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Comment by Mistletoe | Hacker News Reader

I don’t see how they managed to mess this up. The entire world bought an Instant Pot a few years ago when they were all the rage on Reddit, etc. We bought my brother one for a gift.

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Instant Pot was purchased in 2017 by Cornell Capital, a private equity company.

I discovered this just now by when I thought "I bet some private equity company bought them and destroyed them in order to make short term profits" and then googled "instant pot private equity" to see if that was the case. It appears so.

Gotta love those private equity companies. I'm no expert, but this article is a good overview of how they can be incentivized to kill good brands. https://www.vox.com/the-goods/2020/1/6/21024740/private-equi...

If you look at Google trends, searches for instant pot peaked after the 2017 buyout.

I think the examples of leveraged buyouts destroying brands is exaggerated. If it is a good brand, it will exist. It is just a chance of ownership from a capital firm to a lender.

They made a lot of sales. Why does that have to be the death of the company? Just keep making good products. Everything doesn’t have to go up forever. I know this paints me as naive but growth above all else is eating us alive. How much growth is their bankruptcy?

Because youre at the mercy of the distributors forcing you to lower prices, especially with the monopsony that exists in the US. Because you are at the mercy of your manufacturers increasing prices especially during a supply chain foul up during and after the pandemic which would affect you significantly more considering how big and heavy your product is.

There’s a lot of reasons a company selling a lot of product can still go under in todays market.

Things don't have to have continual growth. It actually is possible for a company to just sustain. However, if you see your rapid growth and then rapid decline, that is a dangerous transition for companies. It's easy to overspend and over commit yourself. Random websites on Google say instapot sales are down 65 percent in the last year. That is tough for any company to handle. WSJ says they had to cancel over 100M in contracts.

That said, bankruptcy doesn't necessarily mean it is the end of the product line. More likely it means some investors will lose some money, which is OK because they are in the business of making bets, and some won't pan out

This article talks about debt likes its free money. Getting a loan means convincing a lender that you are very likely to pay it all back. If PE firms had a history of not paying back debts, why would lenders continue to lend to them? Like, who is this moron losing money on loans every day?

Its not that the underlying firm cannot support the debt load, if the proceeds from that debt were put in to productive uses (expand production, design new products, more marketing, etc). The problem is that the debt is taken on, then the firm pays huge special dividends or “management fees” to the PE firm. PE firm often recoups the initial investment within first year. Then the firm is forced to focus on short term gains to make the numbers look good so PE firm can find another sucker (either another PE firm or IPO).

That’s part of the problem with durable or semi-durable businesses. You sell a ton - one to everyone- and then you only sell to people coming of age or to those who have failures. If you want to play with the math look up Bass models or diffusion models. Fascinating but quite sobering. Once a market is saturated it’s very hard to grow.

So from a business sense the best feature of, say, a KitchenAid stand mixer is its accessory port.

As a home user, I agree, that's the best part of the Mixer. God I love it.

Perhaps everyone who wanted one already bought one, so the demand must have crashed.

We have 2, but the 2nd one has never needed used.

Mine’s main purpose is dealing with dinner when I forgot to defrost something the night before. Besides that it collects dust. I know it can do more but I view it as a machine that does everything ok and nothing perfect.

It boils eggs perfectly (shells are always easy to pull off)

That's not hard to do, you just have to immediately run the eggs under cold water after boiling.

It’s an excellent pressure cooker.

And if you know how to pressure cook then it easily becomes the #1 tool in your kitchen, which is what it’s become in ours.

Mine makes perfect oatmeal for my family every morning, and makes stews/slow-cooks meat for a few dinners/week during the winter.

Modern consumer brands have essentially nothing to do with selling consumer goods. They are financial vehicles for private equity to lever up on.

In a decreasing liquidity environment many of these schemes will blow up. They could have sold 100x more insta pots and it wouldn't have mattered, it's pure financial gambling under the hood

I’d like to read more about this, has it been documented or analyzed in any organized way via books/research, etc. that is available?

This is a good jumping off point.

https://www.npr.org/2023/04/26/1172179099/how-private-equity...

https://www.marketplace.org/2023/04/27/how-private-equity-cr...

Roughly the things to look up are private equity and their "bust out" strategy

https://www.youtube.com/watch?v=z5PLEZiSZV

https://www.youtube.com/watch?v=r3_41Whvr1I

https://www.youtube.com/watch?v=o10nh86q64Q

https://www.youtube.com/watch?v=n7VmIy0VXOY

Buy a company with debt (leveraged buy out). Hand that cash back to the "private equity investors". Let the company go bankrupt and the debt magically dissapears.

Basically legalized theft at enormous scale

Agree. One of the most infuriating things we tolerate as a society. The number of good and solid companies adding value to society that have then been raided in order to line the pockets of a few is such a disgrace.

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