Another One Bites the Dust. . . Zume, The $500 million robot pizza startup that excited the investment world . . . has shut down

Another one bites the dust Zume Inc (Robot Pizza making company) shuts Operations.

In the old days, starting a business and expanding it with bank loans and IPOS washard If, for instance, you wanted to make and sell pizzas

  • First you had to prove that you could make pizzas,
  • Then you had to prove that you could sell them.
  • Preferably you should also prove you had some hope of growing a small business into a big one. (Before banks would channel you hundreds of millions of Fed dollars, you had to have experience doing things like managing employees, paying rent, ordering pizza boxes etc…)

Until then, until after you had done those things, you had to rely your own money, your parents money your partners money etc… (No bank loans for you.)

But since, 2001 and especially since 2020, that has been less-and-less the case. The world’s central banks turned on a firehose of money and successful venture capitalists created banks out of thin air so they could access Fed dollars for start-up #2, crazy idea #3, and untested invention #4

The latter was the case when a couple of software writers in California accessed $450 in start-up funds, for their untested idea: baking pizza with robots in trucks.

I created quite a tempest in the investment world.
In 2019

  • couple of coders who had never run a lemonade stand,
  • took the blueprints for unfinished not-yet-operational technology to a bank
  • declared “we’ll be grossing $1 billion a year by 2022”
    and the bank lent them $450 million.
    .
    .
    .

“Who cares if they fail? As long as we package the loan into bonds and sell them before they fail we’re in the clear, right?”

Not surprisingly, the company has fallen on its face and ceased operations last week. It had a staff of over 600 at its high water mark.

https://www.bloomberg.com/news/articles/2023-06-03/fallen-pizza-startup-zume-shuts-down-after-raising-millions

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Wow, I totally missed this one.

For the record, this makes me sad. I have been quite a fan of self propelled, pizza-oven based delivery vehicles since I first heard of them about 3 minutes ago.

Maybe someday😕

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Among the company’s problems.

  • The technology did not work. The cheese slipped and lid all over the oven in moving trucks. Eventually the company parked the trucks and serviced them with a network of drivers. (duh did not test it first.)

  • The owners are business idiots. They headquartered in Silicon Valley one of the most expensive real estate locations in the world. (It’s a mobile operation. Its entire concept is to keep overhead to a minimum.)

  • The owners are business idiots. It turns out their pizza boxes were not recyclable (a no-no in California.) So, did they do like thousands of other California pizza shops and start buying recyclable packaging form one of hundreds of available suppliers? NO they bought a package-making company and tried to run it.

The point is they got $450 in bank funding for a hair brained start-up.

I am not asking you to feel sorry for them.
I am hoping you have the common sense to recognize this is a sign of the times. (You know, boom leads to bust. Crash of '29, crash of 2008, Tulip Bulb Mania, South Seas Company, California Gold Rush, that sorta thing.)

A company dedicated to replacing entry-level human labor with machines went under?

tenor

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Oh, sorry. I was not mocking you. I really am bummed this one didn’t take off. I would have been watching it and rooting for it if I’d known about it.p

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TY

I look at these things as part of the same economic continuum. LIke symptoms of a disease they all provide evidence of the same underlying problem:

  • Imaginary e-coins selling for $65,000
  • Monkey pictures selling for $200,000
  • Imaginary land in the metaverse selling for god knows what
  • A banana taped to a wall selling for $120,000
  • A ridiculously-untested business idea getting $450 in bank funding

That’s all I meant.

It was trying to replace commercial real estate costs with moving vehicles.
They robot was probably just because a pizza cook can’t wear a seat belt in a truck.

The moral of the story is that, for a long while, venture capital and even bank loans had been available for doomed-to-fail ventures by people who never ran three lemonade stands at the same time.

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A little off course and I get what your point is about the bank funding, but here food trucks have started up next to gas stations and in parks. They are all doing really well. Novel concept but it is working.

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As a progressive, I think this is a welcome example of how a capitalist market self corrects. Failure is an inherent part of the capitalist system and essential to a healthy market economy.

An economy with few failures is an economy without innovation.

it astonishes me that anyone who says they are a conservative would find this problematic. Monopolies prevent bad business from failing, as to centrally planned regimes – like Marxist states.

The liberals appear to be the only defenders of capitalism on this board. For every success like Alphabet we should expect dozens of failures.

Goog input. Thanks.

Here is what I am seeing:

Old Way:
“I run a successful food truck business. I have three trucks in LA, three in San Fran, and three more in another city. I have been doing this for years. I keep by expense low by . . . . I know how to run this business here are my tax returns and my audited financial statements. . . . Please give me a loan.”

New Way:
I know nothing this business, and nothing about running another business. I am a software engineer with an idea. I plan to locate a company in the most expensive place in America and if I make a mistake I will spend my way out of it. . . . But it’s technology (ooooh, sexy) . . . please give me a loan."

The new way is getting funded (or was until recently anyway). The Fed and other cent banks turned on a firehose of money and the banks don’t care so long as (like the old days of bad MBS) they can get the bad loans out of house and into a bundle before the failure.

I guess that is the thing. Is it really capitalism self-correcting? Or is it Central banks turning the money sprayer on high causing boom-to-bust?

  • The world’s first famous asset bubble occurred (in Holland) 25 years after the world’s first creation of a central bank (in Holland.)

  • The South Sea bubble occurred within 10 years of the English central bank devaluing currency and instituting price controls

  • The Crash of '29 occurred after 5-7 years of the Fed issuing a special-series of bonds to allow everyday workers to buy stocks on margin using bank loans

  • The “mortgage bubble” occurred five years after Central banks adopted zerintersst rates “temporarily” in response to 9-11

  • Today’s (potential) mess also occurred immediately on the heals of HUGE monetary expansion by central banks.

My Point?

This credit bubble like most credit bubbles is not at all caused by the free market. It is caused by government (in the form of activist central banks) trying to help the poors and the middle class.

Ahhh…the myth of the free market. Keep the faith!

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Certainly right now temporarily the stock market (esp tech) has nothing to do with the free market finding rational prices.

Right now temporarily it is 100% about what policy the Zentral authorities adopt.

The latter…

“ This credit bubble like most credit bubbles is not at all caused by the free market. It is caused by government (in the form of activist central banks) trying to help the poors and the middle class.”

In the form of actin central banks…perhaps to the comment about the poor sand middle class you could add “and dictating social Justice and environmental activism”…

Just a thought.

So far . . .
the ECB has toyed with an environmental agenda
and the (US) Fed has expressed a willingness to do so if congress tells them to do so.

Otherwise the Fed is “neutral” with regard to policy . . . except that it has taken a very big role in specially targeting housing credit. It is no longer neutral there it just pretends it has not noticed the “mission creep.”

I don’t think this is exactly where you were going with the thread.

Catch me if I’m wrong ‘cause I don’t want to sidetrack…but you’ve made the case that tossing zillions of dollars at projects doomed to fail just creates massive credit bubbles that hurt us all…

Sadly there are still some Solyndra’s out there for us to waste the taxpayers money on. Remembering “Solyndra” – How Many $570M Green Energy Failures Are Hidden Inside Biden’s Infrastructure Proposal?

In my estimate it is the Central Bank’s money-tossing that is the problem.

The number of great business ideas changes little from time to time. Whether it’s television or cell phones or microwave ovens of desktop computers there is ALWAYS a new technology either “right here right now” or "just around the corner.

The number of experienced entrepreneurs does not change suddenly. (EX “I’m an experienced food truck operator. I run a 20-truck franchise and have my own mechanic shop I want to start a coast-to-coast business please give me a loan.”)

The current/recent tidal wave in funding dumb business ideas by people with zero business background did not come “because there are more ideas to fund,” nor “more good solid business people.” The tidal wave was caused because more currency was available to fund stuff.

Normally, once all the good ideas get funded, the idea-funding stops. Now, after the good ideas got funded, there was money left over so dumb ideas or dumb people got funded too. (Like tulip bulbs or metaverse land or monkey pictures, or bananas on a wall.)

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When has this free market your speak of exist?

There has never been anarchy and zero government intervention (if that is the bar I have to hit I fail.)

But more economic freedom has always and everywhere meant

  • more wealth for all (including the lower and working classes)
  • more purchasing power for all (including the lower and working classes)