explained

The internet has had a field day this week making fun of an internet-connected juicer called the Juicero. It was supposed to provide farm-fresh ingredients and save people the hassle of having to buy, clean, and cut up their own fruits and vegetables.

But a Bloomberg investigation revealed that you didn’t actually need the company’s $399 device to squeeze juice out of the company’s $8 bags of fruits and vegetables. Bloomberg interviewed Juicero investors who were dismayed that they’d sunk millions of dollars into an apparently useless gadget.

On Thursday, Juicero CEO Jeff Dunn posted on Medium in defense of his company and its juicing technology.

“Juicero’s mission is to make it dramatically easier and more enjoyable to consume more fresh, raw fruits and vegetables, and that’s a really tough nut to crack,” Dunn wrote.

But critics say that it’s not really a tough nut to crack. In fact, it’s so easy to crack that you can do the job with your bare hands.

The fact that Juicero has managed to raise $120 million to build an over-engineered juicersays a lot about the state of Silicon Valley today. There’s now so much money sloshing around San Francisco’s technology world that even seemingly outlandish ideas can attract lavish funding.

But while it’s easy (and entertaining) to make fun of Juicero and its investors, the company’s fundraising success doesn’t necessarily mean there are larger problems with the way technology startups get funded. Funding a few actually ridiculous startups like Juicero might just be the price we have to pay for seemingly absurd but truly useful companies like Airbnb.

Juicero sells a $399 juicer for $8 bags of fruits and vegetables

A normal juicer requires the customer to buy, clean, and cut up individual fruits and vegetables. Juicero’s juicer, in contrast, only works with pre-made bags of chopped up fruits and vegetables that are also sold by the Juicero company for $5 to $8.

Juicero’s sales pitch is that using a conventional juicer is too much work: preparing the fruit is a hassle, and then you have to clean both the machine and your kitchen afterward. By getting the fruit in a premade bag, you avoid all that mess and hassle.

You can think about it as the juice equivalent of a Keurig coffee machine, which allows people to make a cup of coffee from a pre-made, single-use package of ground beans.

The company has been very successful at raising venture capital. According to Crunchbase, Juicero has hauled in $118.5 million in investment capital and counts the prestigious Silicon Valley firm of Kleiner Perkins Caufield & Byers and Google’s venture capital arm among its investors.

It turns out you can just squeeze the Juicero bags by hand

Since its debut last year at the even more ludicrous price of $699, Juicero has served as a handy metaphor for Silicon Valley’s excesses. It’s not clear why anyone would pay $399 for a juicer that only works with proprietary bags of fruits and vegetables. But Juicero really became a punchline this week when a Bloomberg story revealed that you don’t actually need the Juicero juicer to get juice out of the Juicero packs. Squeezing them with your hands works about as well:

After the product hit the market, some investors were surprised to discover a much cheaper alternative: You can squeeze the Juicero bags with your bare hands. Two backers said the final device was bulkier than what was originally pitched and that they were puzzled to find that customers could achieve similar results without it. Bloomberg performed its own press test, pitting a Juicero machine against a reporter’s grip. The experiment found that squeezing the bag yields nearly the same amount of juice just as quickly—and in some cases, faster—than using the device.

Needless to say, the story became a viral hit on social media. Internet users love nothing more than mocking rich people for doing ridiculous things with their money, and this story had that in spades.

Juicero CEO Jeff Dunn, hired last November, addressed the controversy in his Thursday Medium post. And he didn’t really dispute Bloomberg’s core findings. Instead, he used a lot of buzzwords to insist that a $399 juicer that only worked with Juicero’s proprietary bags chopped up fruits and vegetables really was going to revolutionize the juice business.

“Our connected Press itself is critical to delivering a consistent, high quality and food safe product,” Dunn wrote. Dunn touted the safety benefits of a Press that could automatically block the use of tainted bags. And he argued that Juicero users benefit from “consistent pressing of our Produce Packs calibrated by flavor to deliver the best combination of taste and nutrition every time.”

One big question Dunn doesn’t answer is why Juicero doesn’t just ship out bags of juice. After all, Juicero is already acquiring the fruits and vegetables, processing them, and shipping them out to customers. Presumably, Juicero could squeeze the fruits and vegetables in their factory and then ship just the juice to the customer — not only reducing shipping weight but saving the customer the trouble of pressing the juice. Juicero claims that its approach yields the freshest possible juice, but it’s not obvious that fruit pulp stored in a bag actually stays fresh longer than juice stored in a bottle.

On one level, the mockery of Juicero was a bit unfair. After all, it’s possible to make a normal cup of orange juice by squeezing oranges with your bare hands. But people generally don’t do that because it takes several minutes and your arm muscles are going to be sore at the end. The same point applies to the Juicero: You can spend two minutes squeezing a Juicero pack to get juice out of it, but it’s more convenient to stick the pack into the machine, push a button, and come back 2 minutes later for your juice.

What makes the Juicero genuinely ridiculous is how over-engineered it is. If Juicero had built a basic device that just squeezed juice out of a bag, it probably could have cost a lot less than $399.

Juicero want to create a “platform” for delivering juice

Photo Illustration by Joe Raedle/Getty Images

Juicero’s goal wasn’t so much to build a conventional kitchen appliance as to create a technology “platform” for delivering juice to consumers. Juicero wanted to lock customers into buying a steady stream of juice packs from Juicero, and in the future, maybe other food-related products — in much the same way that an Amazon Prime subscription locks customers into buying a steady stream of packages from Amazon. Juicero’s plan for doing this was to add a wifi chip and a QR code reader to the device.

Each Juicero pack has a QR code that’s specific to that particular bag. It indicates exactly where the fruits came from and when they were packaged. Juicero claims that this has health and safety benefits: If a package is past its expiration date, the machine will refuse to process it. Similarly, if there’s ever a safety recall, Juicero can automatically prevent customers from using tainted packs.

The consumer benefits of this extra technology are debatable. People don’t die from drinking juice that’s a day or two past its expiration date. The Juicero Press won’t squeeze a bag unless it has a Juicero QR code on it, and it refuses to operate at all without a wifi connection. A reason for this might be one suggested by Business Insider: “Juicero wanted to learn from mistakes Keurig has made, and one problem Keurig has said that other companies are making pods for its coffee maker and stealing profits.”

Of course, what a company considers “stealing profits,” its customers might just consider healthy competition. Juicero is hardly the first company to deliberately make its product less useful in order to protect a future revenue stream — printer companies have been suing each other over this kind of thing for more than a decade — but this is not the behavior of a company that puts its customers first.

But I suspect the main reason the Juicero is so ludicrously over-engineered was less to do with gouging customers than it was about impressing Wall Street. Because if Juicero’s business plan was merely to sell a conventional juicer and bags of juice, it never would have been able to raise tens of millions of dollars of venture capital.

Venture capital firms in Silicon Valley want to invest in technology platforms that have the potential to become huge, profitable businesses over time. If Evans had said from the outset that his main product was overpriced bags of pureed fruits and vegetables, it would have been a lot more difficult to convince investors that this had the potential to be a multibillion-dollar business.

One venture capitalist said as much to Bloomberg, saying that his firm “wouldn’t have met with [Juicero CEO Doug] Evans if he were hawking bags of juice that didn’t require high-priced hardware.”

Juicero can be seen as part of a larger trend known as the “internet of things,” in which internet-connected devices interact with real-world industries like, in this case, juice. In a widely read 2011 article, the venture capitalist Marc Andreessen predicted that “software would eat the world” — that is, more and more aspects of our lives would be driven by digital innovation.

Many venture capitalists believe that digital technology is on the verge of disrupting a wide variety of industries, and so when an entrepreneur claims they’re using a technology product to disrupt a seemingly random industry like juice, some investors are ready to believe it.

Part of the problem seems to be that the device Juicero ultimately delivered fell short of the goals outlined in Evans’s original pitch to investors.

“In fundraising meetings, Evans promised a revolutionary machine capable of squeezing large chunks of fruits and vegetables, said two people who agreed to invest in the company. Evans secured funding in 2014 by showing 3D-printed renderings of the product without a working prototype,” according to anonymous sources who talked to Bloomberg. Instead, Evans seems to have built a machine that squeezes juice out of fruits and vegetables that have already been processed almost to the point of being purees, leaving little for the device itself to do.

Juicero is silly, but some silly ideas actually work out

Photo by Charley Gallay/Getty Images for Airbnb

Silicon Valley has emerged as one of the few bright spots in an economy that has suffered from weak innovation over the past 15 years. The result: a Bay Area investment climate where there are far too many venture capitalists chasing far too few investment opportunities.

And venture capital investments often look crazy at the outset. Companies like Google, Facebook, and Airbnb all faced sustained skepticism in their early years. A lot of people found it hard to imagine that websites for sharing photos with your friends or sharing your couch with strangers could ever become a multibillion-dollar business.

Obviously, the skeptics were wrong in those cases, and these stories — and many others like it — have given venture capitalists an ingrained willingness to make big bets on ideas that sound crazy but might turn out to be hugely lucrative. After all, they think, if a business was obviously a good idea, a bunch of companies would already be doing it.

And as more and more cash has poured into Silicon Valley, investors have become willing to make larger and larger bets on more and more outlandish ideas. Companies that only sound a little bit out there get funding quickly and easily, and venture capitalists still have more clients wanting to invest. So venture capital firms reach deeper into the application pool, giving a second look to pitches that might have been rejected in less flush times.

The result: Often venture capitalists wind up financing a lot of ideas that turn out to be exactly as bad as they sound. And because the media likes to make fun of Silicon Valley, the outlandish examples tend to get an outsized share of the attention. Before Juicero, a favorite poster child for Silicon Valley excess was the rap annotation site Rap Genius, which raised more than $50 million between 2011 and 2014.

But the fact that venture capitalists fund companies like Juicero and Rap Genius doesn’t necessarily demonstrate that there’s something fundamentally wrong with Silicon Valley. There have also been plenty of perfectly plausible technology startup ideas that have turned out to be duds. Those companies aren’t as easily mockable, but the money spent on them is just as wasted. Meanwhile, some truly outlandish business ideas — like Airbnb — turn out to be huge companies that benefit a lot of people. So it’s a good thing that venture capitalists are willing to take a risk on ideas that sound a little wacky, even if many of them don’t pan out in the end.

[Source:-VOX]