Kozmo

Yesterday was a bright sunny day on the east end of long island. So the Gotham Gal wanted a hat to shield the sun from her face and pulled out this gem from one of our closets.

jo in kozmo hat

For those that don’t know, that’s a Kozmo.com logo on the hat. Kozmo shut down in early 2001 and has been gone for over fourteen years. But I still see bike messengers riding around NYC with their messenger bags. It turns out the schwag is often more durable than the company. In this case, that has absolutely been true.

My prior venture capital firm provided much of the early capital to Kozmo and we wrote off something like $25mm or $30mm when it went up in flames.

On the way back from lunch, the Gotham Gal turned to me and said “Kozmo was way ahead of its time.” I woke up thinking about that this morning. It’s true.

Kozmo pioneered the idea of same hour delivery in 1998, fifteen years before its time. Kozmo pioneered the idea of raising and spending hundreds of millions of dollars a year long before it became fashionable, even normal to do so. Kozmo nailed the practice of scaling while your unit economics are upside down. They took that practice into almost twenty markets before the capital markets turned on them and there wasn’t money available to incinerate anymore.

I hope it all turns out differently this time. There are many reasons to hope and expect that it will. But for now, I see a lot of similarities out there in the delivery space to what Kozmo was doing, long before it was common.

I have a lot to be thankful for from Kozmo. I’ve got hats and messenger bags. But more than that, I’ve got scars. I wear them every day.

#VC & Technology

Comments (Archived):

  1. awaldstein

    I remember them well.Things certainly have changed.

  2. LIAD

    “I’ve got scars. I wear them every day” – we all do bruva.upside is what starts as a wound turns into a strength.now that would be an interesting superpower: x-ray vision to see mental/emotional scars.

  3. Anne Libby

    Too funny to see this today, Fred: last night I lounged at home in a Kozmo tshirt. I loved them here in NYC, still remember a weekend of holing up for a Bill Murray film festival, courtesy of Kozmo DVD delivery.

    1. fredwilson

      with ice cream too?

      1. Anne Libby

        Pretty sure it was Cherry Garcia.

  4. steve nson

    “They took that practice into almost twenty markets before the capital markets turned on them and there wasn’t money available to incinerate anymore.” This quote has me cracking up.

    1. fredwilson

      it is the absolute truth

      1. steve nson

        I believe you Fred. Please enjoy this short video of Floyd Mayweather burning money a la “Kozmo” style πŸ™‚ https://www.youtube.com/wat…. I believe that’s were the term “burn rate” came from.

  5. Rob Underwood

    Inspires me to break out a bunch of my old Pandesic swag!

  6. David Semeria

    That’s a pretty expensive cap Fred πŸ™‚

    1. fredwilson

      indeed

  7. creative group

    I have not failed. I’ve just found 10,000 ways that won’t work.” – Thomas A. Edison

  8. Tom Labus

    Amazon has Bezos and timing. Along with a some magical hold over the markets.

  9. John Pepper

    This one brought me back to my Kozmo for Food idea from spring of 2000… Just found and posted the AOL chat session between my brother and I as we conspired to dominate using the Kozmo model. Thanks for motivating me to find this Fred. If nothing else my bro and I will share a few chuckles about the chat session. How young we were πŸ˜‰ http://bit.ly/kozmofood

  10. Tejaswi Nadahalli

    “I hope it all turns out differently this time.” Oh boy!

  11. Pranay Srinivasan

    “How upside down were the unit economics” is probably the answer to “I hope it turns out differently this time”

  12. Jorge M. Torres

    Didn’t you once say, Fred, that it takes $30 million to educate a venture capitalist? Pretty expensive education.

    1. fredwilson

      Yup. I think John Doerr is responsible for that line though

      1. Mario Cantin

        You’ve certainly graduated then.

      2. William Mougayar

        One I heard is:”both vcs and astronauts are expensive to train.”

        1. pointsnfigures

          Add commodity traders to that one.

      3. Richard

        Why didn’t Kozmo hook up with a fast food restaurant ?

  13. TyDanco

    Angel investors mostly have too large a collection of $25k t-shirts. Not scars, but death by 1000 cuts. I think they are great humility reminders…I still use a vintage Drexel Burnham Lambert yellow silk “power tie” when required.

  14. JimHirshfield

    I like her sweatshirt better.

    1. fredwilson

      Its a good one

  15. JimHirshfield

    About those scars…”Muscle building cannot occur without first tearing down muscle fibers, the main component of muscle tissue.”http://www.livestrong.com/a…

  16. Jordan Thaeler

    I’m not convinced any of these last-mile services will produce a profit until they have massive scale. A lot of them claim that this model now works because they don’t have to own the delivery asset and it can be flipped on-demand but how many people are going to drive 5 miles to deliver something in traffic only to earn $1? The math here doesn’t add up in my book.

    1. Richard

      its proven to be a solid business (as far back as I can remember) for restaurant delivery

      1. Jordan Thaeler

        Can you share some examples of these sorts of companies at scale? I’d like to see some unit economics if you have them πŸ™‚

        1. Richard

          Dominoes Pizza. Thier first slogan was pizza in 30 minutes. ps thier pizza was awful but they kicked ass as a company.

      2. Jordan Thaeler

        Hmm that’s not exactly what I was hoping for! Pizza costs about $1 to make and they’ve figured that out for that niche restaurant segment. Often times they charge for delivery anyhow. I was looking for something amalgamated.

    2. Eric Satz

      exactly correct.

  17. Eric Satz

    delivery businesses are not technology businesses. the people and economics don’t scale. until consumers are willing to pay the true cost of convenience the way they pay for the true cost of a taxi ride, whether its a yellow cab or uber, these businesses won’t work. if there were money in just in time delivery to consumers, the incredibly entrepreneurial courier industry would have figured it out by now. kozmo wasn’t ahead of the technology, it was ahead of the psychology, which i’m not sure changes.

    1. Jordan Thaeler

      My sentiments exactly. Are startup deliveries today using VC dollars to artificially lower true costs so the business model *looks* scalable? I would think so…

      1. markslater

        yes they are. Its a race to the bottom again….

        1. Hu Man

          All you need is a charismatic CEO…

    2. Ana Milicevic

      The psychology is exactly what has changed – back in the early 00s our version of instant gratification was being able to reply to a work email on ye olde Blackberry. Fast forward to today when we’re not only all over instant gratification but we’ve also changed other aspects of our lives (e.g. even fewer car owners in urban areas, premium placed on free time vs. nuisance chore time, better selection at warehouse vs. corner store, etc).I agree though that running these types of ops at scale is a challenge. As necessary as they are in high-pop-density urban areas they may be completely superfluous in others.

      1. JLM

        .You are both right.Your observations on instant gratification are multiplied by our desire to prioritize for more personally controlled time and more direct control of our own activities.It is a very subtle development.The other night I watched a movie line almost come to blows with a Fandango ticket purchaser who jumped the line. Most of the people in the line didn’t even know what Fandango was.I get pissed off when free WiFi isn’t fast. I can’t remember when I didn’t have 1Gig service.JLMwww.themusingsofthebigredca…

      2. Eric Satz

        i partially agree. i’m speaking more specifically about the psychology of paying someone else to run your errands. a lot comes down to the good or service provided. if it is unique, the supplier can price appropriately to reflect the added convenience. if it is not, they can’t.

    3. heather

      Actually thriving delivery businesses are some of the most sophisticated technology shops I’ve been around. The algorithms needed to understand traffic patterns, restaurant make times (which change day to day, hour by hour and by cuisine), factoring the impact of weather, seasonality and event schedules, and much more separate the leaders from those who don’t start at the technology. Consumers absolutely value the convenience of delivery in my experience – but they also demand that the technology evolve and continue to be reliable.

      1. Richard

        i made my drinking Money one semester in college by coordinating a 5 person pizza delivery team.

        1. JLM

          .Or did you make your pizza money coordinating a 5-man drinking team?Hey, it could have happened that way?JLMwww.themusingsofthebigredca…

      2. Eric Satz

        i co-founded and ran an online grocery and home delivery business for 5 years. yes, we incorporated alot of technology solutions in our service, including warehouse layout, pick/pack order, and delivery routes, but at the end of the day we knew were a logistics business. we could stock, pick and deliver in the most efficient manner possible, but at the end of the day it didn’t matter because customers didn’t want to pay the true cost of having their groceries delivered. they couldn’t stomach a delivery fee and they complained when the same gallon of milk was $0.20 cheaper at [name a store]. if consumers truly valued convenience, amazon would be the most profitable store in the world, and it only makes money when bezos says he wants to prove it can.

    4. Richard

      There is always an arbitrage opportunity against those seeking instant gratification. Hacked at beach magazine delivery during college. It worked.

    5. Marissa_NYx

      I quizzed the Instacart team at Wholefoods in SF recently – I wanted them to deliver my groceries after I had shopped in store, which sort of confused them (I like to do my own shopping but I didn’t want to carry heavy bags up & down SF steep streets). Anyway, I wanted to understand their business model. the staff said they get paid 13c per grocery item ordered. So for an order of say, $60-$80 for 15 items, and with instacart’s markup on the grocery bill being nil ( consumer pays no more for the groceries ), the cost in store for Instacart alone to shop for their customer (before adding in the cost to deliver) is $1.95 . If we assume the delivery cost is about the same ie. $1.95 , that’s $3.90 in cost without adding in Instacart overheads, fixed costs and equipment (like in store lockers). I have no idea what these costs would be , but let’s again assume they equal the previous mentioned cost of $3.90. So a total of $7.80. Which is around 9-15% extra to the cost of the customer order (paid initially by Instacarts investors) . Assuming most customers would aim to have their items delivered for free or at the lowest cost (who in their right mind would pay for surge pricing when they can pick a lower cost delivery window? and when did grocery shopping become a time sensitive or urgent activity particularly now that grocery stores are open till late every night) . Even with a $10 home delivery fee, this nets off to $2.10 income for the order, I’m not clear how this can be viable or scaleable. It just seems like a lot of heavy lifting. If there is upside to a delivery business or if technology can make a real difference here then please do share. I wish I could see it . Maybe advertising on the side of their delivery vans?

      1. Richard

        The answer is obvious, markups and or hold inventory. Also, instacart does not pass through in store discounts. Better question is whether it makes sense for 1099 deliver team (from what I’ve learned tips are rare and small)

        1. ShanaC

          There are markups in nyc I believe

      2. LE

        “I quizzed the Instacart team at Wholefoods” I love love love the fact that you did that. And your analysis. Regardless of whether your numbers are right or not just the fact that you thought to do this.Also the “which sort of confused them”. That’s so typical a reply. And the chance that if you did the same thing with 1000 Instacart workers most likely none of them would ever echo your request back to management. That is almost assured. That’s why they are spending their time picking groceries (ok well most of them anyway I guess). Reminds me of the Panera Bread manager that I have made suggestions to. He stands there with a quizzed look. Later he is on his smoking break outside just getting through the day.The other thing that works against Instacart (and the markets) is that it most likely prevents a large amount of impulse buying. When you walk into a supermarket you almost can’t leave without buying something that you didn’t intend to buy. Many of those impulse items are where the profit is made. If you aren’t in the store you aren’t buying them.

        1. JLM

          .Your comment on impulse purchases is brilliant. I go to the store (infrequently) and return with $100 of stuff. I was going to get tortillas.I should never be allowed to go to Sam’s by myself or while hungry.JLMwww.themusingsofthebigredca…

          1. LE

            This is also why Staples is also in trouble. I used to go there to pickup supply items now I order everything off of Amazon. I would also buy things at Staples that I didn’t really need (and you know hunger wasn’t even involved there).So I am not even in that shopping center that much. That means I don’t stop at the liquor store next to the Staples either.In another shopping center there is a chinese restaurant that used to be packed. There was a popular movie theater in that center. (Art theater). That theater is no longer packed, hence the sushi restaurant is much less busy. Empty on many nights. Didn’t use to be like that. Movie theater provided a good base of customers. Now they need to offer groupon and any other discount they can get. Mrs. Owner Lady cries to me all of the time. I feel bad for her I don’t even use couponsthat I could with her.Retail is an eco system. If you remove some one part it is often hard to make up for that low hanging fruit of foot traffic. The local WAWA (like a 711 done right) sells cigarettes. The smokes bring people into the store just like selling lottery tickets.If WAWA had to stop selling cigarettes they would sell less hoagies. Then they’d have to raise the price of the hoagies. Then they would sell even less hoagies. Because of “magic numbers”.It appears that they will get around this by simply adding more addictive comfort foods. Not a week goes by where they don’t have another fatty or sugary offering which they are using to addict the customer base that they will lose when they finally (like CVS) decide to or are forced to get stop selling cigarettes.

          2. PhilipSugar

            Wawa also has gas and coffee.

          3. LE

            Gas you sit in the car typically (at least in NJ). They are big on coffee. But you really can’t compare either to cigarettes. It’s rare that I am in a line at Wawa and the person in front or in back of me doesn’t get cigarettes. And it’s rare that the person who takes my money doesn’t say “anything else” where that means “cigarettes” (what else is at the counter that they’d have to ask for?). I dress in dungarees and a tshirt so I probably look like “Mr. Working Class Smoker”. This is across many Wawa’s that I have been to. It’s a consistent pattern.Wawa Gas is great. Much better service than the guys with the turbans that tend the other stations in the area.

          4. PhilipSugar

            Well NJ is its own world. Even though gas is cheaper there, I hate the experience.I cannot tell you (I know you are not supposed to do this) how many people put in the pump on auto, crank a quick order in the computer pay, get their stuff, put the pump away and go.They also have great locations. I live in MD and work in DE. There is a Wawa on the border in MD (gas cheaper), right next to it there is a discount cigarette store (that’s all they sell I think) in DE (cigarettes much cheaper).I cannot tell you how busy that Wawa is. We did some work for them and some of my European counterparts could not understand what they were, when they came we went there for lunch and they just stood there with jaws dropped.

          5. LE

            I’ve actually gotten used to it since I moved here. I hated it at first also but now I have to say that I like the fact that I don’t have to get out of the car.They also have great locations.And like any major player they get first dibs on those great locations. The dregs go to people who take what they have already passed over.The other thing that makes Wawa special is the people that work there. They are all cut from the same bolt of cloth. Hard working, nose to the grindstone, fast moving, working class people. And they appear to be lifers as well. I don’t note much turnover in their labor force, unlike the Starbucks crowd.We need to make a side bet. I say that if Wawa ever sells to Wall Street or Private Equity over time all of that goes out the window and the magic disappears.

          6. PhilipSugar

            We would be on the same side of that bet.

          7. Anne Libby

            Coffee, hundreds of coffees, are probably the only reason I ever bought anything at a Wawa (38th and Spruce, specifically)Ugh edited to fix about 37 typos.

          8. LE

            When I was down in that neck of the woods there were no Wawa’s and the coffee was that god awefull sludge that they had in Lippincott library that used to drop from a vending machine.

          9. Anne Libby

            I remember dashing over there in all kinds of weather. Now when I go back to visit there are lots of other options.

        2. Richard

          They will build impulse buying into app experience (which sucks now).

        3. Matt Kruza

          Your impulse buying statement is very, very true. The impulse items are also often the highest margins. The milk and eggs back of the store are maybe a loss leader (depends but often the case). Walking back to get there the $candy / chips / frozen dinner that you buy may literally be 10x more profitable. I think the fallacy here is that the industry is so big (what like $600 billion on groceries I think) and everyone has to eat 1000+ times a year, so the shear size is sexy and leads to many spreadsheet profits πŸ™‚ Very hard to bring those into reality. Once you have self-driving cars it may be possible because delivery cost could be reduced 75%. But that is not what instacart and others are currently banking on

          1. LE

            Right. My cousin used to own several supermarkets and would always say “people gotta eat” he did good in any season. And when there was a storm or similar he would check in with the stores just to hear what the tape was doing.One other thing I forgot to mention. Supermarkets also make money on slotting fees for shelf space and other mfg. promotions for end cap placement and the like. Additionally they also have some vending machines that they collect rent from and also perhaps even other vendors paying rent in the same space (not sure how much that matters of course).A delivery service of course could do a version of any of these perhaps but the point is that similar to a car dealer people shouldn’t assume the only money that is made (that you are competing with) is the actual cost of the car and what is obvious. There are often multiple profit centers in any business operating at any point in time.What is interesting though is that in web businesses often the only thing that they sell is advertising and they don’t even have a lock on that (meaning this isn’t the 70’s and they aren’t Vogue or Playboy..)

      3. ShanaC

        Thank you. Yes, a lot of logistics startups seem to have impossible math, which you just showed

      4. JLM

        .Occam’s Razor — it isn’t.JLMwww.themusingsofthebigredca…

    6. ShanaC

      It changes. And technology is definitely needed for demand forecasting. That’s gotten significantly better.

      1. Eric Satz

        external forces must be involved for it to change even temporarily. when the economy is trending up and to the right (as it is now) and people are busy with families and jobs, they are more willing to trade time for money, at times. but when personal economic situations change, the first thing to go are the minor luxuries.

    7. Sean Hull

      Well said.

  18. CorkageVIP

    Fred, by chance did you Kondo the Kozmo hat on purpose?I am starting to buy into this tidying craze but still keeping a few early pieces is Wall Street research (Blodget) covering Internet stocks from the 90’s.It’s a nice hat but if it no longer “sparks joy”, you have thanked it for its service and can probably sell it on EBay for an exorbitant sum.http://www.today.com/home/l

  19. pointsnfigures

    On other things (since I haven’t invested in delivery yet), I don’t have scars but oozing wounds. Haven’t healed yet….

    1. JimHirshfield

      There’s an app for that.

      1. pointsnfigures

        Does it deliver you money and your psyche back?

        1. JimHirshfield

          Nope. Uber for psychiatrists.

    2. ShanaC

      You’ll get there

      1. pointsnfigures

        Exits help. One thing that people don’t understand when startup investing is the opportunity costs involved with lack of liquidity. That’s one reason I avoid deals with high valuations at seed. I know full well I am tying up money for 10 yrs, and it’s high risk. So, not only does valuation have to be priced right, but anticipated rate of return needs to be high to cover the opportunity costs.

        1. Girish Mehta

          Yup. The optionality value of liquidity is very under-rated. Viz. Cash as a Call Option without an expiration date. Thanks.

    1. Kirsten Lambertsen

      Painful!

      1. Ana Milicevic

        Yep. But very much worth the pain. I’d put it and Startup.com on the required viewing list on anyone embarking upon raising money (or bootstrapping for that matter).

  20. JimHirshfield

    You say tamayda, I say tamaada.You say swag, I say schwag.Let’s call the whole thing off.

  21. William Mougayar

    In the same league, Webvan also went up in flames after raising $800 million & having Bechtel build a warehouse for them. Their bins still exist today & used for storage. Homegrocer also went public & died, attempting the same thing.The infrastructure costs of delivering exceeded the potential revenues, then. We need to understand what has changed now since then.

    1. awaldstein

      What has changed is that their is a market.We expect these services and impatient for them to be delivered.

      1. William Mougayar

        OK, but back to Jordan’s comment, does the financial model work on a spreadsheet? (I dunno, just asking)

        1. awaldstein

          Not warehousing anything changes the game and the model. Crowdsourcing the workforce as well.

          1. William Mougayar

            Still like to see the math on it.

          2. Eric Satz

            anyone can build a profitable spreadsheet and someone will believe them. doesn’t mean the game has changed.

          3. William Mougayar

            Well, as a first step one do a reality check on spreadsheet assumptions, then I would ask questions .

          4. Eric Satz

            that’s the disheartening thing about this segment. the assumptions always seem realistic!

          5. William Mougayar

            well, assumptions can be challenged by a trained eye πŸ™‚

          6. Eric Satz

            that’s a myth. differentiated assets are required. only way to charge a premium. if instacart can’t show positive net income at $100m of sales, the unit economics don’t work and they won’t work any better at $1B. pure arrogance.

          7. awaldstein

            Good points.

          8. Richard

            But the margins are with those who hold inventory, distributors and retailers (and those that work there between (brokers).

      2. ErikSchwartz

        My question is will that market survive an economic downturn.It’s one thing to pay a 20% premium for convenience when you’re in an employment bubble (as SF is in). It ‘s quite another if you just took a downgrade in salary.

        1. awaldstein

          Good points.Good counterpoint to my optimism.Downturn in NYC–is it really a reality? I simply don’t see it.

          1. ErikSchwartz

            The whole point of the tech industry is it doesn’t require as many people to do the same jobs. Tech companies are spending their capital as if this isn’t true.I know a ton of tech companies that are probably 50% overstaffed (while everyone complains how busy they are when they come in at 10:30 AM and leave at 5).

          2. Richard

            Twitter

          3. ErikSchwartz

            Twitter 2015 reminds me a lot of Yahoo! 2000.So far so good. Too many new people with fuzzy roles. Ton of potential. But it could all go horribly wrong so easily.

          4. Richard

            Thier head count is quite perplexing. What would jack welsh do?

          5. ErikSchwartz

            NYC is much more economically diversified then SF and therefor better protected.That said, a NYC only logistics company should probably not be raising venture capital.

          6. LE

            The best is NYC real estate being inflated by significant sales to billionaires and foreigners. There was recently a bubble with the Chinese buying up domain names. I sold, in a few months, about 3 to 5 years of inventory at unheard of prices. I experienced this first hand how easy it is to get people to overpay. All based on “a greater fool” coming along. (Some of them made out and were able to resell things that I sold them but from what I can tell most have not.)All the time I knew it would end. I knew it was a bubble and had to end. And it did end. So I worked as fast as I could to sell as much as I could.Real Estate: I was looking at buying something in NYC and had dealings with a few brokers. They all tried to play the game and I walked from it. But I can definitely see how others, with a need for a place to live, (I was not in this category) could (as a group) easily and predictable buckle and pay more than they had to. Once again, the group determines what any individual can do.That said the thing that could cause a downturn in NYC is possibly crime or more importantly the perception of crime. Right now it feels incredibly safe but with Deblasio it is possible that that could change over time.

          7. awaldstein

            Crime?

          8. LE

            You may have forgotten the rock group Wham but surely you remember squeegee men or at least I do every time I came off the tunnel.https://www.youtube.com/wathttps://youtu.be/7Lmnyrc8wB…Right now as a result of all of the money and all of the paramilitary police force NYC feels (to an outsider at least) incredibly safe at least in most parts of Manhattan.But ask yourself if you would feel safe going into Central Park at night. People don’t do that primarily because of the perception (correct me if I am wrong since you live there I don’t) that it’s not safe. Not because they have had an experience there but because of things that they have read based on some outlier incidents. Likewise it wouldn’t be impossible for some outlier events to change the perception (once again to outsiders) of NYC not being a safe place anymore. As a result fathers (such as myself and JLM) might not be so encouraging and supplement their daughters rental payments to live in NYC which requires parents to cosign leases and a boatload of money upfront to live there. An ecosystem that happens to work now. Wasn’t always like that in the past. NYC was a shit hole in the 70’s.Do I think it will happen? No. Could it happen? It could.Right now it’s safe also because the ratio of people with money outnumber the people w/o money. Go walk in Atlantic City at night and see if you feel safe. A few miles south in Margate NJ you will feel incredibly safe.

        2. Richard

          On the one hand Groceries have always been somthing that we are very price elastic, on the other hand shopping is time consuming, it’s time v money.

      3. Anne Libby

        “We” is an undetermined slice of the market. My guess is that most of the market (I think of a family member who is a 5-figure Amazon shopper) can wait til tomorrow…

        1. awaldstein

          It’s a pleasure to disagree with you.

          1. Anne Libby

            Lol. Likewise!

  22. Matt A. Myers

    Celluride seemingly was ahead of its time as well – and looks like Uber, founders and some investors, are being implicated in stealing/using its trade secrets for their own gain.For those of you who haven’t heard of Celluride, there’s an interesting video the founder put together a bit longer of a video (11 minutes) – the video is a little eccentric – https://www.youtube.com/wat… – outlining details; 50+ page lawsuit + 150 pages of supporting documentation.Based on Uber’s other behaviours I’d say this isn’t difficult to swallow as probable truth.

    1. Bob Vance

      Ideas are meaningless, execution is everything. I though about an Uber-esque experience a long, long time ago as well, but didn’t do anything about it.>Uber’s other behavioursWhat behaviours?

      1. Matt A. Myers

        Dropping a cliche sentence about how ideas are worthless is a pretty empty foundation for an argument.And Celluride’s founder was executing.If you care enough about the topic then do some research on Uber’s behaviours.

        1. Bob Vance

          It’s cliche because it’s true. Besides the point, that video is ridiculous.He pitched FC in ’07 and Uber launched in ’10. Celluride’s founder admittedly put the idea on hold during a portion of those three years before Travis and Garret launched. He has no claim on Uber and will definitely lose.I have looked into Uber, and they’re doing nothing wrong IMO.

          1. JLM

            .Don’t have a dog in this fight but I’m going to have to give the win to Matt in this beef.Uber has numerous instances of questionable and downright ethically compromised practices.From personal experience, I can tell you of a slimy way they mislead Austin by God Texas about their willingness to forego demand pricing in return for being allowed to operate.They agreed to it as a condition of being approved.Their lobbyists got the City Council to bifurcate the action item into two separate items: #1 approving Uber; #2 agreeing to forego demand pricing.They got the Council to hear #1 whereupon they voted on it and they were approved.They then got the Council to ignore #2 — next agenda item — which was never voted on.Had the public known about this, there would have been pitchforks at the Council meeting.Based on this one anecdote, seen close enough to smell, I would have to say that the Uber fellas are a bunch of sharpies.Matt, for the win.JLMwww.themusingsofthebigredca…

          2. Bob Vance

            I disagree on the underlying premise. The condition of removing surge pricing was an unwise choice. Uber without fluctuating pricing is not Uber, it is not reliable. Making that a conditional is anti-consumer. Attempting to make choices for the public would have hurt the consumers.I don’t approve of misleading, lying or breaking terms, so if what you said is true, I partially agree.

          3. JLM

            .It does not really matter whether you or I agree or disagree with the underlying premise. It is just a story of what actually happened.The Uberalls were not going to get in front of that City Council with the demand pricing feature intact. This is the People’s Republic of Austin, the last liberal bastion in all of Texas.Austin is like any fairly large city, the lobbyists run a lot of things. I used to build high rises here, so I used to be in the swim myself. With the State Capitol here also, it is all about what you can get approved, what you can negotiate.The City Staff was not going to allow that request to get to the City Council — they really don’t have that power but Uber was essentially trying to make an end run around the entire taxi medallion infrastructure.It was Uber’s idea to bifurcate the issues — having promised they would forego the demand pricing feature. Let me say that again, Uber came up with the strategy of separating the concepts, likely having already counted noses and knowing how it would turn out.Plenty of times, I went to Council meetings for 6-8 hour public hearings knowing I had the votes in my coat pocket.I am not a fan of Uber’s demand pricing. One of the most important reasons Uber was able to be approved in the first place was the overwhelming demand for transportation during SXSW, ACL, Formula One, UT football game weekends.JLMwww.themusingsofthebigredca…

          4. ShanaC

            Not surprised in the slightest

          5. LE

            Not something that I would have expected to happen in Texas.The cliche that is appropriate here is “better to ask for forgiveness than permission especially when you have good funding and can pay for attorneys”.

          6. JLM

            .The City of Austin has never won a lawsuit in its history.If I were looking for a way to make a quick million, I would let a COA vehicle hit my truck.JLMwww.themusingsofthebigredca…

          7. PhilipSugar

            I’m going to have to grant a tie. While I agree with you and Matt completely about Uber’s ethics, I can’t tell you how many times people have said somebody “stole my ideas”. Basically anytime somebody is successful some dreamer thinks I had that idea.Don’t dream, execute.In this case the person suing did it to another company before and lost. In addition, why wait six years??? They wouldn’t respond on that.So in my mind you have not just one but two pigs wrestling in the mud, they both are going to get dirty which is what they both like.

          8. LE

            The question to ask yourself is always “how many ideas did I have that nobody ever did or someone did and the idea didn’t work?”. You never hear about those. In fact most of us forget that type of thing.

          9. JLM

            .Not in the “stole my ideas” debate personally.It is hard to sympathize if you didn’t suit up.JLMwww.themusignsofthebigredca…

          10. PhilipSugar

            It hard to sympathize if you suited up and got your ass kicked. πŸ™‚

          11. PhilipSugar

            He has lost before on a different “idea”

          12. Matt A. Myers

            It’s cliche because it’s a justification people perpetuate who are okay with ideas being stolen, taking advantage of others.Imagine a world where people actually joined the efforts of others instead of trying to take the whole pie for themselves – unfortunately for the VC model that doesn’t give them enough returns.

          13. Bob Vance

            >It’s cliche because it’s a justification people perpetuate who are okay with ideas being stolen, taking advantage of others.Idea’s have no inherent value. They’re a bunch of words on a page a concept in ones mind. They have no value to anyone, not the provider not the consumer.I am very curious though, let’s assume for a moment that ideas can be owned, how would that work? Would ideas be patentable? Can you patent as many ideas as you want? What happens if someone makes a business from your idea? Did they steal from you? Can only one person have an idea? Do you own another persons business because you patented your idea first? So many questions!Please specifically outline the system in which you think would be more beneficial than the current one. >Imagine a world where people actually joined the efforts of others – unfortunately for the VC model that doesn’t give them enough returns.We live in that world. Do you know what a company is? It’s a group of people providing a product or service in which others can choose to buy. >instead of trying to take the whole pie for themselvesThis fictional pie is not a fixed amount, I buy an iPhone because the perceived value of it is more than the cost. eg. the capabilities the iPhone provides me is more than the $700 I paid for it, who is losing in this scenario? Apple makes a good 30-40% margin on that and my life is fundamentally better than it was before. >unfortunately for the VC model that doesn’t give them enough returns.I am unsure what you mean by this, mind clarifying?

          14. Matt A. Myers

            Really? That’s quite the statement. You don’t think Uber’s founder having heard and seen the in-depth ideas of Celluride didn’t help him in deciding to start Uber?I am not talking about owning ideas, I am about stealing someone’s work, taking advantage of it – call it morales if you will.There is a difference between seeing the outer shell of an idea and then deciding to do R&D on your own to launch a company, vs. getting to the see the inner workings of a company and then launching your own.”Everything is built upon the shoulders of everyone before” is something I do believe. Without certain knowledge and technology then other ideas merely will not have the foundation leading to the idea’s creation.Re: Apple iPhone example – How is the quality of life for everyone involved, including all of the side economics that exist in order for the iPhone to exist and for you to be able to afford one? It’s an overall gain for you and anyone that can currently afford a smartphone, however there are known negative impacts to people’s lives and the environment – I hope you’re aware of this.In my mind it comes down to allotting resources to good people vs. people who will do whatever it takes to gain personal wealth; if you don’t care about how your actions impact others then I’d rather you had less resources to use and abuse/manipulate systems and people.In the long-term I believe Uber’s technology will likely be one of the first that a worldwide and national governments will facilitate in being duplicated and then perhaps required for everyone to use within that governed area – meanwhile allotting enough public resources to make sure those systems stay online. When push comes to shove, the people will win – not a private company who’s bias is private profits.

          15. Bob Vance

            He didn’t steal anything, as you just said you cannot own an idea. He didn’t steal any code, he built an iPhone application, hired drivers, and got people on the system.>Re: Apple iPhone example – How is the quality of life for everyone involved, including all of the side economics that exist in order for the iPhone to exist and for you to be able to afford one? It’s an overall gain for you and anyone that can currently afford a smartphone, however there are known negative impacts to people’s lives and the environment – I hope you’re aware of this.Tell me who is worse of due to a consensual trade of wealth between Apple and me? How could their resources be allocated in a more efficient manner? You seem to have skipped a lot of specifics, and relied on rhetoric.>In my mind it comes down to allotting resources to good people vs. people who will do whatever it takes to gain personal wealth; if you don’t care about how your actions impact others then I’d rather you had less resources to use and abuse/manipulate systems and people.You are assuming that that is a binary choice, I can do whatever it takes to gain personal wealth and be a ‘good person’ (which is incredibly difficult to quantify). Say I want to become the richest man on the planet, so I look and say ‘hey Bill Gates is the richest man right now, I’ll do what he did’.Microsoft did not abuse or manipulate anyone, they provided products and services which people want, and that’s how Bill Gates became the richest man on the planet, he build things which people *consensually* purchased, and now he is allocating his earned resources in an extremely effective manner, because he earned that wealth.Whereas when an agency relies on coercion and the initiation of force, it’s very easy to spend someone else’s hard earned money with little care of any outcomes.>In the long-term I believe Uber’s technology will likely be one of the first that a worldwide and national governments will facilitate in being duplicated and then perhaps required for everyone to use within that governed area – meanwhile allotting enough public resources to make sure those systems stay online. When push comes to shove, the people will win – not a private company who’s bias is private profits.There are a lot of misconceptions here, firstly you are assuming that any government is capable of producing an Uber-esque experience. We only need to look to healthcare.gov to see that that is a fantasy.>When push comes to shove, the people will win – not a private company who’s bias is private profits.Now right here is where you are severely misunderstood. Do you understand how a business works? A company creates a product or service in which people can choose to purchase, so if you create a derivative of Uber, and provide a worse experience you will not be in business, why? Because people will choose the best product, the product which is the optimal combination of time and price.With every purchase a person makes they are in effect voting, voting for which products should survive, it is not a zero sum game like the government processes are.Say you want a blue tie and me and by buddy want a red tie, in this situation you are coerced into wearing a red tie, whether you agree with it or not. In a true market economy you have what you originally want.It seems we’ve strayed a bit off topic! Anyway…if you are going to respond please do so to all of my points. ThanksBottom line: Travis didn’t steal anything, he didn’t steal any code (he couldn’t it’s an entirely different platform) didn’t steal and IP, didn’t steal any money, what he did was execute on a concept which many, many people have already thought of and done a couple of google searches on.

          16. Matt A. Myers

            How about you respond specifically to what I did say as opposed to avoiding it to try to form an argument around it? I never said he stole an idea – you’re reframing the argument to be able to have try to have an argument at all. Primarily you’re avoiding what I said relating to taking advantage of someone – e.g. being exposed privately and in a confidential manner to trade secrets.I already know we won’t get anywhere in this conversation based on our own individual experiences and unique perceptions of how the universe works, so I will gracefully bow out now.Take care.

        2. PhilipSugar

          You should also do research on the person bringing the suit.

          1. Matt A. Myers

            If I was trying to be judge and jury and was making rigid statements about the people involved with Uber being guilty, certainly.

      2. sigmaalgebra

        “Ideas are meaningless, execution iseverything.”That’s a common statement. As I recall,once such a statement came to this blogfrom John Doerr.One version of the claim is “Ideas areeasy and plentiful, and execution is hardand everything.”Here’s a sense in which such a claim istrue or nearly so:An entrepreneur has a startup in mind andexplains it in just, say, 1-4 sentencesto, say, a friend, someone on theirseventh beer at a party, their Kirche,KΓΌche, Kinder, Kleider, Kammer, Keller,Hausfrau grandmother, etc. Yup,nearly always such an ideapresented in just that way really is”meaningless”, worthless, etc.And, sure, it’s easy to come up with anidea presented in just 1-4sentences. “Plentiful” is correct.For more, given no more than just such anidea, sure, “execution iseverything.”Heck, in that case we can say much more:Execution is next to hopeless, much morethan just challenging, vast goalswith half-vast planning, nearly a fool’serrand. We’re talking wacko.No one should take seriously just a”meaningless” idea.But, hmm, let’s see: Are all ideas”meaningless”?Example 1:How about a biochemist has an idea inbiochemistry that yields a safe,effective, cheap one pill taken once tocure any cancer. Just an idea.Then the execution would be routine, lowrisk, and high payoff.He’d have to hire security guards to holdoff customers desperate to get a pill tosave their lives.All it takes is an idea. The US Congressrichly funds research in pursuit of justsuch an idea.If ideas are easy and plentiful, then wecan expect a solution soon, right?Example 2:There’s a question in computer science andmathematics called P versus NP. The firstcorrect solution will win a prize of $1million from Clay Math in Boston.And if the work found an algorithm thatshowed that P = NP and if just kept thesolution secret and ran the software onthe cloud — solutions as a service– then one heck of a valuable businesswould follow; trust me on this one.The consequences of an algorithm thatshows that P = NP would be one of the mostimportant contributions to the economyever.With such an idea, “execution” would beroutine, low risk, high payoff.All it takes is just an idea, just onegood idea. Everyone is welcome to try tofind the idea.If ideas are easy and plentiful, then wecan expect a solution soon, right?Example 3:Ike wanted some pictures. He tried theU-2, but it flew too low and slow and gotshot down.So, “Kelly” Johnson at Lockheed along withsome people at a branch of Pratt andWhitney in Florida had some ideas.Right, take pictures with a new airplanewith unrefueled range of 2000+ miles, ataltitude of 80,000+ feet, and at speedMach 3+. Worked great. Never got shotdown. One of the ideas was a turbojetthat near Mach 3 became a ram jet with,then, some fantastic advantages.Sure, a picture is athttp://iliketowastemytime.c…Example 4:The fundamental theorem of arithmetic isthat any positive whole number can befactored into a product of prime numbersin just one way. E.g., 15 = 3 x 5, andboth 3 and 5 are prime numbers.We’re talking grade school simple, here,guys!Okay, how to do this factoring for largernumbers, say, 10,000 digits? Ah, let’s begenerous, one billion digits. And we’dlike to do it in just a few minutes,faster if we can. And we can make theproblem relatively easy: We areinterested only in numbers that can befactored into a product of just two primenumbers.So, how to do that needs just an idea.With the idea, quite successful executionwill be routine: There are very eagercustomers waiting with super deep pockets.If ideas are easy and plentiful, then wecan expect a solution soon, right?Example 5:The first Xerox photocopying machineneeded just an idea.Given that idea, the rest was routine, lowrisk, and high payoff.Example 6:For some ideas in business, we take veryseriously protecting them with patents ortrade secrets.Such ideas are definitely not regarded asmeaningless, easy, or plentiful.Here is another statement:Bad ideas are easy, plentiful, andworthless. Given just a bad idea,execution is everything and likely ahopeless fool’s errand.Good ideas are difficult, rare, andvaluable. Given just a good idea,successful execution is routine, low risk,and high payoff.

        1. ACR

          There is a good book about #5 Xerox: Copies in Seconds by David Owen. The photocopy process was a completely novel way to make images and the inventor conceived it as a pure idea, patented it, and spent years (much of his life) trying to find a partner for manufacturing and distribution. He could not interest anyone and the patent had expired before he ultimately partnered with Xerox. It is an exemplary story of entrepreneurship, intellectual property, and the gap between idea and execution. Far from routine or low risk.

        2. Matt A. Myers

          This breaks down the concept nicely.If you have a full picture, all the little details included, then it’s easier to understand yourself of the value and lessen the feeling of risk — this would go for a would-be founder or potential investor.If someone else did all of this work and then two of those people worked together (would-be founder got money from potential investor), then that’s very different than hearing about “an app for hailing cabs.”

  23. SD

    I wonder if VC firms that were heavily invested in Webvan, Kozmo, etc… have tended to avoid this current wave because they are gun-shy, or if they have tended to dive back in because past experience helped them understand “what’s different now”.

  24. laurie kalmanson

    Yes

    1. LE

      I love the composition where you posed that cup ransom note style in front of the blog post.

        1. LE

          Thanks for that. Notice also that the genius who ordered the caps thought that they were the next Nike or Apple and so they didn’t need the name just the logo would suffice.While the “marketing person” who did the cup put the name on the cup.

          1. laurie kalmanson

            iconic! that was when everyone had to have a swoosh … “the swoosh epidemic of 1999”

          2. laurie kalmanson

            related

          3. pointsnfigures

            Ha, I remember that one. I had a Treo.

          4. LE

            Nothing is worse than people who have no clue copying other people who have no clue.Remember Netscape Now download button? When people, parroting other people, thought it was a good idea to have someone, over dial up, download a new browser to use their site. Because after you took the time to get to someone to visit your website who cares if they fork to another activity and never come back?I always felt the same way about outbound links and how that spread commercially by parroting “oh this is what we do”. Because when you go into a mall store they always have doors that lead to the store next door and they make it easy for you to leave their store and shop elsewhere.

          5. laurie kalmanson

            FREE BEER

          6. Eric Satz

            Oh too bad and too true, “Nothing is worse than people who have no clue copying other people who have no clue.” This just hit my inbox a minute ago: https://www.shipt.com/nashv…Why didn’t i think to shop in someone else’s store and give free delivery for any order over $35? Entrepreneurs shouldn’t let entrepreneurs lose money alone.

          7. Richard

            A swoosh is just a step away from a flop

          8. Jerome Gentolia

            Holy swoosh! LOL! Shoosh!

          9. xklsv

            never really thought of the angle.

  25. markslater

    I was a young analyst at CMGi in that era – it was a fascinating boot-camp for my career…..My bosses were doing a good bit of incineration themselves! i remember being told that one of the operating companies who was burning several million a month was not burning enough!This delivery craze feels hauntingly similar i’m afraid….. Its still a race to the bottom on price and a challenge to build a valuable set of services on top. Uber has the killer service on top – its hard to see how they don’t win this….

    1. awaldstein

      Agree.In NY at least there are a bunch of apps filing the gaps. Whether they are a business I don’t know. As a consumer though they are quite a great addition to life.

  26. Eric Weiner

    Kozmo was a savior of mine in law school. I was crushed when it went away. The hat looks nice, however.

  27. Rick_Robinson

    Meanwhile, a little before this, Aol’s Digital City was creating the 1.0 version of many of today’s successful startups and apps: http://streetfightmag.com/2

  28. TeddyBeingTeddy

    Fred – any chance you’d do a post about Scars…revealing your 10 biggest scars, and the main lesson learned from each of them?Would be great learning for the rest of us…

  29. Richard

    Magazines were a good choice for product bc publishers credit for unsold inventory.

  30. wsmco

    I loved UrbanFetch, and we looked at them after they burned through their mountain of OPM. They were actually profitable in NYC and London, but lost money in all of their other markets.I’d have liked to have kept them going only in their profitable markets and see what they could have grown into over time (could we have added Macy’s, Bloomies, Serendipity, other services?, etc) but was overruled.

  31. Paul Sanwald

    I moved to NYC right out of college in ’00 and remember ordering my wife a DVD player for her birthday from urban fetch at 11pm while I was at work (at Digital Club Network).to a north carolinian like me, NYC seemed like a pretty amazing place that you could get cookies and a DVD player at 11:30pm on a wednesday.I’d be curious in what’s different this time around, in this vertical (which I know little about). Payments technology has changed a lot, but has supply chain infrastructure changed that much? I guess I’m curious about the economic bottlenecks to scaling this kind of business.

    1. Kevin Parakkattu

      A lot of the new traction stems from the “always-connected lifestyle” we now maintain. Like Fred said, Kozmo and other endeavors were ahead of their time both in their pursuit and the underlying consumer demand infrastructure. This article explains the main differences between then and now: http://www.businessinsider….

    2. laurie kalmanson

      afternoon snack time at the office: people ordered food, and t-shirts came gratis

  32. Andre Jacobovitz

    Just wondering if you think they went under because (a) the “capital markets turned on them”, (b) their business model had serious issues, or (c) both? I suppose this could help us (attempt to) answer whether similar startups will turn out differently this time around…

  33. JLM

    .What does it say when your wife keeps a “failure” talisman for fifteen years?It isn’t a bad thing but it is a thing.Learning from real, big mistakes is a powerful lesson.JLMwww,themusingsofthebigredcar.com

  34. Robert Heiblim

    Interesting, isn’t it? Kozmo does seem much like the same day services springing up. Services from that era not only suffered from some technical limitations but the overall adoption of internet services did not provide enough delivery density to make it efficient enough in my view. At that time, many companies thought not to pay for internet based services and considering the market state where many without revenue or proof of scaling were breaking out it was not easy. With online transactions closing in on 10% these kinds of offers no longer seem ahead of their time.

  35. ShanaC

    For many of the reasons you describe about kozmo I’m not sure half of these logistics companies (which is what they are) will survive either. The money story doesn’t make sense,and the big difference now is people forgot history

    1. mattkrae34

      Thanks! I was starting to feel like Mugatu. They are all the same company, and it’s a logistics company. Maybe one or two end up nailing it and becoming the defacto local delivery solution, but I don’t see the difference between on demand delivery of X or Y or Z.

      1. Andre Jacobovitz

        Great zoolander quote! And if I were a betting man, I’d say Amazon Prime Now is best positioned to becoming the de facto local delivery solution?

  36. DonRyan

    I think Amazon and other providers with much bigger bankrolls are going to fill the vision of Kozmo. Here in the middle west (Columbus), Amazon is opening a huge fulfillment center that will allow for same day delivery of a number of items. Kozmo was indeed ahead of its time.

  37. laurie kalmanson

    same day / next hour delivery — dating back to messenger services on foot and on bikes — works in dense places; not so much in sprawl. obvious points are obvious.

  38. Jonathan Libov

    Cyril’s?

  39. Charles Stanton

    Clam Bar is a great spot

  40. Dave Pinsen

    Thomas Pynchon’s Bleeding Edge, which is set in 2001, includes a character who keeps wearing his Kozmo gear and making bike deliveries after the company has gone under.

  41. panterosa,

    Besides decades early, define too early.

  42. Kirsten Lambertsen

    I’ll say it again: God, I LOVED Kozmo. I lived in SF at the time.Those days seem very F. Scott Fitzgerald now.

  43. Supratim Dasgupta

    Latest to succumb is WunWun.Another instant delivery service in NYC(http://techcrunch.com/2015/….I heard they were doing a lot of deliveries in NY. I am not sure if Kozmo died because of being ahead of time. Wunwun is only 3 yrs old. i think its an extremely low margin business and depends heavily on having an army of people who will work lower than minimum wages.

  44. Semil Shah

    I will blog a longer response, as this is one area I’ve focused my attention in seed investing, but for now would just add one big caveat — this time around, some very large companies (Amazon, Google, eBay, Walmart, and even Uber) are all devoting lots of resources and attention to figure out how to deliver this style of service to their customers, as well. So, while there are issues, the movements of these bigger players do affect the venture atmosphere in the category.

  45. jschless

    LOL . my dad always wears his ridiculous Kozmo jacket as a survivors badge. That, coupled with with his lack of style !

    1. JLM

      .Dads ebb and flow with style as they and everything they own becomes vintage.My Perfect Daughter didn’t believe that the Rolling Stones actually belonged to Dad’s generation until I proved it to her.JLMwww.themusingsofthebigredca…

  46. kenberger

    I also remember Pink Dot with a somewhat similar service in L.A. when I lived there from ’88-93. They never branched out, kept it local. Even more ahead of their time.

  47. monsur

    Oh I wish I had some Kozmo swag! Kozmo is my favorite tech company, and I still talk about it to this day. They powered me through my 20s (first in Seattle and then in NYC). I remember hearing a rumor that they were actually doing alright in places like Seattle and NYC, but just spread themselves out too thin in other areas.

  48. Gary Krivin

    Agree, it was ahead of its time. I was working at a digital shop in 1998 and Kozmo taught me about the potential power of delivery on demand both ad a consumer and as a consultant. I remember ordering ice cream on a hot summer evening to see what kind of shape it would arrive in. It arrived perfectly frozen!

  49. Terry J Leach

    I would think it is far more satisfying investing on the cutting edge with less scaring compared to running with the herd.

  50. Dorian Benkoil

    Fred, maybe you could auction off some of that Kozmo swag for a charity. ( I was rooting for them way back. They delivered DVDs, back before streaming video could handle the bandwidth. And I could get snacks, too! What was that other one? Urban …. something. )

  51. StayingAnon

    My biggest challenge has been to not let the scars define who i am and how i behave everyday. I still havent had blow out successes like you have so its hard to let the scars be just scars.

  52. aminTorres

    Clam Bar ?

  53. Pete Griffiths

    Pain is weakness leaving the body.

  54. chicagosean

    If I’m not mistaken, it appears you and Gotham Gal were enjoying a fine day at Cyril’s. I’m a big fan πŸ™‚

  55. sigmaalgebra

    Hmm, after LE’s post athttp://avc.com/2015/06/gett…yesterday on delivery and my response athttp://avc.com/2015/06/gett…today the whole thread is about delivery.Fast change.Hmm, apparently so far in this thread none has mentioned the recent:Takeout Giant Delivery Hero Raises Another$110M At Over $3.1B Valuation Ahead Of IPOathttp://techcrunch.com/2015/…So, in part there, there is”He believes the company will be in aposition to list this year β€” it’s nowclocked up 200,000 restaurants across 34countries, processing 10 million orderseach month and generating $165 million inmonthly sales for its network ofrestaurants.”It seems to me that there are someserious, practical, operational issues ofefficiency, i.e., keeping downcapex (e.g., for vehicles) and opex(driver compensation, vehicle operatingexpense, insurance, etc.) in such a’delivery’ business.I know; I know; soon all the deliverieswill be done with drones that are toocheap to worry about — maybe. “Bzzzzz”– maybe a whole flock of them just flewover.Or:Mr. McGuire: I just want to say one wordto you. Just one word.Benjamin: Yes, sir.Mr. McGuire: Are you listening?Benjamin: Yes, I am.Mr. McGuire: Drones.In the meanwhile, back to reality. Iconsider four progressively more involvedscenarios:Scenario 1:There is a Chinese restaurant that sellsnearly all just carry out (one look attheir dining room will explainwhy), and they want to offer delivery.So, they hire, say, Judge Reinhold fromFast Times at Ridgmont High as inhttp://digitaldaily.allthin…with a Mini Cooper.So, Reinhold sits and waits until order #1and then delivers it.Okay, soon it occurs to him to wait toleave on the delivery for order #1 to seeif order #2 and, maybe, #3 can be combinedin the same trip without too much delayfor order #1. Besides, if he is deliveringjust order #1, he may not be back in timeto deliver order #2 on time.Scenario 2:It occurs to the restaurant owner toaccept delivery orders only fairly closeto the restaurant to reduce the drivingper delivery and make more deliveries perhour.Scenario 3:It occurs to Judge Reinhold to get a cellphone and meet also with the owners of twomore Chinese restaurants, three pizzashops, and a McDonald’s and a Wendy’s, allin much the same area.Then he says busy making deliveries.And sometimes while he is delivering aChinese order, he gets a call with adelivery request from a pizza shop, seesthat the origin and destination pair forthat order are an easy add-on for hisChinese restaurant delivery, picks up thepizza, and delivers it on the same trip.So, with his higher density, hestarts to make his deliveries faster forless cost. Progress.Scenario 4:Being entrepreneurial, Judge Reinhold seesthat he can hire some of his buddies andline up all the restaurants, grocerystores, florist shops, pharmacies, autoparts stores, copy shops, hardware andbuilding supply businesses, etc. in thearea, have a central dispatcher, make gooduse of cell phones and GPS, and haveessentially a natural monopoly ondeliveries in his area.He has a fairly strong geographic barrierto entry and, thus, is not really incompetition with similar little businessesover 100 miles away or with Delivery Hero.While having as customers nearly all thebusinesses in his area, his dispatcher hasa tough job, at least if he wants to do itwell: Minute by minute, which vehiclegoes where? Bad decisions could waste alot of money and a lot of time makingdeliveries take longer than necessary andmaking fewer deliveries per hour thanpossible.The problem is not trivial, especially dueto the fact that the nextorigin/destination pair the dispatchersees is essentially random.Q. 1. What might be a good dispatchingtechnique?Q. 2. How to evaluate a proposeddispatching technique? Sure, likely bycollecting historical data on the deliveryrequests and, via software, executing thetechnique on the historical data. Then doa little statistical argument that saysthat doing will on the historical datameans doing well in reality in the future.But, of course, the technique that did thebest on the historical data might not bethe best even in probabilistically thesame data in the future — might wantto address this issue. I smell an oldproblem in statistics with a fairly simplesolution close to, say, bootstraptechniques.Q. 3. Is there a way to know what anoptimal dispatching technique would be andhow to know when a proposed technique isoptimal or nearly so?Simple Lesson: First-cut, the lastmile, on demand delivery business isgeographically local with big costadvantages for a service that has lots ofdeliveries per square mile per hour.

  56. sachmo

    Ouch, a reminder of the age of irrational exuberance…When I hear stories like this, I think of the complete disconnect between people that you see and talk to every day, and technologies ‘just on the cusp’ like soylent and VR. I think there’s generally a kernel of usefulness in many of these up and coming startups, but I have to wonder which ones will go up in flames.

  57. BillMcNeely

    Somebody in the comments assumed a $10 delivery fee with a net profit of $2.10. A little over 20% is an awesome profit margin in logistics , If I read this right anything above 5% is excellent. .http://www.marketwatch.com/story/a

  58. Alejandro Cosentino

    I also have Kozmo cap as well as Starmedia and Gratis1 T-shirts from those days. I also wear the scars that helped me so much since then. It’s too bad to arrive too early and too late.

  59. sachmo

    Ran across this on Quora… so funny, I think the name in the stock certificate is actually flatiron associates.

  60. Tanner Hackett

    I did a ton of analysis on this exact topic a few months ago. Consumer expectations and behaviors have changed enormously since the late 90’s, not to mention technology. Take a look at the research – http://www.businessinsider….

  61. DavidScacco

    Is Postmates today’s Kozmo? They appear to be doing well.Will they succeed long-term?

  62. ellen sing

    My husband’s favorite wool jacket with suede was from kozmo. It is still in fine shape so many years later. It really is too bad the company did not last. It was a grand idea way ahead of it’s time.