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Nitrozac & Snaggy

Instant Gratification


This is the fifth and final story of a Re/code Special Series about the new instant gratification economy. In five days of stories, photos and videos, we are exploring the explosion of tech startups that cater to our every need and desire, on demand.

When I lose myself in typing until my stomach tells me that it’s time to eat, I open my phone and type “sp” in the search bar.

The only-in-Silicon-Valley on-demand food services SpoonRocket and Sprig have quite literally fueled the writing of this instant-gratification series.

I check both their menus to see what appeals. SpoonRocket is the cheaper of the two, and has a nifty system of roving hubs of cars that make its orders arrive super fast. Sprig food tends to be fancier and healthier, and each meal is accompanied by a tiny dessert at the end, like a vegan dark-chocolate truffle, or a sort of fruit-and-nut brittle.

I like them both.

For this series, I welcomed the on-demand world into my life, and then it crept in even further. One night after the stories started publishing, I took the train home and saw the station covered in ads for a startup I had just written about, the restaurant-delivery site Caviar, touting deliveries from the hippest tapas and deep-dish pizza joints in town that arrive quickly and without waiting in line behind hipsters.

I tell someone that I like her desk bouquet, and she says it came from BloomThat, an on-demand flower service that shows up in 90 minutes.

muni-caviar

Liz Gannes

Even my editor caught the instant bug. He updated me via instant message about the Dominos pizza he had rush-delivered via an app as we worked on late-night edits. He ordered next-day underwear on laundry day.

It turned out that my local scoop shop launched its own app, called “Ice Cream Life.” Ice cream is the ultimate on-demand food, right? If it melts — game over.

Some days you just need a little ice cream, like perhaps the day after you eat a vegan enchilada and cold-pressed juice with turmeric from the on-demand food-delivery app Thistle. My two pints of salted caramel and mint confetti show up 26 minutes after I press the button. With two pink spoons.

There aren’t yet answers to some fundamental questions about the staying power of the instant gratification economy. Is there wide-scale demand? Will people pay for it? Who is this for? Will it work outside of cities?

So there are doubters, and for good reason.

“There is a small market for stuff to be delivered with high reliability quickly,” says Massachusetts Institute of Technology engineering professor Yossi Sheffi, who leads the school’s research on transportation and logistics.

“There seems to be a reason all these services were started in San Francisco: Because there are lots of young people who work long hours and have lots of money,” he says. “This is not a slice of America. It’s not even in every neighborhood in San Francisco.”

That may have been true in the beginning. But on-demand apps are clearly reaching different demographics. SpoonRocket’s Anson Tsui will tell you that he and his co-founder came up with the original idea for the company when they were frat brothers in college at Cal, hungry after a night of partying but too drunk to drive. (Coincidentally, the founders of Caviar were pledge brothers at the same frat at Cal at the same time)

Today, busy working parents are some of the most vocally supportive users of these apps. On Yelp, you’ll find Oakland mom Lempi Miller, who writes, “SpoonRocket is like the soccer mom’s secret weapon.”

Wall-E / Walt Disney Pictures

The availability of such services — the mere possibility — has stoked demand.

“I have the Amazon app on my phone, but now that’s overlooked. And I never think of going a few blocks to Walgreens,” says Chris Jennings, an online video host based in San Francisco.

“I signed up as soon as it was available, and I got the initial email, “Would you like to be part of the beta?'” Jennings says. “They gave me a free six months, and it just keeps renewing. That was April 2013. I’m sure I’m going to have to pay for it at some point, but now I’m hooked.”

Jennings is talking about Google Shopping Express, the company’s expensive experimental same-day service built to compete with Amazon. He starts clicking around his email to find receipts. “What was my last order? A bar of soap, a tube of toothpaste, compost bags, a bath mat.”

He clarifies. “Those are all separate orders.”

Jennings has set up a virtual Google Voice number attached to his doorbell so he can let people into his entryway from his phone when he’s not home.

“Say you run out of toothpaste in the morning, you can order it, and then it’s ready for when you brush your teeth at night,” he says.

“The majority of the time, there’s no interaction,” Jennings says, meaning he doesn’t have to say hello to a delivery person or sign for a package.

And in the future, people may be taken out of the delivery equation altogether.

Amazon Prime Air is in development, but faces regulatory challenges.

That future is coming sooner than you think. Two years ago, the geek world went wild for an idea called Tacocopter. “Flying robots deliver tacos to your location,” said its website. “Easy ordering on your smartphone.”

People wanted it to be real so badly that they took it seriously.

PCWorld nitpicked: “It’s unclear whether or not Tacocopter uses a native app or a smartphone-friendly website to accomplish this.” Other logistical issues — time of delivery, quality of tacos — also got some play.

The more serious-minded tech-commentary site Techdirt was already anticipating the theoretical regulatory fight with the FAA. “It wouldn’t surprise me to see that the regulations that now limit such uses of drone technology will almost certainly remain in effect much longer than the technological limitations remain a hurdle,” wrote Mike Masnick.

Eight months ago, Amazon upped the Tacocopter stakes with a promo video for Amazon Prime Air, showing a hovering robotic aircraft depositing a package on a suburban patio. It was a marketing stunt designed to jumpstart the holiday shopping season.

Or was it?

In July, Amazon wrote to the FAA asking for permission to test flying commercial drones outside at speeds of up to 50 miles per hour. The company said it hopes to deliver packages weighing five pounds within 30 minutes of orders being placed.

Though she’s not currently working on drone delivery, Tacocopter co-creator Star Simpson says she’s optimistic about the prospects.

“It actually is happening, period,” Simpson says. “It’s just a matter of how long.”

Simpson, who is now at a stealth hardware startup in San Francisco, agreed that the big holdup for drone delivery in the U.S. is legal, not technological. But that doesn’t mean she doesn’t take it seriously.

“You always have the bullish Silicon Valley approach of charging ahead despite regulations, but I’m not excited about that when you’re putting a flying lawnmower above a city full of people,” she says.

Shervin Pishevar crop

Shervin Pishevar of SherpaVentures

The ludicrous and the savvy are not so very far apart. While many technology investors lament missing out on Uber before the transportation appmaker was worth billions, and now are pouring money into “Uber for X” startups to make up for lost ground, Shervin Pishevar is not one of them.

Pishevar invested in Uber when it had a grand total of 9,000 customers in the world. And he has followed Uber with investments in more than 20 on-demand startups. Earlier this week, we published Pishevar’s Sherpa Ventures report on how on-demand companies are using technology to connect people and services.

As we’re talking about the report over lunch, Pishevar muses on the broader implications of on-demand.

“A lot of things fundamentally change,” he says. “Does the architecture of homes change because there’s more space when you don’t need garages and kitchens? Do you really need a grocery store? You shouldn’t use all that real estate in a city for giant parking lots, you should push a button and be able to get what you want delivered, like Instacart.”

He continues. “And then you argue, is there a world where you have Munchery [another San Francisco food creation and distribution service] delivered to a restaurant that’s not really a restaurant, but it’s a … it’s a front-end. It’s a beautiful spot with a beautiful view, and it doesn’t need a kitchen, just have a few tables for a sit-down dinner.”

This train of thought has taken him to a new place. “You know, I hadn’t thought about that,” Pishevar says. “It’s just a … a distributed table. And then someone would come serve you.”

Is that actually going to happen?

“It will now,” Pishevar says. “I will make it happen. That would be a really great experiment.”

Caviar orders in progress at San Francisco restaurant Split Bread

Caviar orders in progress at San Francisco restaurant Split Bread, owned by Caviar investor Mixt Greens. Vjeran Pavic for Re/code

You don’t really know how instant fits into your life unless you try it on for size. Maybe you don’t mind waiting an hour for dinner to arrive at your door. Or maybe you schedule a same-day house cleaning and you never want to go back.

One morning while reporting this project, I wake up and wonder which instant gratification apps do breakfast. It’s funny — I’ve gotten lunch, dinner, groceries and ice cream on-demand, but never breakfast. I first go to Google Shopping Express, which on my iPhone is abbreviated to just say “Shopping.”

Okay, breakfast foods, let’s see what you’ve got. A search for “eggs” returns the following items:

  • “Green Eggs and Ham” (hardcover) from Target
  • Sour Brite Eggs by Trolli, 24 count, from Smart & Final
  • LiceMD Lice & Egg Removal Kit from Walgreens
  • Harris Bed Bug Killer from Cole Hardware

For kicks, I order the only item that has any vague connection to eggs laid by a chicken — a backpacker meal of freeze-dried instant eggs and bacon from REI.

It’s gross. It turns out that some things aren’t meant to be instant.

 

Minor setbacks aside, this I-want-what-I-want-when-I-want-it trend isn’t going away anytime soon, because the companies in the space are relatively cheap to run and are incredibly well-funded. Earlier this year, I started making a list of investment rounds for on-demand food startups. Week by week, it kept getting longer.

The courier service Postmates got $16 million in February. Sprig raised $10 million in March. SpoonRocket took $10 million in April. The next day, Munchery said it had raised $28 million. Then Caviar took $15 million. In May, restaurant delivery site DoorDash collected $17 million. In June, grocery delivery service Instacart raised the stakes to $44 million. Then independent local grocery service Good Eggs raised a big round that hasn’t yet been publicly announced. Just this week, the Brazilian startup Movile said it has $55 million for its motorcycle delivery app iFood, which is available in 60 Latin American cities.

A popular justification for all this food-startup fundraising is frequency: Most people eat three times a day, at least.

No, really, that’s what every venture capitalist will remind you. This market is an opportunity because it ties into existing daily habits. People eat more often than they need to Uber across town. And so, the biggest opportunity in “instant” is food.

In a widely shared guest column on TechCrunch called “The New Fast Food,” entrepreneur Matt Mireles wrote, “Food is a market like the Internet is a market — it’s too big to be to considered just one ‘market’ … Counted in terms of DAUs, the number of potential daily active users for these companies is in the billions.”

(Mireles, by the way, has had two different on-demand food startups, one around booze delivery and another around groceries. He tried a whole bunch of different models, but ended up shuttering the last one, EasyFridge, after he decided his heart wasn’t in it.)

“Local winners are typically monopolies, and I think that’s why investors think they’re appealing. Monopolies are worth paying for,” says Andreessen Horowitz partner Jeff Jordan, who was formerly CEO of OpenTable and led the most recent round for Instacart, despite a significant bump in price since the previous round.

It’s not just VCs who believe in the business. Restaurants tell me that brand-new delivery startups are having a substantial impact on their own volume and revenue. Mixt Greens CEO David Silverglide says he invested in Caviar after seeing how much more professional and efficient they were, compared to alternatives like Seamless and Postmates.

The first New York location of the Szechuan Chinese restaurant Han Dynasty has lines out the door. The restaurant tells me that a partnership with Caviar now accounts for 13 percent of the East Village restaurant’s business. To be precise, Caviar brought in $347,000 worth of food orders in the past 10 months for that one location.

SpoonRocket CTO Anson Tsui

Vjeran Pavic for Re/code SpoonRocket CTO Anson Tsui

Though some of today’s startups seem like clones made from dot-com DNA, others say they are raising the stakes higher by making the food themselves.

“Anything over 30 minutes is not on demand,” declares SpoonRocket co-founder and CTO Anson Tsui.

SpoonRocket is either a really interesting company or a really boring one. It makes meals and it delivers them, faster than anyone else. The company says its average delivery time is eight minutes. SpoonRocket used to have its own cars, but after two of them were totaled, separately, in 24 hours, the insurance costs went way up, so now drivers put flags and magnets on their personal cars. It works just fine.

“I see SpoonRocket as being the Henry Ford of food,” says Tsui, who is prone to hyperbole.

Sure, making food is not novel. The innovation here is making food that ties into smart logistics systems that match supply and demand, and coordinating crowdsourced workers so that meals arrive so fast it seems like magic.

“We’re mass-producing the same meal for all these people. We get economies of scale that no restaurant will ever have because of the physical location. Whereas, we can serve the whole Bay Area with the same supply.”

This is not just a restaurant, says Tsui. Combining the core mobile functions of location and real-time makes for a fundamental shift beyond what other mobile apps — besides Uber — are doing.

“People will look back and say, ‘I can’t imagine how life was like before this,'” Tsui says.

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On-demand shopping used to mean the Sears catalog.

Today, it’s flowers, marijuana, massages, smoothies, tamales, groceries, tacos, freeze-dried eggs, booze, cashmere sweaters, underwear and a guy to fix your kitchen sink — all delivered later that day.

Especially for those who live in the cities well served by these services, it’s probably time to start thinking about what deserves to be slowed down, and what things we’d prefer to wait for and savor. Either that, or the inexorable march toward convenience will bring us ever closer to fulfilling the prophecy of those shapeless “Wall-E” couch potatoes, who have trouble standing up after sitting on the couch for so long.

But beyond instant — what comes next?

It’s probably making those brilliant on-demand logistics systems even more brilliant, anticipating our wants and needs before we even have them, and starting to send things our way before we push the button.

Both Amazon and Google are already working in this direction. Or maybe instead of tacos and drones, we’ll all just get 3-D printers, so we can replicate our meals at the table, just like Jane Jetson.

And maybe then Veruca Salt would just calm down.

Read more from the Instant Gratification series:



4 comments
Peter Fretty
Peter Fretty

The instant operations are a foreshadower of the potential harnessed within what Cisco calls the Internet of Everything. It's about bringing together people, process, data, and things to make networked connections more relevant and valuable than ever before-turning information into actions that create new capabilities, richer experiences and opportunities. 


Peter Fretty

Tom Mock (Ciena Corp.)
Tom Mock (Ciena Corp.)

lompp brought up the limitations of the infrastructure, but focused on physical infrastructure. What about the network? How do you keep up with the connectivity needs that these applications create? Furthermore, many of the things consumed in an  instant gratification economy” are actually being delivered over networks (e.g: movies and other entertainment.) Making sure our networks can keep up is another fundamental issue since this instant gratification economy won’t be slowing down. 

lompp
lompp

A few thoughts I got from reading this very interesting and well-written article:


1. Who are the losers?


Assume that the amount of food a person can eat in a day is limited. You describe the winners of on-demand? Who are the losers? Who is selling less food or making less money because of on-demand?


2. What are the limits?


Eventually, maintaining the infrastructure for on-demand will be costly. Gas prices are on the rise. More delivery, means more cars means more wearing-off the infrastructure. Who is gonna pay? What about sustainability, especially in the context of climate change? I guess in San Francisco most items could be delivered with some sort of e-mobility. What about parts in the US or in the world where this couldn't be done?


3. What is the total size of the on-demand food market?


It would also be interesting to relate that to the total food market.


4. What does the profit/revenue ratio of a typical on-demand food start-up look like in numbers?


5. What comes after the "predict-economy"?


Once companies serve our needs before we even know them, we may loose the ability to formulate our needs. But isn't this ability the very core of being an individual? If we would loose this ability, wouldn't we loose our drive? And would that ultimately kill our ability to innovate? 

ftl
ftl

Instant delivery needs to go to the next step. Every one of these operations does basically the same thing, and has to create its own delivery network. The real scale of economy will come if all these deliveries for different services can be done by a company specializing in deliveries.


Only the biggest companies run their own web servers. Everybody else rents that service from a company that specializes in it. In the instant delivery world it needs to be the same for all these startups for then deliveries can be optimized not just by product but also by delivery location of all products. It's what UPS and FedEx are all about. If somebody can crack that nut, then that's where all the money will be.

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