Pricing Soylent Efficiently | Hacker News Reader

Pricing Soylent Efficiently

blog.soylent.com

59 pointscaublestone38 comments

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.

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.

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...

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.

Sounds like a pretty good problem to me.

I order $400,000 of goods from you. You have to make and deliver those goods to me, and I pay you 30 days after you invoiced me.

Your challenge is to come up with $X00,000 of funding at a time when it's tricky to get loans.

Your other challenge is to either hope your current suppliers can suddenly increase their capacity, or that you can find a supplier who can fill your demand.

If you're making the product you need to employ and train extra staff, and hope they fit in whatever building you have.

And you need place to store raw material, product being built, and built product ready for shipping.

Only a problem if requirement to deliver at once which I don't see why would be the case in most situations. A big order is only a problem to a problem-seeker.

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

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

Cost-sensitive customers will make their own...

more to cost than the price tag...

It depends how cost sensitive you are. If you have an extra hour a month to mix the ingredients you can mix your own healthier version for half the cost. Definitely a tradeoff worth making for some people.

Buying a large enough quantity of ingredients to save money is going to cost a lot initially. Need to consider that.

That is an important consideration. If you are committed to doing it though, the cost savings are high. So high that unless your opportunity cost is over $100 for the hour of mixing the ingredients it will make sense.

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.

My first thought on seeing the clinical packaging in the background of the blog post was that they need to make up for the astronaut-tube-food product with colourful detailed rich drawings on the packaging. Package it like chocolate: (https://www.google.com/search?q=bahen+%26+co+chocolate+packa...).

Yet people around me keep eating at their desks.

I haven't tried Soylent, and I probably do like food too much to try it, but there are days when I'll take a lunch break without eating, and enjoy the break part none the less. Go for a cycle, or a walk, or go sit outside a café with a pack of cigarettes, or.. I could easily add Soylent in and get both the enjoyment of the break without having to drink it at my desk.

Yeah, these Soylent fadsters are really missing out on the Human Eating Experience of devouring a ham and cheese sandwich right from its tupperware.

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.

I am kind of surprised that Facebook is still in business, having missed the point that most people on the planet don't actually have an account with them.

(Less snarky response: I actually had a conversation with my beautiful wife earlier today about how frustrating I find eating to be. Helped her better understand why I see cooking as a chore not a hobby or passion. She actually said "You'd actually be happy with Soylent, wouldn't you?")

Soo... they should open a restaurant or food delivery business?

Snark aside, if 0.1% of people would like to replace a meal per day with a flavorless slurry this still leaves them with a 100,000 client base in US alone.

Are you also surprised that vegetarian food is sold, having missed the point that most people eat meat? Or surprised that screwdriver factories still exist, having missed the point that most people prefer driving in nails using hammers?

Different tools for different jobs, I think - it seems a really strange attitude to have, to think that if a company isn't aiming their product at you personally then there can't be a reason for them to exist.

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.

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.

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.

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.

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.

I sympathize with the position you're taking, their marketing is certainly pursuing the busy-body yuppie audience. I think if you spend some time reading comments and posts from users of Soylent online you'll see a lot of people are buying it because it is inexpensive and nutritious, while still requiring very little time to prepare. I acknowledge that, as an example, a healthy and cheap meal can be made from beans, rice, and frozen vegetables, but it takes non-trivial energy to make that every day, which is hard to find on a consistent basis after working or studying all day.

I certainly see Soylent as a means to improve public health and the state of mass food production. I think if you take an honest look at Rhinehart's blog posts about Soylent and his other (somewhat radical) personal experiments you'll find that his pursuits are similarly aligned.

I agree with you in general, but I didn't read it that way – I read it as them saying that developing world-changing technologies takes a lot of capital, not that having a lot of capital necessarily leads to world-changing technologies.

Well they (*joylent actually, because soylent doesn't deliver in EU yet) managed to change my life somewhat. Easier to keep a diet and I never stress about buying food anymore - I only get what I feel like eating when I feel like eating it, because I have a standard backup to go to.

This goes with being the first company to make a certain kind of product. If they had opened a pizza chain they may have been more or less successful, but there would have been zero claim on changing the world.

I'm glad that Soylent / Joylent works for you.

> This goes with being the first company to make a certain kind of product.

That's not accurate. They were maybe the first company to successfully market this product to the general public?

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.

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.

Ironically, that's exactly what the article told you not to do

  You may want to be careful when someone suggests you should do X because that’s what AMZN does

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.

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.

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

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