1) Govt. SF health + planning made our lives hell. They didn't like our innovations. We had to bribe officials ("lobbying").
2) Gross Margins (GM). As we grew, our burn rate grew too. We were losing money on every meal. If only we could get to critical mass.
We were always “1-2 months away” from managing the burn.
We finally got some progress on margins, but it meant degrading the product: food is fickle.
Less money in, worse food out.
Sprig's peak was Feb 2016:
4,500 meals per day (largest restaurant in SF)
$22M run-rate (SF + Chi)
1,300 employees (incl delivery)
The public treated me like a star, which was both uncomfortable & awesome.
Even my dating life felt like it had improved 2-3x.
But secretly, I was nervous - it didn't feel like a done deal.
On Feb 22, 2016: our growth curve inverted. +2%/wk became -2%/wk.
We scrambled to figure out why.
Was it seasonality? Was it our rising prices? Was it the quality of the food?
Everyone was running tests to figure out why and what to do.
It was UberEATS, which launched that week.
Fucking Uber. After hearing all the war stories from @lyft, I knew they were unsavory competitors.
Super smart, ruthless with big coffers.
What about pursuing a sale? If we do layoffs, then we can’t sell. If we don’t, we may die trying.
We decided to pivot to a new offering that focused on food quality.
Everyone (fam, friends, investors) thinks you're doing well and you can't tell them you're not.
We were in pure panic mode.
We launched Sprig 2.0, shut down Chicago and laid off 1/3 of HQ staff to conserve burn.
I shut down external activities, such as talks and press, so we didn’t become a Theranos.
Internally, I leaned on my executive team. They were honest and kind with our employees. Through it all, we had only 1 departure.
We got to $0 margins, but the traction didn’t improve.
The board asked us: what would it take to be fully profitable?
We were running a restaurant doing $6M in revenue but paying real estate for a place that needed $20M in revenue to be profitable.
1) In 2013, we mistook present for future. Delivery apps got better w scale. We got worse.
2) The profit equation was off. The market size in SF was too small for our big kitchen. We blitzfailed.
3) Cap Table + Burnout. Hard to restart after losing $50M.
If you're gonna fail, do it fast.
If you're gonna succeed, do it slowly.
In startups, remember to watch your flanks. Your competitors are not your direct competitors, but the whole market.