WEBVTT - More Startups that Died in 2023 0:00:04.480 --> 0:00:12.440 Welcome to Tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.440 --> 0:00:15.920 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:15.920 --> 0:00:19.239 I'm an executive producer with iHeart Podcasts and How the 0:00:19.320 --> 0:00:23.040 Tech are You. So we're continuing our episodes about tech 0:00:23.120 --> 0:00:28.440 startups that met their end in twenty twenty three. Last 0:00:28.440 --> 0:00:33.000 episode we covered a cloud services company, a cybersecurity firm, 0:00:33.560 --> 0:00:38.120 an organization that provided telemedicine services to pet owners, as 0:00:38.120 --> 0:00:40.279 well as a music streaming service, all of which had 0:00:40.280 --> 0:00:43.760 to close up shop in twenty twenty four for various reasons. 0:00:43.800 --> 0:00:47.800 Though I should add that cybersecurity firm did later emerge 0:00:47.880 --> 0:00:51.320 out of bankruptcy earlier this year and has a new 0:00:51.440 --> 0:00:54.480 lease on life. So it was only, in the words 0:00:54.480 --> 0:00:59.120 of Miracle Max, mostly dead. But what other startups had 0:00:59.120 --> 0:01:03.080 their end downs in twenty twenty three? See what I 0:01:03.080 --> 0:01:06.440 did their startups and downs? Well, how about a real 0:01:06.560 --> 0:01:10.280 estate company that went on to embrace technology. You can 0:01:10.280 --> 0:01:12.800 think of it as kind of like a cyborg real 0:01:12.920 --> 0:01:15.400 estate company if you will. It didn't start off as 0:01:15.400 --> 0:01:18.800 a tech company, but it would embrace tech as part 0:01:18.880 --> 0:01:22.839 of its DNA. I think of a lot of tech 0:01:22.959 --> 0:01:25.080 companies when you boil it down, or at least a 0:01:25.120 --> 0:01:29.000 lot of tech startups end up not really being that 0:01:29.440 --> 0:01:33.640 much about tech. Tech tends to get tacked on or 0:01:34.040 --> 0:01:38.440 you know, sloppily incorporated into the company identity, but in 0:01:38.480 --> 0:01:42.480 reality you're really just talking about some other business. We Work, 0:01:42.520 --> 0:01:45.240 I think, is the perfect example. Right. We Work is 0:01:45.319 --> 0:01:48.640 treated as a tech company. You find articles about we 0:01:48.760 --> 0:01:52.120 Work in like websites that cover tech news, But we 0:01:52.200 --> 0:01:54.840 Work is really just a real estate company. You know, 0:01:54.880 --> 0:01:59.000 it's a company that ends up purchasing or leasing office 0:01:59.040 --> 0:02:02.800 space and then sub leases it to tenants. That's it. 0:02:03.160 --> 0:02:06.920 The tech thing is kind of superfluous, but we still 0:02:06.920 --> 0:02:09.760 treat it like that because it's part of this startup culture. 0:02:09.800 --> 0:02:13.679 So please forgive me that some of these intrigues are 0:02:14.200 --> 0:02:19.040 tech light, But I think, if anything, they really illustrate 0:02:19.720 --> 0:02:26.040 problems that exist in the venture capital community. And I 0:02:26.040 --> 0:02:31.800 would argue venture capital has caused so many problems by 0:02:32.400 --> 0:02:36.680 elevating ideas that weren't ready like, ideas that just could 0:02:36.760 --> 0:02:39.600 not be viable, and then pushing them to the moon, 0:02:40.120 --> 0:02:45.160 and then ultimately these ideas failed. The example that well, 0:02:45.160 --> 0:02:49.919 besides we Work, the example that leaps to mind is Therhanose, Right, 0:02:50.040 --> 0:02:55.120 Theharrannose was a company that was based on a critically 0:02:55.280 --> 0:02:59.840 flawed premise, one that could not possibly have worked, and 0:03:00.720 --> 0:03:03.480 there was a lot of sunken cost fallacy going on 0:03:03.680 --> 0:03:06.639 around Thearrahnose. I've done an episode or two or three 0:03:06.880 --> 0:03:10.200 about Pharahnose in the past, so we won't go over that. Plus, 0:03:10.320 --> 0:03:13.120 we're focusing on stuff that died in twenty twenty three. 0:03:13.240 --> 0:03:17.239 Therhos's old news. So we are turning to this real 0:03:17.360 --> 0:03:21.240 estate company, and its story is a doozy because this 0:03:21.280 --> 0:03:25.560 particular company had raised hundreds of millions of dollars just 0:03:26.160 --> 0:03:31.400 one year prior to having to liquidate everything. So I'm 0:03:31.440 --> 0:03:38.320 talking about a company called viv v EEV, and Viv 0:03:38.600 --> 0:03:41.280 is a special case for us, partly because the tech 0:03:41.320 --> 0:03:45.000 part of tech startup is debatable, but the other big 0:03:45.040 --> 0:03:48.680 reason is that Viv was a unicorn. That's a startup 0:03:48.720 --> 0:03:52.240 that reaches a valuation of at least one billion with 0:03:52.320 --> 0:03:56.360 a B dollars. So for a company to hit Unicorn 0:03:56.640 --> 0:04:01.640 benchmarks and still fizzle out just one year after achieving 0:04:01.720 --> 0:04:05.840 unicorn status, in fact, that's noteworthy. I mean, that's a 0:04:06.040 --> 0:04:10.119 that's a precipitous fall. So Viv's origins are rooted back 0:04:10.160 --> 0:04:13.640 in two thousand and eight, when a'm A Holler and 0:04:13.880 --> 0:04:18.960 Ami Avrahami founded an asset management and real estate development 0:04:19.040 --> 0:04:23.200 company in Israel. So Holler and Avrahami had met in 0:04:23.240 --> 0:04:26.320 the early two thousands back in Israel. Holler had founded 0:04:26.360 --> 0:04:31.760 a mobile handset company called IXI Mobile and Avrahami had 0:04:31.839 --> 0:04:34.400 served as the product manager for that company, and then 0:04:34.480 --> 0:04:37.560 they continued to go into business with one another, and 0:04:37.880 --> 0:04:40.640 they would co found a different real estate startup called 0:04:40.800 --> 0:04:45.640 Really r Eali that launched in twenty fifteen, so that 0:04:45.720 --> 0:04:48.840 came after VIV, but it would shut down in twenty 0:04:48.920 --> 0:04:52.280 twenty two after interest rates and inflation hit the real 0:04:52.360 --> 0:04:56.720 estate market really hard and it just became an unsustainable business. 0:04:56.960 --> 0:04:58.960 And as it would turn out, Really would be kind 0:04:59.000 --> 0:05:01.680 of a preview of what would happen to VIV. Like 0:05:01.800 --> 0:05:06.000 VIV predated Really and it lasted longer than Really, Like 0:05:06.040 --> 0:05:10.360 it closed after Really did, but like Really, it would 0:05:10.400 --> 0:05:13.159 not be able to stick around. So VIV originally started 0:05:13.160 --> 0:05:15.400 off with a different name. The one that it was 0:05:15.480 --> 0:05:18.000 known for for the first few years of its existence 0:05:18.120 --> 0:05:21.520 was the Dragonfly Group, but it switched to VIV in 0:05:21.680 --> 0:05:26.320 twenty nineteen. By then, VIV was also changing its focus, 0:05:26.440 --> 0:05:29.640 like it had been kind of a more classic real 0:05:29.760 --> 0:05:33.280 estate company, but it would describe itself as quote a 0:05:33.440 --> 0:05:38.760 vertically integrated developer focused on building innovation end quote. And man, 0:05:38.880 --> 0:05:42.799 you gotta love buzzwords that don't actually tell you anything. 0:05:43.000 --> 0:05:45.680 You know, you got to keep it vague, y'all. Anyway, 0:05:46.080 --> 0:05:51.280 VIV was emphasizing homes made out of prefabricated elements. So 0:05:51.520 --> 0:05:55.159 think of like modular homes made up of various cubes, 0:05:55.560 --> 0:05:59.919 or a homemade of prefabricated walls that essentially click into place. 0:06:00.120 --> 0:06:04.120 That kind of thing. It's meant to drastically reduce the 0:06:04.279 --> 0:06:07.719 time and money it takes to construct a building. But 0:06:08.040 --> 0:06:10.960 a lot of stuff hit around the same time, and 0:06:11.000 --> 0:06:13.240 I'm sure it made it very challenging to maintain a 0:06:13.360 --> 0:06:17.520 home building business posing as some sort of tech company. 0:06:17.800 --> 0:06:20.719 I guess the prefabricated part was largely seen as the 0:06:20.760 --> 0:06:25.359 tech element, but the pandemic and inflation and interest rates, 0:06:25.360 --> 0:06:29.000 all of these things contributed to runaway real estate costs. 0:06:29.120 --> 0:06:32.040 While potential home buyers were holding back because I mean, 0:06:32.040 --> 0:06:34.440 who could afford to buy a house in that market 0:06:34.839 --> 0:06:38.640 In March twenty twenty two, Viv secured a four hundred 0:06:38.839 --> 0:06:42.680 million dollars in funding. That is when VIV officially hit 0:06:42.800 --> 0:06:47.200 Unicorn status in its valuation. But by November of twenty 0:06:47.320 --> 0:06:50.080 twenty two, just a few months later, the company had 0:06:50.120 --> 0:06:53.520 had to downsize by around thirty percent, which meant they 0:06:53.640 --> 0:06:57.560 laid off about one hundred employees. The following year, VIV 0:06:57.600 --> 0:07:00.400 would be forced to go into liquidation after the company 0:07:00.440 --> 0:07:03.760 could no longer deliver upon financial obligations they had to 0:07:03.800 --> 0:07:07.880 their various partners and their employees, meaning they couldn't afford 0:07:07.920 --> 0:07:11.920 to pay anyone. All US based employees were let go. 0:07:12.040 --> 0:07:15.600 At that point, VIV ownership transferred to the real estate 0:07:15.680 --> 0:07:19.280 company Lenard. That's a that's an enormous real estate company, 0:07:19.680 --> 0:07:25.520 and according to an Israeli tech journal, the transaction was 0:07:25.640 --> 0:07:29.840 for quote several dozen million dollars end quote now several 0:07:29.920 --> 0:07:32.760 dozen million dollars. That's a big junk of change. I 0:07:32.760 --> 0:07:37.840 wouldn't mind finding several dozen million dollars in my couch. 0:07:38.000 --> 0:07:40.240 That would be awesome. But we also have to remember 0:07:40.320 --> 0:07:44.520 that just a year earlier, VIV had hit a billion 0:07:44.680 --> 0:07:48.160 dollar valuation, so being sold for a few dozen million 0:07:48.200 --> 0:07:52.400 dollars was a heck of a markdown. Avrahami was let go, 0:07:52.640 --> 0:07:56.320 as was another co founder named Dafna Akiva, who had 0:07:56.360 --> 0:07:59.280 served as the chief revenue officer for the company. And 0:07:59.600 --> 0:08:03.239 hitting a billion dollars of value only to go bust 0:08:03.240 --> 0:08:08.040 a year later is really rough. Like it's hard to 0:08:08.080 --> 0:08:12.240 put into perspective how something like that happens. Now. Obviously 0:08:12.480 --> 0:08:18.000 we're talking about an incredibly expensive business. Anything that's involved 0:08:18.080 --> 0:08:22.600 with home construction. We all know that those costs went 0:08:22.680 --> 0:08:26.280 up around the pandemic era. I mean, there were supply 0:08:26.440 --> 0:08:30.320 chain issues. Raw material costs were through the roof, Like 0:08:30.360 --> 0:08:33.640 if you wanted to build a house around twenty twenty 0:08:33.679 --> 0:08:37.839 to like twenty twenty two, it was suddenly way more expensive. 0:08:37.880 --> 0:08:40.360 Then you also had things like labor shortages, which made 0:08:40.400 --> 0:08:44.520 it even more complicated. You had shortages in skilled labor, 0:08:44.880 --> 0:08:48.760 so if you needed someone like a skilled electrician or plumber, 0:08:49.040 --> 0:08:51.200 that was really hard to come by. There were just 0:08:51.640 --> 0:08:54.600 not that many out there that you could get access to. 0:08:55.240 --> 0:08:58.000 So there were a lot of factors that all happened 0:08:58.000 --> 0:09:00.880 at the same time, and it's possible that VIV would 0:09:00.920 --> 0:09:03.200 have stuck around had it been just a little bit 0:09:03.240 --> 0:09:07.600 more established. I don't necessarily know that it was mismanaged 0:09:07.679 --> 0:09:11.360 or anything, but there were a lot of external factors 0:09:11.400 --> 0:09:15.440 that were stacked against it. But you know, hitting a 0:09:15.440 --> 0:09:17.920 billion dollars of value only to go bust a year 0:09:18.000 --> 0:09:21.960 later is tough. What if instead you hit two billion 0:09:22.040 --> 0:09:25.679 dollars in value and still went bust. And what if 0:09:25.720 --> 0:09:30.360 the company was known for pizza making robots. That's right, 0:09:30.840 --> 0:09:34.720 we have pizza making robots coming up next with our 0:09:34.800 --> 0:09:39.840 story of a company called Zoom. Zu me. I will 0:09:39.920 --> 0:09:43.200 tell you that sad tale after we come back from 0:09:43.200 --> 0:09:56.640 this quick break to think our sponsors. Okay, so the 0:09:56.880 --> 0:10:02.800 super easy but not entirely accurate description of Zoom is 0:10:02.840 --> 0:10:06.160 that it was a startup that used a kind of 0:10:06.600 --> 0:10:12.200 food truck delivery service for pizza, but it had other 0:10:12.360 --> 0:10:16.560 tech elements to it. For example, a robot back at 0:10:16.920 --> 0:10:20.240 Zoom headquarters would do some early prep on a pizza, 0:10:20.280 --> 0:10:22.439 so you would have this pizza dough, it would already 0:10:22.440 --> 0:10:25.199 be formed into the shape of a pizza, and a 0:10:25.320 --> 0:10:28.760 robotic arm would apply pizza sauce, the idea being that 0:10:28.840 --> 0:10:32.960 it would be a consistent amount of sauce and consistently 0:10:33.000 --> 0:10:35.480 distributed because you've got a robot, it's just going to 0:10:35.559 --> 0:10:37.400 do the same thing over and over and over again. 0:10:37.440 --> 0:10:39.959 You never have to worry about having repetitive stress injury. 0:10:40.040 --> 0:10:41.920 You just might have to do some maintenance every now 0:10:41.960 --> 0:10:46.000 and then. That was the first part. You might say, huh, 0:10:46.120 --> 0:10:49.520 that seems like a pretty high tech solution to something 0:10:49.520 --> 0:10:53.160 that's not really a problem. That's a key early indicator. 0:10:54.160 --> 0:10:56.440 After that, you would actually have a human staff member 0:10:56.440 --> 0:11:00.520 who would add toppings according to the order that were 0:11:00.559 --> 0:11:03.640 coming in to Zoom. So customers would order a pizza 0:11:03.640 --> 0:11:06.679 with certain stuff. The robot would put some sauce on 0:11:06.760 --> 0:11:09.440 a pizza, a human would put toppings on the pizza, 0:11:09.480 --> 0:11:13.160 and then they would load this uncooked pizza into the 0:11:13.200 --> 0:11:16.520 back of a delivery truck. Now, the delivery trucks had 0:11:16.720 --> 0:11:20.920 ovens with GPS trackers in them, so the oven would 0:11:20.960 --> 0:11:24.599 know quote unquote where it was, and it was programmed 0:11:24.880 --> 0:11:28.160 so that it would bake the pizza at a rate that, 0:11:28.400 --> 0:11:31.320 in theory, would mean the pizza would be fully cooked 0:11:31.400 --> 0:11:35.280 shortly before the truck would actually arrive at the customer's location. 0:11:35.679 --> 0:11:39.120 So the idea is that this pizza is hot and ready. 0:11:39.679 --> 0:11:42.720 Little Caesars, eat your heart out hot and ready as 0:11:42.760 --> 0:11:46.400 the truck is pulling up to deliver this pizza, and 0:11:46.440 --> 0:11:49.800 then there was another robot in the trucks that could 0:11:49.920 --> 0:11:53.920 cut the pizza, slice it into the proper slices, and 0:11:53.960 --> 0:11:57.640 then boom, the customer would have themselves a really, really 0:11:57.679 --> 0:12:01.400 fresh pizza delivered to their home or play of business. However, 0:12:01.800 --> 0:12:04.520 just saying that zoom was this, that's doing a disservice 0:12:04.600 --> 0:12:08.400 to the company, which was more than just pizza. They 0:12:08.440 --> 0:12:13.040 had larger ambitions. When they actually formed those ambitions, that's 0:12:13.040 --> 0:12:15.560 hard to say. A lot of the accounts suggest that 0:12:15.920 --> 0:12:20.079 at least after the pizza business failed spoiler alert, that 0:12:20.160 --> 0:12:22.080 they were like, oh, well, that was just kind of 0:12:22.120 --> 0:12:25.959 a use case, a test case for what we want 0:12:26.000 --> 0:12:29.559 to do, which is a much larger idea. Some people 0:12:29.600 --> 0:12:32.400 have suggested that maybe they said that only after the 0:12:32.400 --> 0:12:34.880 pizza thing failed, when they said, how can we take 0:12:36.040 --> 0:12:38.800 these ideas we had and turned them into something viable. 0:12:39.200 --> 0:12:41.000 I don't know the truth of the matter, but the 0:12:41.080 --> 0:12:45.120 story goes that they had these larger ambitions. Unfortunately, just 0:12:45.160 --> 0:12:47.360 delivering on the promise of a well made pizza would 0:12:47.360 --> 0:12:49.880 turn out to be a lot harder than they anticipated. 0:12:50.200 --> 0:12:53.200 Let alone, the more lofty goals of doing stuff like 0:12:53.440 --> 0:12:56.959 using data to predict consumer behavior so that you can 0:12:57.040 --> 0:12:59.960 maximize your fleet of delivery vehicles and thus, you know, 0:13:00.080 --> 0:13:03.439 deliver more than just pizza, and to do so really efficiently, 0:13:03.559 --> 0:13:06.720 not to mention, you know, be able to anticipate things 0:13:06.760 --> 0:13:09.600 within the supply chain so that you're able to cut 0:13:09.640 --> 0:13:13.040 costs that way. Those were sort of the big ideas 0:13:13.360 --> 0:13:16.600 that would form when they formed. I don't know if 0:13:16.600 --> 0:13:19.000 it was actually part of the plan all along to 0:13:19.080 --> 0:13:23.280 make this a larger business, or if it was just 0:13:23.360 --> 0:13:25.959 something that kind of came up after the pizza delivery 0:13:26.000 --> 0:13:29.280 business started to falter. I can't say for sure. Now 0:13:29.760 --> 0:13:32.120 for this particular entry in our list of startups that 0:13:32.160 --> 0:13:35.120 failed in twenty twenty three, I am relying heavily on 0:13:35.240 --> 0:13:38.960 an amazing piece, truly. It's a great article and it's 0:13:39.000 --> 0:13:44.680 written by Jared Herman. It's a ja ryd Jared Herman 0:13:44.920 --> 0:13:49.400 and Herman wrote an article titled Why Zoom Died, How 0:13:49.480 --> 0:13:53.480 Melting Cheese Burnt a two point three billion pizza delivery 0:13:53.520 --> 0:13:57.199 startup run by robots. It's a great title. You can 0:13:57.240 --> 0:14:01.120 find that piece on how they grow. That's the website 0:14:01.320 --> 0:14:04.319 it's a thorough explanation of the mistakes that led to 0:14:04.440 --> 0:14:08.040 Zoom's demise by someone who really understands business far better 0:14:08.080 --> 0:14:11.920 than I do. So if you want insights as to 0:14:12.040 --> 0:14:15.640 what went wrong that go well beyond my capabilities, I 0:14:15.679 --> 0:14:19.160 recommend checking out that article, all right. So co founders 0:14:19.240 --> 0:14:22.680 Julia Collins and Alex Garden got the initial idea for 0:14:22.800 --> 0:14:26.360 Zoom sometime around twenty fifteen, and the goal was to 0:14:26.440 --> 0:14:29.680 take a lot of the labor costs out of making pizza. 0:14:30.040 --> 0:14:33.000 You would automate as much of the process as possible, 0:14:33.360 --> 0:14:37.480 and this would be disrupting the pizza market Silicon Valley style. Now, 0:14:37.480 --> 0:14:40.720 the plan included a big data element as well, not 0:14:40.800 --> 0:14:44.040 just consumer behavior, but everything up and down the supply chain. 0:14:44.120 --> 0:14:46.640 So the thought was, if you can be nimble, then 0:14:46.680 --> 0:14:49.240 you can take advantage of the market. You can buy 0:14:49.280 --> 0:14:53.960 from different suppliers to minimize costs while you are guaranteeing 0:14:54.040 --> 0:14:57.920 the best quality ingredients for your pizza, and you can 0:14:57.960 --> 0:15:01.080 measure the convenience of buying from one place that might 0:15:01.240 --> 0:15:05.360 charge more, but that place might be closer to your operations. Therefore, 0:15:05.440 --> 0:15:09.000 it would reduce transportation costs and minimize food waste through 0:15:09.080 --> 0:15:11.800 stuff like spoilage, so like, there are all these different 0:15:11.800 --> 0:15:16.600 factors that usually are very difficult to account for, and 0:15:16.840 --> 0:15:19.520 the idea was that with data you could start to 0:15:19.560 --> 0:15:23.240 anticipate these things more effectively and thus run at a 0:15:23.320 --> 0:15:25.880 level of efficiency that's never been seen before and that 0:15:25.880 --> 0:15:28.560 would really save you money in the operation side. So 0:15:28.640 --> 0:15:31.640 this was an audacious plan from the get go. Just 0:15:31.680 --> 0:15:33.720 a bit about preparing pizzas in the back of a 0:15:33.760 --> 0:15:37.000 moving vehicle would prove to be really tricky. Zooms soon 0:15:37.080 --> 0:15:41.080 discovered that cooking pizzas in a moving vehicle isn't the 0:15:41.160 --> 0:15:45.760 best if you want predictable, consistent outcomes, because there are 0:15:45.760 --> 0:15:48.360 a lot of forces at play, Like there are bumps 0:15:48.360 --> 0:15:52.080 in the road, their stops, their starts, you know, acceleration, deceleration, 0:15:52.400 --> 0:15:55.080 all of that can have an effect on the construction 0:15:55.160 --> 0:15:58.880 and cooking of a pizza. So while the pizzas would cook, 0:15:59.240 --> 0:16:03.640 Zoom discover that cheese would slide around and burn, and 0:16:03.760 --> 0:16:07.560 topping's distribution would be inconsistent due to this, and it 0:16:07.760 --> 0:16:11.920 just wasn't a very smooth production as was first envisioned, 0:16:12.080 --> 0:16:14.280 and it meant that consumers were disappointed, like they would 0:16:14.280 --> 0:16:17.560 get pizzas, and they would look terrible because it wasn't 0:16:17.600 --> 0:16:20.320 like a pizza that had been cooked in a stationary 0:16:20.400 --> 0:16:23.880 kitchen and then shipped over to the customer. It was 0:16:23.920 --> 0:16:26.160 cooked in an oven that was moving all over the place. 0:16:26.400 --> 0:16:29.280 And sure, you might say that the founders should have 0:16:29.400 --> 0:16:33.840 anticipated this. That anyone who has ever ridden in a vehicle, 0:16:33.960 --> 0:16:36.640 especially if you've had to stand up in a moving 0:16:36.720 --> 0:16:39.520 vehicle like on a bus or a subway train or something, 0:16:39.640 --> 0:16:43.120 you know that even a boring, uneventful trip can cause 0:16:43.280 --> 0:16:47.280 some lurching and such. And perhaps that bit of the 0:16:47.320 --> 0:16:50.720 plan was just a little too unrealistic. But as Jared 0:16:50.760 --> 0:16:53.560 Herrmann points out in the article I mentioned, a bigger 0:16:53.640 --> 0:16:55.840 problem might have been that the team was looking at 0:16:55.920 --> 0:16:59.560 multiple challenges all at the same time, rather than focusing 0:16:59.640 --> 0:17:04.280 on just one before incorporating or attacking another challenge. Herman 0:17:04.440 --> 0:17:08.080 argues that Zoom was quote trying to be three things 0:17:08.160 --> 0:17:11.640 all at once, a technology company, a pizza shop, and 0:17:11.680 --> 0:17:16.320 a sustainability play end quote. However, the pizza delivery service 0:17:16.440 --> 0:17:18.880 was just part of this puzzle, right. The real goal 0:17:18.920 --> 0:17:22.119 of Zoom, according to the co founders, was to figure 0:17:22.119 --> 0:17:25.480 out how to leverage all these individual pieces, right, a 0:17:25.560 --> 0:17:30.760 fleet of delivery vehicles. Now the logistics of operating those vehicles, 0:17:30.320 --> 0:17:34.040 this message of sustainability, how to take all of that 0:17:34.160 --> 0:17:37.520 and to apply all the data that was being gathered 0:17:37.800 --> 0:17:42.159 for various purposes. The pizza delivery business was therefore just 0:17:42.359 --> 0:17:46.520 a use case, sort of prototype test run. Now, the 0:17:46.560 --> 0:17:49.439 pizza delivery business did not go smoothly, it was not 0:17:49.520 --> 0:17:52.720 a success. But then the whole thought, or least is 0:17:52.760 --> 0:17:56.120 how it was communicated, was that the team would learn 0:17:56.160 --> 0:17:59.960 from their mistakes and their failures. They would correct those issues, 0:18:00.480 --> 0:18:03.040 try again, and keep going down that route toward a 0:18:03.080 --> 0:18:07.159 sustainable business that could run on proven technologies, and that 0:18:07.240 --> 0:18:10.040 this business could then be ported for all sorts of 0:18:10.080 --> 0:18:14.160 different use cases, not just pizza delivery. That's not exactly 0:18:14.200 --> 0:18:17.520 what Zoom actually did, though, So while they might have 0:18:17.560 --> 0:18:22.600 communicated that this was their plan, their actions spoke differently. 0:18:22.680 --> 0:18:25.800 So first they tried to stick with the pizza delivery thing. 0:18:26.280 --> 0:18:29.600 They switched gears so to speak, not to use a pun, 0:18:29.920 --> 0:18:33.399 but rather than driving an oven around town, they would 0:18:33.560 --> 0:18:37.320 park the truck's food truck style. They would cook the 0:18:37.359 --> 0:18:39.800 pizzas in their food trucks, and they would rely on 0:18:39.880 --> 0:18:43.240 delivery drivers to pick up finished pizzas at the trucks 0:18:43.280 --> 0:18:45.919 and then deliver them to customers. I assume they also 0:18:46.880 --> 0:18:50.679 depended on delivery drivers to bring the uncooked pizzas to 0:18:50.760 --> 0:18:53.080 the food trucks in the first place, unless the food 0:18:53.119 --> 0:18:56.640 trucks were just stocked with all the ingredients, because remember, 0:18:56.880 --> 0:19:00.240 originally the idea was that the initial assembly of the 0:19:00.240 --> 0:19:03.760 pizzas happened in a stationary kitchen. Anyway, it was just 0:19:03.840 --> 0:19:06.040 that then the uncooked pizzas would be sent to the 0:19:06.040 --> 0:19:09.280 delivery trucks. So I don't know if that step still 0:19:09.320 --> 0:19:12.119 existed at this point where they went to the stationary 0:19:12.160 --> 0:19:15.800 food truck model. If it did, that adds unnecessary steps, 0:19:15.880 --> 0:19:20.080 right like why are you preparing a raw of pizza 0:19:20.160 --> 0:19:23.119 in one place, shipping the raw of pizza to a 0:19:23.200 --> 0:19:26.480 second location for cooking, and then shipping from that location 0:19:26.680 --> 0:19:30.359 to the customer. That seems unnecessary. So I don't know 0:19:30.400 --> 0:19:32.000 for sure that that's what they were doing, but if 0:19:32.000 --> 0:19:35.240 it was, they definitely were not making it more efficient, 0:19:35.640 --> 0:19:39.119 and no surprise, this still did not work out. It 0:19:39.160 --> 0:19:42.760 did not make a successful business, so the company did 0:19:42.760 --> 0:19:46.120 a pivot to a more farm to table food truck approach, 0:19:46.359 --> 0:19:49.920 so again not just pizza but other stuff. This involved 0:19:49.960 --> 0:19:53.119 licensing the technology to other companies, but none of that 0:19:53.200 --> 0:19:57.199 seemed to really click right. It certainly wasn't becoming a 0:19:57.200 --> 0:20:01.320 sustainable business. In twenty nineteen, zoo Zom shifted to something 0:20:01.680 --> 0:20:05.240 entirely different. So instead of preparing and delivering food, the 0:20:05.320 --> 0:20:09.600 company got into the business of producing food packaging. Not 0:20:09.720 --> 0:20:13.120 food itself, but the packaging that food goes into, which 0:20:13.160 --> 0:20:16.600 is wild like. That is a heck of a pivot. 0:20:16.960 --> 0:20:20.720 The boxes that Zoom produced were made from plant based material, 0:20:20.880 --> 0:20:25.280 so once again the goal of promoting sustainability was emphasized 0:20:25.320 --> 0:20:28.440 as part of Zoom's mission statement. So rather than using 0:20:28.560 --> 0:20:31.880 single use plastic, you could have food packaged in plant 0:20:32.000 --> 0:20:36.040 based boxes. But there was one teeny tiny little problem. 0:20:36.359 --> 0:20:43.000 These boxes contained polyfluoroalkyl substances or pfas. So these are 0:20:43.080 --> 0:20:47.879 chemicals that have a long shelf life. They can be 0:20:48.040 --> 0:20:52.840 found in various organisms that have absorbed these chemicals, and 0:20:52.880 --> 0:20:56.119 they have potential links to quote harmful health effects in 0:20:56.240 --> 0:20:59.240 humans and animals end quote. That's according to the Environmental 0:20:59.280 --> 0:21:02.879 Protection Agent here in the United States. As such, some 0:21:03.119 --> 0:21:06.520 places do not allow food to be packaged in boxes 0:21:06.560 --> 0:21:10.840 that have pfas in them. One of those places happens 0:21:10.880 --> 0:21:14.720 to be San Francisco, which is obviously where most tech 0:21:14.760 --> 0:21:18.080 companies in the United States incubate and grow. So that 0:21:18.240 --> 0:21:22.600 was a huge setback for Zoom, and it turned out 0:21:22.640 --> 0:21:27.040 that all that data that Zoom was touting as being 0:21:27.119 --> 0:21:30.880 like the key to their business strategy could not make 0:21:30.960 --> 0:21:34.879 this business work despite more than two billion dollars raised 0:21:34.880 --> 0:21:39.000 in various funding cycles over the lifespan of Zoom. So 0:21:39.240 --> 0:21:43.119 in June twenty twenty three, Zoom shut down. If you 0:21:43.160 --> 0:21:46.200 want to dive deeper into the various factors that led 0:21:46.240 --> 0:21:49.040 to this sad end I recommend you check out that 0:21:49.200 --> 0:21:52.280 article on how they grow, the one that's written by 0:21:52.359 --> 0:21:56.199 Jared Herman. But way up among those reasons is an 0:21:56.320 --> 0:21:59.399 argument that ultimately Zoom was a hammer in search of 0:21:59.440 --> 0:22:02.080 a nail. It was a solution to a problem that 0:22:02.400 --> 0:22:05.719 didn't really seem to exist. So just because an idea 0:22:05.960 --> 0:22:08.880 is interesting doesn't mean it's going to be a practical 0:22:08.960 --> 0:22:12.080 business in the real world. That is a pretty tough 0:22:12.160 --> 0:22:15.600 lesson to learn, particularly if you're an investor who has 0:22:15.640 --> 0:22:20.920 sunk millions of dollars into that idea. Okay, we've got 0:22:21.240 --> 0:22:25.640 a few more stories to get through. There's two in one, 0:22:26.000 --> 0:22:30.679 and there's also a story I found incredibly unsettling. But 0:22:30.960 --> 0:22:33.840 before we get into all that, let's take another quick 0:22:33.920 --> 0:22:46.760 break to thank our sponsors. We're back with startups that 0:22:46.960 --> 0:22:49.680 failed in twenty twenty three, and this is a two 0:22:49.720 --> 0:22:54.040 for two different companies offering very similar services. And both 0:22:54.080 --> 0:22:57.479 of these companies would fail in twenty twenty three, and 0:22:57.600 --> 0:23:01.640 both are located or we're located in Europe. So first up. 0:23:01.880 --> 0:23:05.560 In twenty twenty one, a group of German entrepreneurs founded 0:23:05.600 --> 0:23:10.320 a same day grocery delivery service that catered primarily to Berlin, 0:23:10.440 --> 0:23:15.040 Germany's population of Turkish and Arabic residents. This business was 0:23:15.080 --> 0:23:19.439 called Yababa and secured more than fifteen million dollars in 0:23:19.560 --> 0:23:23.399 seed funding. Initially, things seemed to be going pretty well, 0:23:23.520 --> 0:23:26.960 and the co founders had aggressive plans to scale up 0:23:27.040 --> 0:23:31.280 the company and launch services in other European cities, including 0:23:31.320 --> 0:23:34.879 ones outside of Germany. Now that sounds to me like 0:23:34.920 --> 0:23:38.800 those plans were perhaps a bit too aggressive. It actually 0:23:38.840 --> 0:23:42.080 kind of reminds me of stories I would hear during 0:23:42.119 --> 0:23:44.720 the dot com rush here in the United States. In 0:23:44.760 --> 0:23:48.280 the late nineties, you had these companies that pushed to 0:23:48.400 --> 0:23:52.639 scale super fast and rapidly reached a point where the 0:23:52.800 --> 0:23:56.879 cost of operation was so great that it was outpacing 0:23:56.960 --> 0:24:00.199 the amount of investment coming into the company, or the 0:24:00.280 --> 0:24:04.360 investment plus revenue. Usually if the company had a way 0:24:04.400 --> 0:24:06.360 of generating revenue in the first place. In the dot 0:24:06.400 --> 0:24:08.920 com days, that was never a guarantee. There were companies 0:24:08.960 --> 0:24:11.440 that had no business plan to speak of that still 0:24:11.480 --> 0:24:14.200 got huge amounts of investment in those dot com gold 0:24:14.280 --> 0:24:19.040 rush days. So providing same day grocery delivery services in 0:24:19.119 --> 0:24:22.960 a single city is already a huge undertaking. There are 0:24:23.160 --> 0:24:26.239 so many operations you have to take care of for 0:24:26.320 --> 0:24:28.800 that to work, laying the groundwork to do the same 0:24:28.880 --> 0:24:32.119 in other cities, and scaling up operations to support that 0:24:32.240 --> 0:24:37.040 kind of work. That's a gargantuan task. It's hard to 0:24:37.080 --> 0:24:41.600 stress how difficult that is, particularly for a startup. It's 0:24:41.640 --> 0:24:45.959 not something that I think you should rush into. Yubaba, however, 0:24:46.119 --> 0:24:49.720 embraced the challenge and in early twenty twenty three, despite 0:24:49.760 --> 0:24:52.480 burning through investor cash at a heck of a rate, 0:24:52.720 --> 0:24:55.840 the company launched a pr campaign to raise awareness of 0:24:55.880 --> 0:24:58.880 the service in Berlin, and the hope was this would 0:24:58.920 --> 0:25:03.119 help encourage another round of investors who, again, due to 0:25:03.240 --> 0:25:07.440 global economics, we're being a little more conservative with their 0:25:07.560 --> 0:25:10.879