That sounds like a lot of money to me. I’d honestly be interested to learn how that is actually a restrictively small amount of money. Anyone want to break the numbers down for me?
30,000 customers with an average of 2 weeks of food (making a small assumption.) Marketing, website hosting, IT, manufacturing, packaging, shipping, insurance, salaries, and overhead. It’ll be a couple iterations before they show a profit. According to a few news articles, they received $2.1 million USD from crowdsource backers, and $1.5 million from investors. I’d imagine the profit margin is around 20%, and it’s probably all going into R&D, production, and savings (any sane company better be saving at least 6 to 12 months of operating cash.)
Pure speculation, but they’ll have to show a profit within 2 to 3 years, most likely, or face penalties from the investors. If 15k people remain as subscribers, with an average monthly subscription of $192.50 (between 2 weeks and 1 month) and if they have a profit margin of 20% (picked it from the air) then their monthly gross would be around $577,000 USD. After paying employees and overhead they’re probably looking at $200k or less leftover for R&D and savings. This means it will take roughly 2 years to pay back the $1.5 million, and still remain competitive. I’d bet that they actually see 40k+ subscribers by next year, and that they’ll be wildly successful.
Thank you, just thank you. Could not have explained operating costs, loan repayments and necessary cash buffers better myself.
I’d be surprised if they were actively trying to save any money. Like most tech startups, they might be hoping to raise another funding round to keep themselves going and expand operations. But unlike most tech startups, they make a real product and have money coming in, so they don’t have to worry as much about burning through their funding.
You always, always, always want to save money. Always have an emergency fund of at least 6 months of operating costs, whether you’re a multimillion dollar startup or an average joe flipping burgers. It’s shortsighted and dancing with disaster if you don’t. They could get sued, have unexpected tax liabilities, or run into an awesome opportunity for investment where they just need a pile of cash. That’s how you build wealth.