before it had to battle on the low end.
It looks like you were charging 10% over the nearest shop price, but if the experience was high quality enough could you have charged closer to $7-$10?
It costs $14 to get a single cup of Starbucks coffee delivered to my office on Uber Eats. It's $17 if I want it in closer to 15 minutes. How did they think they could do it for so much less?
I would love if they had said where the money went (they said they made _3_ apps, but what amount of money was it) to see maybe where they could've tweaked expenditures.
I would also love to see where the money came from in the first place. They said $300k was allocated to this and it wasn't "their main business". What was that money allocated for originally and from who? Would love to hear the financiers opinion of the whole thing
I would never have thought about ordering coffee until i lived in an airbnb for 6 months, now im surprised how well it works, in the whole time i got only one half-spilled coffee and maybe 2 times it was a bit cold. What i don't understand is why did they stop doing the only thing that would have been necessary to fill the need? No app, no website, no drivers, the only thing necessary would have been to run a ghost cafe, have the partnerships with baristas/cafes, provide the insulation inlays/transport cups and use bolt or similar existing apps. There seems no way to compete with a general purpose company that owns a huge fleet of drivers, scooters, cars, can balance profit margins form smaller and bigger orders etc. It seems the primary goal was not to solve the problem but to build a startup and a fancy apps?
I'm somewhat confused by the whole premise. You ran a small scale test to see if your business idea would work, it didn't, and then you decided to pump $300k into it. While it's always interesting to read about how people build things, didn't you consider figuring out a business model that works first?
I'm not even sure the problem exists. Most people don't care when their coffee was roasted. For me, I'm fine to get what's in the pre-brewed carafe, especially in an office, where it's free. (There is an automatic/on-demand machine as well but I never bother with it.)
You’re very clearly not the target market for this. There are most definitely people who obsess over good coffee and would never drink, for example, Dunkin Donuts cigarette butt tea. That said, that’s still not evidence for or against product-market fit. That’s what revenue is for.
You are correct, but if very few people care and the target market is very small, it means there is no business or is a very small/niche/difficult business, which goes back to the original point. It is no surprise that such investments are likely going to be a failure.
Your comment doesn't really contradict the parent comment in any way. They said most people don't care and I'd wager that's true. That doesn't mean there aren't people who care, only that they're a small minority.
There are always people who obsess over coffee, but IMO, workplace delivery absolutely does not fit. My father is one of those, (5 expresso machines, 3 grinders), but he does it for the experience/hobby and not the convenience.
Here in Portland you kinda have to put a roasted on date if you want your coffee to sell… that is, if people don’t buy directly from the roaster. If you want some amazing coffee, check out Nossa Familia. They are vertically integrated (own their own farms in Brazil for the last century). They ship anywhere and have great sales online. A lot of the time we’ll just buy the coffee online for convenience, and they’ll always ship it with a roasted on date just a week out or less (not supposed to make coffee directly after roasting). Give it a try! I’m not sponsored in any way, just absolutely love their coffee. https://nossacoffee.com
Interesting. The trend is to avoid spending gas while buying within budget. I've never used delivery apps but if a company has its own app, I'd buy from them since product costs are almost closer to what they have in store (prob. shipping and handling but that's it).
Not sure if this is what the author is going for, but -ika appears to be a czech suffix indicating a study or branch of science. Which makes this kind of a cool name, in my opinion.
Yep, but it is the same in Italian as -ica or in English as -ics (matematica, fisica, balistica = mathematics, physics, ballistics, etc.).
Talking of coffee, using the Italian c instead of the k might have been more appropriate, while making the word seem less similar to swastika to the English/American user.
At the risk of being naive, couldn’t you work out the margins of this business on a napkin, or by asking a few local coffee shops? Or by running a subscription pilot with an existing shop? It just feels like this endeavor was tech first and business second. Shiny apps don’t solve any of the above problems.