Feeding the Rebels
Not Boring: Thursday Edition + Our Giant COVID Survey
Hi Friends 👋🏻,
Happy ✨Thursday✨ and welcome to the all-new Thursday Edition of Not Boring.
As a reminder, I’m splitting the newsletter into a Monday edition featuring an original essay or analysis and a Thursday edition featuring Links & Listens, Books, and bonus content like guest posts and interviews. Today, there are three sections:
Not Boring’s First Guest Post: Feeding the Rebels by Jeremy Diamond + Q&A
Links & Listens
Let’s get to it.
First things first. If you’re here because someone shared this newsletter with you or you clicked a link somewhere, welcome! Subscribe by clicking the link below and I’ll send Not Boring to you every Monday (and maybe Thursday) morning.
Guest Post: Feeding the Rebels
Today, I’m sharing the first of what I hope will be many guest posts in Not Boring. The goal of these guest posts is to feature the work of someone who is thinking and writing about the types of things that you and I are interested in, and who has a much deeper knowledge of a particular topic than I do. Today’s post by Jeremy Diamond is a perfect kickoff.
In Feeding the Rebels, Jeremy Diamond applies business strategy frameworks to a topic that has become even more relevant during the Coronavirus: food delivery. He compares two divergent paths by looking at companies that exemplify each approach: CloudKitchens vs. Tock.
How this works: I’ll share the introduction of his piece, link to the full piece on Medium, and do a Q&A with Jeremy. Since this is the first time doing this, we would love your feedback! Without further ag
Feeding the Rebels
The most important shift in restaurants in the past decade has been the rise of online ordering and delivery. UberEats, Postmates, Doordash, and a handful of other apps have been knife-fighting (in extremely uneconomical ways) for the privilege of becoming food delivery aggregators. Own enough customer demand, the thinking goes, and not only will restaurants go through you to reach customers, they’ll pay you 30% of each order and thank you for sending them business that would have gone elsewhere!
But delivery apps have problems on both fronts. Because the supply of restaurants on these apps is mostly commoditized, customers will go wherever they get the best deal, which means the apps are constantly spending on marketing and discounts to reacquire churned customers. On the restaurant side, margins are already so thin that shifting the channel mix towards delivery quickly becomes unsustainable.
For the past few years, restaurants and delivery apps were putting on a delicate balancing act trying to make this model work. Coronavirus has blown it all up. Customers still demand delivery but it’s now obvious that the existing delivery app business model is not sustainable for restaurant owners. And since these apps are very much not in the business of running restaurants, if it’s unsustainable for their suppliers, it’s unsustainable for everyone.
The takeout and delivery business needs to be rethought. I see two new popular paths emerging. They represent diametrically opposing views of this space. Investors and operators need to realize what they’re signing up for before they go too far down a path that promises only the same unsustainable economics as our current crop of delivery apps…
Read the rest of the essay on Medium. It is excellent, and includes deep dives on:
A comparison of CloudKitchens versus Tock
The Five Forces of Food Delivery
What drives value for a restaurant business?
Read Feeding the Rebels by clicking the button 👇
Q&A with Jeremy Diamond
Tell us a little bit about yourself - your background, what you’re up to now, and how you got interested in restaurants and the delivery wars.
Back in 2016 I was regularly attending VR and AR meetups here in Seattle. I met a couple of engineers who were working at Oculus Research and we hit it off. We stayed in touch. A couple months later, they told me they were leaving to start their own thing and they asked me to join them. The company we started is now known as Picnic.
That's how I got interested in restaurants and delivery. I studied the business models of quick-service restaurants and pizzerias so that we could build a product that aligned with the realities of running these businesses and improved their models in a sustainable way. In the process, I learned all about these devastating new forces in the space from the people who were being most directly impacted: food service operators and employees.
We brought on a professional CEO to take over in 2018 and I left on good terms. These days, I'm mainly consulting, sourcing potential investments for a handful of venture funds, and advising startups.
Without giving too much of the essay away, people and location are crucially important to a restaurant's success. Within that framework, how do you account for the success of Taco Bell and Domino's?
I believe the big common thread between Taco Bell and Domino's is about winning visions operationalized by strong processes. Process is a type of capital. It just doesn't go on a balance sheet. Process is an extension of people and place. And both strong branding and operational excellence at the store level are extensions of process.
Taco Bell's management, probably more than any other restaurant chain, understands what its brand is. It's fast, innovative, quirky, and self-aware. And those values run from top to bottom. They were early to lean into social media. Their menu is easily the most "fun" of any big Quick Service Restaurant (“QSR”) brand. And can you think of another national chain that would replace job applications with "Hiring Parties"? They know how to sell experience and affinity. And that means repeat business. People associate with the brand so strongly that Taco Bell can open a pop-up hotel and sell out reservations in two minutes.
They were the fourth biggest QSR chain the country last year and they did it with a fraction of the total store footprint compared to any of the top 3.
Domino's is also elite on branding and affinity, especially relative to their peers in pizza delivery (Papa John's, Little Caesars, and Pizza Hut). More importantly, Domino's figured out the importance of online ordering earlier than any of its competitors — they launched their Pizza Tracker in 2008! They made the right investments to build a best-in-class ordering experience and a state of the art customer loyalty program. And even though delivery-first pizza businesses are a little less reliant than most on a specific place, they've effectively leveraged their brand (and used some clever tactics) to maximize the return on that part of loyalty.
There are likely to be a lot of opportunities for new restaurants out of COVID. How would you think about building a restaurant business from the ground up today?
There are so many considerations.
What can you execute? Which cuisines? Which operational models? And who else will help you? There's going to be a rare opportunity to quickly pull together new teams or back existing ones with strong track records and brands.
In many neighborhoods, you'll literally be able to walk down the main drag and see exactly what has been lost, from the names and hours and formats down to the menus. Is there still a demand for what those businesses brought in terms of cuisine, experience, or community presence?
Even with the drop in supply, it's going to be nearly impossible to launch a new business pre-vaccine if it's built entirely on in-person dining. Even if you get your permits quickly and nail your brand, operating model, menu, and pricing, the same real estate won't be able to serve as many customers until social distancing is in the past. So you'll have to get creative with landlords, who may be loathe to offer you advantageous or flexible terms when they know their space will be more valuable very soon.
And even then you need to figure out a way for the service or experience you provide to transition to the home — either by choosing the right cuisine or working through a trusted partner like Mystery Night In or Tock To Go. If we ever have to go back into lockdown, you need to be ready.
Lastly — and I'm obviously biased on this one — consider that integrating automation into your business model from the jump can significantly increase margins and enable reliable, predictable staff scheduling. Without the lunch or dinner rush and with more attention on front of house, you and your people can spend far more time getting to know customers and the community.
Why do you write?
I write in bursts. These take a lot out of me, so I have a high bar: When I can't stop thinking about a subject and I'm convinced that I have a particularly unique perspective on it, I will try to write something.
For public issues, this is pretty rare. But I have a particular affinity for pitch decks, so I regularly take the time to review decks and end up writing founders tomes of individualized feedback on what message they're sending and actionable advice on what needs their attention tactically or strategically. The back-and-forth that produces is incredibly fulfilling.
Where can people find you online?
I'm on Twitter @jer_diamond. This is the best place to reach me.
I occasionally publish on Medium — I recently wrote the fourth in a series of posts that I started last year on the Robotics as a Service business model. I also used to write a blog where I reviewed old startup pitch decks, but I abandoned it because the format never felt quite right. Like I said in the last answer, I vastly prefer giving that feedback directly to founders.
I'm also on Instagram but 99% of my pics are of vanity license plates.
Giant COVID Survey
We are all living through something that (hopefully) we will never live through again, and we want to take a snapshot of everything we’re thinking, feeling, and doing.
So Anja Jamrozik and I got the band back together - we worked together at Breather, where Anja was the Director of Research - to build the Giant COVID Survey. It’s the most wide-ranging documentation of our behaviors, views, and predictions for our unpredictable future on the internet.
There are a lot of surveys out there about very specific topics or about the downsides of the Coronavirus, so we created something different: a survey that spans a variety of topics, including the lighter and weirder aspects.
For this to work, we need as many people as possible, from all areas of the country, demographics, ages (above 18), and circumstances to take the survey. For that, we need your help.
We’d love for you to take the survey here
Share publicly: LinkedIn, Facebook, Twitter, Instagram, Slack groups
Share with your family: those overactive family text chains? Drop the link in there and ask your family to participate.
At the end of the survey, we will produce a report with all of the results, interesting findings, correlations, and predictions, and you’ll be the first to receive it.
Links & Listens
💸 $1 trillion in equity: How Carta is set to unlock the private markets | Tribe Capital
Tribe Capital, a quantitative VC fund that writes really well, penned a love letter to one of its portfolio companies, Carta, which caught some heat last week for laying off 161 employees while simultaneously raising $200 million at a $3 billion valuation.
Layoffs aside, Tribe’s essay was excellent for a few reasons:
It introduced (to me) the concept of N-of-1 companies - companies that identify a new atomic unit of value, capture the atomic unit of value, and transform into a central utility. Facebook did this with the Social Graph, for example.
It recognized the massive problem with the illiquidity of startup employee equity and discussed Carta’s ability to solve the problem.
I love it when a founder calls his shot, like a strategic Babe Ruth. It’s easy to say “we meant to do that” post-hoc; it’s much more impressive to call out a complex, patient strategic plan early and execute against it. Carta’s CEO, Henry Ward, did that in his 2015 Series A pitch deck, plotting a path from boring cap table management software to capturing the full equity management stack.
(Small world: Jeremy wrote about the 2015 Carta Series A deck that this slide came from here)
Nathan Bashchez and Dan Shipper set the Substack newsletter world on fire last week when they announced that they would bundle their popular newsletters, Divinations and Superorganizers. (The Substack newsletter world gets pretty wild.) Substack doesn’t support bundling - offering multiple subscriptions for one price - but it’s a feature that many writers have been asking for, for the reasons that Baschez lays out in his piece.
Essentially, if subscribers have a little bit of demand for multiple newsletters, but are willing to pay different amounts for each, bundles often increase revenue to each writer while increasing value to each subscriber. The full piece is worth a read to get a better understanding for how bundles, on Substack and more generally, work.
📹 Who is MrBeast? | Blake Robbins
Sad to say, but I’m too old to know what’s going on on YouTube. But Blake Robbins is all over it. This week, he wrote about the fastest-growing star on YouTube: a 21-year-old from North Carolina who goes by MrBeast.
MrBeast has 34.2 million subscribers. For comparison, on Twitter, Elon Musk has 33.2 million followers, and Virat Kohli, one of India’s most popular cricketers, has 34.6 million. And MrBeast’s number is growing faster - he adds 1.5 million subscribers every month. Learn how he does it, what that says about what works on YouTube, and generally what the cool kids are up to by reading Robbins’ piece.
Somehow, we are still facing a massive shortage of Personal Protective Equipment (PPE) in the United States. Nurses are wearing trash bags and doctors are re-using masks for weeks at a time. Masks are available - there are millions of them in China - but they’re not getting to our frontline medical workers.
Jesse Koltes, a supply chain expert who has years of experience importing from China and selling to stores like Walmart, Costco, and Kroger, is working to fix the problem. He teamed up with my friend David Perell to fix the problem:
My plan is to donate them to health care facilities in need. In the event that I can sell them at cost so that I can buy more masks, I’ll do that.
Let me be clear: I'm not trying to make a penny here. I just need your help. Money is still the key resource to getting the masks from China so we can get them to hospitals in need.
Koltes and Perell are raising $50,000 to buy masks to donate or sell at cost to US hospitals. I trust the people behind this, my friend Eric Jorgensen shared it with me, and I donated myself or I wouldn’t ask you to. It’s a great cause and the right people to make it happen. If you would like to donate, you can get to their GoFundMe by clicking the button.
A Thread on the History of the Anti-Mask League of 1918* | Tim Mak
Speaking of masks, NPR Investigative Correspondent Tim Mak wrote a thread on the Anti-Mask league of 1918 and found a host of similarities with the current situation:
a portion of the population resistant to the measures; a business community crying out for relief; a second wave after an initial loosening; threats to public health officials
If you have any feedback on the Monday/Thursday split or the guest post, I would love to hear it. Just reply to this e-mail or comment below.
And of course, spread the word! Since Monday, we’ve made 41 new friends, thanks to you and to a mention in the Financial Times (!!). This is starting to get exciting. If you’re enjoying the Not Boring Newsletter and know someone else who would too, invite them to come hang out and learn with us.
That’s all for this week. See you Monday.
Thanks for reading,