4 tough lessons from a failed startup & its co-founder

August 30, 2014

Here's a hot idea. What if you could get healthy food from a vending machine?

In most urban settings, you don't need to walk far before you can smooth out a dollar bill, feed it into a slot, and hear the promising clunk of a Snickers bar. In the '50s, machines in New York subway stations sold everything from meat to booze to paperback books, at least until vandalism got out of control. The Netherlands chain Febo currently sells warm entrees in the same fashion. But it never claimed to be particularly health-conscious, and a lot of Chicagoans are starting to eat more mindfully.

[ibimage==39873==Medium==none==self==ibimage_align-right]In July 2012, Chicago gourmet chef Nick McMillan hatched the idea for RyteBytes, a startup that “whipped up a way to serve you fresh, healthy and zesty meals with zero hassle. The recipe? Just three quick steps!” Place an order with your phone, grab the food from a branded vending machine, and heat it.

By winter, RyteBytes had incorporated. In early 2013, it made its first sale. It promised to donate 10 percent of its profits to food charities, spreading its zeal for nutrition around the world. And, as of this August, it's all but gone. Here are four lessons from what went awry.

1. Know Your Industry, Know Your Tech

“Neither myself nor my partner had experience in consumer packaged goods or vending,” said McMillan. “My experience in the food industry just wasn't broad enough.”

The realities of running RyteBytes acquainted McMillan with the business of vending machines, which “is pretty old-school," said McMillan. "There isn't a large need for innovation when you're just selling candy bars. The vast majority of vending machines are closed systems where the machine communicates with a backend server that handles inventory and systems management. Because we wanted to break that model by introducing integration with our smartphone apps, the costs skyrocketed. This was something completely new to them. Their software was written in Visual Basic!” 

As McMillan absorbed more knowledge of vending machines, he realized he wasn't dealing with a tech startup – he had a brick-and-mortar business on his hands. When he got the cost estimate for his first six machines - $150,000 - he knew RyteBytes was probably doomed.

2. Design Matters

There's an old piece of restaurant wisdom: 'You eat with your eyes first.' Unfortunately, as a trained cook, McMillan knew taste buds better than aesthetic tastes. “If the food isn't going to taste great,” he said, “you might as well stop there. The problem was, once we achieved a menu and taste that people were willing to pay for, we didn't transition our focus to the look and packaging of the product.”

Many customers indicated that they disliked, not the food, but the 'look and feel.' RyteBytes failed to invest in eye-catching graphics and an endearing visual brand until it was too late.

3. Accept What You Can't Control

McMillan spent his weekends in the kitchen heat, and the food dominated his focus. As a trained chef, he never thought he needed to bring in someone else to help cut the mushrooms.

“I love to build products,” he said, “so it was tough for me to make it a priority to look for someone else to be responsible for such a critical part of the business. Had we thought to bring in a chef earlier in the company's lifetime, we could have used the time we were spending on menu development, ordering, and cooking on other parts of the business.”

As it was, the company didn't properly tend to packaging, vending, or sales.

4. Scuttle the Ship When the Time is Right

After the death blow from the vending machine vendors, reality set in. This summer, RyteBytes ceased operations. It's selling its assets and clearing up its invoices, and McMillan is moving on.

“I still think there's a need in the market for a meal option that doesn't require cooking and has a longer shelf-life than fresh food,” he said. He even has kind words for Nomiku and Mellow, two startups currently exploring a similar space. “Unfortunately, RyteBytes won't be creating it.”


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