The Ample Hills ice cream company had $19 million, a place on Oprah's favorite things list, a deal with Disney, and dreams of becoming the next Ben & Jerry’s. Then everything fell apart.
I hear a lot of these stories about hubristic startups overextending and then crashing and burning these days. It's telling that so many upper-class and upper-middle-class individuals are so...
I hear a lot of these stories about hubristic startups overextending and then crashing and burning these days. It's telling that so many upper-class and upper-middle-class individuals are so insulated from the constraints of reality.
I absolutely agree that the overextend and crash model is a major issue, but I do think that blaming it essentially on rich kids not knowing the value of money is oversimplifying. Obviously this...
I absolutely agree that the overextend and crash model is a major issue, but I do think that blaming it essentially on rich kids not knowing the value of money is oversimplifying.
Obviously this article specifically paints them in that light, written as it is with both the benefit of hindsight and the need to form a coherent narrative, but the only part I found truly damning was the founders saying "It was a shock to learn we were in dire financial straits". That should never come as a surprise - it's a shitty thing to find out, for sure, and maybe one you can't solve, but it should be something you at least see coming in the spreadsheets a mile off.
I think the larger problem is the culture of, and misaligned incentives around, large investments and the VC world. Investment is generally necessary for growth, but it shouldn't be treated as a sign of success in and of itself - if anything, it's the opposite: akin to debt, only to be taken on minimally and when necessary. Businesses tout huge funding rounds and massive valuations as if they are equivalent to sustainable cashflow, because that's what the Ubers of the world have taught them. It's easy to forget that those guys are called unicorns for a reason, and buy into the belief that your latest paper valuation is equivalent to success, growth, and even stability.
Investors also like to suggest that they share the same risks and rewards as the founders, but this is misleading at best. The founder has a single business, on which they succeed or fail. The investor has an interest in ten, or twenty, or a hundred. Pushing them all to overextend in the hope of explosive, exponential growth from one is a reasonable strategy to maximise return for the investor, but one that leads to failure for the majority of individual businesses.
Put all that together and it's hardly surprising to me that founders, and the employees who work for them, end up making a lot of the wrong decisions and ultimately paying the price for it.
I don't know of it's how the article is written, but I'm always surprised when they talk about repeatedly buying the wrong machinery. They have a product. They know how that product acts, and if...
I don't know of it's how the article is written, but I'm always surprised when they talk about repeatedly buying the wrong machinery.
They have a product. They know how that product acts, and if they don't they can measure it.
But they buy freezers that can't cope and packaging that doesn't work and etc etc.
Maybe I'm being harsh, but this feels a bit like the modern Internet Expert - they can use Google so they think they can do anything, so they balk at the cost of production engineering.
I say this to try to explain my reaction to this article. I recognise that maybe this is all projection on my part, and perhaps I'm being unfair.
I don't think you're being unfair per se, although I'd say you are doing a tiny bit of what you say they're doing: you're assuming that matching the right manufacturing tech to their product, or...
I don't think you're being unfair per se, although I'd say you are doing a tiny bit of what you say they're doing: you're assuming that matching the right manufacturing tech to their product, or picking the right process engineering firm, is easy or self evident.
I'm not defending these guys specifically - I haven't done any additional reading on them, so all I know is what the article gives, but I did want to give another perspective on what's causing so many startups to fail on a fairly similar trajectory.
Maybe they made decisions that really were obviously wrong: quotes like the one about not knowing their own financials certainly suggest that was the case in some places. Even so, those decisions would be presented as smart and calculated risks had they succeeded. Equally, decisions like which process engineering firm to use are presented as cheap and foolish when there could have been a thousand complex variables that led them to do the best they could with the information available.
Sometimes you've got to gamble, sometimes it's best to play it safe. The pressure and advice to gamble on growth comes from people whose interests are in an overall win, not necessarily in your specific business. The way the press frames you is pretty much entirely predicated on the outcome of that gamble, regardless of whether it was pure genius or blind luck. In short: it's all kind of messy, and I mainly just wanted to underline that.
It's specifically that they aren't normally free of those constraints, and then suddenly have more money than they know what to do with. When tens of millions of dollars are suddenly available,...
It's specifically that they aren't normally free of those constraints, and then suddenly have more money than they know what to do with. When tens of millions of dollars are suddenly available, unless you have experience dealing with money on that scale you start to lose track of what that much money does and does not mean. $19 million dollars definitely means you can have three to five storefronts and a small factory backing it up, but you're not going to be the next Ben & Jerry's without a lot more money and infrastructure.
I mean the only time they seemed to have more money than they knew what to do with was at the start. After that it was more a case of not even knowing how much money they had.
I mean the only time they seemed to have more money than they knew what to do with was at the start. After that it was more a case of not even knowing how much money they had.
Yeah, it seemed to also be that they were great and really creative at making ice cream, but wouldn't listen to other specialists (accountants, production specialists, food industry experts who...
Yeah, it seemed to also be that they were great and really creative at making ice cream, but wouldn't listen to other specialists (accountants, production specialists, food industry experts who told them not to use square containers, etc.). It's a problem Socrates (maybe Plato?) identified that being good at one thing tends to make one believe they are proficient in a number of other things they have no idea about. See also Dunning-Krueger. On the one hand it seems incredibly prideful/conceited and it's hard not to think of them with contempt, but I'm trying to imagine what I would do if I suddenly had to find a bunch of those experts myself that I trusted enough to run a business with...
Yeah, it's easy to fail to update your projections, leaving you with an outdated understanding of what your finances actually look like. Especially during aggressive periods of growth it can be...
Yeah, it's easy to fail to update your projections, leaving you with an outdated understanding of what your finances actually look like. Especially during aggressive periods of growth it can be really hard to even know what the fundamental stable point of a given branch is, let alone for the organization as a whole.
I hear a lot of these stories about hubristic startups overextending and then crashing and burning these days. It's telling that so many upper-class and upper-middle-class individuals are so insulated from the constraints of reality.
I absolutely agree that the overextend and crash model is a major issue, but I do think that blaming it essentially on rich kids not knowing the value of money is oversimplifying.
Obviously this article specifically paints them in that light, written as it is with both the benefit of hindsight and the need to form a coherent narrative, but the only part I found truly damning was the founders saying "It was a shock to learn we were in dire financial straits". That should never come as a surprise - it's a shitty thing to find out, for sure, and maybe one you can't solve, but it should be something you at least see coming in the spreadsheets a mile off.
I think the larger problem is the culture of, and misaligned incentives around, large investments and the VC world. Investment is generally necessary for growth, but it shouldn't be treated as a sign of success in and of itself - if anything, it's the opposite: akin to debt, only to be taken on minimally and when necessary. Businesses tout huge funding rounds and massive valuations as if they are equivalent to sustainable cashflow, because that's what the Ubers of the world have taught them. It's easy to forget that those guys are called unicorns for a reason, and buy into the belief that your latest paper valuation is equivalent to success, growth, and even stability.
Investors also like to suggest that they share the same risks and rewards as the founders, but this is misleading at best. The founder has a single business, on which they succeed or fail. The investor has an interest in ten, or twenty, or a hundred. Pushing them all to overextend in the hope of explosive, exponential growth from one is a reasonable strategy to maximise return for the investor, but one that leads to failure for the majority of individual businesses.
Put all that together and it's hardly surprising to me that founders, and the employees who work for them, end up making a lot of the wrong decisions and ultimately paying the price for it.
I don't know of it's how the article is written, but I'm always surprised when they talk about repeatedly buying the wrong machinery.
They have a product. They know how that product acts, and if they don't they can measure it.
But they buy freezers that can't cope and packaging that doesn't work and etc etc.
Maybe I'm being harsh, but this feels a bit like the modern Internet Expert - they can use Google so they think they can do anything, so they balk at the cost of production engineering.
I say this to try to explain my reaction to this article. I recognise that maybe this is all projection on my part, and perhaps I'm being unfair.
I don't think you're being unfair per se, although I'd say you are doing a tiny bit of what you say they're doing: you're assuming that matching the right manufacturing tech to their product, or picking the right process engineering firm, is easy or self evident.
I'm not defending these guys specifically - I haven't done any additional reading on them, so all I know is what the article gives, but I did want to give another perspective on what's causing so many startups to fail on a fairly similar trajectory.
Maybe they made decisions that really were obviously wrong: quotes like the one about not knowing their own financials certainly suggest that was the case in some places. Even so, those decisions would be presented as smart and calculated risks had they succeeded. Equally, decisions like which process engineering firm to use are presented as cheap and foolish when there could have been a thousand complex variables that led them to do the best they could with the information available.
Sometimes you've got to gamble, sometimes it's best to play it safe. The pressure and advice to gamble on growth comes from people whose interests are in an overall win, not necessarily in your specific business. The way the press frames you is pretty much entirely predicated on the outcome of that gamble, regardless of whether it was pure genius or blind luck. In short: it's all kind of messy, and I mainly just wanted to underline that.
It's specifically that they aren't normally free of those constraints, and then suddenly have more money than they know what to do with. When tens of millions of dollars are suddenly available, unless you have experience dealing with money on that scale you start to lose track of what that much money does and does not mean. $19 million dollars definitely means you can have three to five storefronts and a small factory backing it up, but you're not going to be the next Ben & Jerry's without a lot more money and infrastructure.
I mean the only time they seemed to have more money than they knew what to do with was at the start. After that it was more a case of not even knowing how much money they had.
Yeah, it seemed to also be that they were great and really creative at making ice cream, but wouldn't listen to other specialists (accountants, production specialists, food industry experts who told them not to use square containers, etc.). It's a problem Socrates (maybe Plato?) identified that being good at one thing tends to make one believe they are proficient in a number of other things they have no idea about. See also Dunning-Krueger. On the one hand it seems incredibly prideful/conceited and it's hard not to think of them with contempt, but I'm trying to imagine what I would do if I suddenly had to find a bunch of those experts myself that I trusted enough to run a business with...
Yeah, it's easy to fail to update your projections, leaving you with an outdated understanding of what your finances actually look like. Especially during aggressive periods of growth it can be really hard to even know what the fundamental stable point of a given branch is, let alone for the organization as a whole.