02 What Went Wrong.docx

What Went Wrong? Dishero: How Mediocre Success can Lead to Difficult Decisions Dishero was started in 2013 by Alex Fishman, Ilya Ginzburg, and Dmitry Fink. It operated in the restaurant space. Its primary service was photographing food. Many restaurants have photos of their dishes. The photos appe...

What Went Wrong? Dishero: How Mediocre Success can Lead to Difficult Decisions Dishero was started in 2013 by Alex Fishman, Ilya Ginzburg, and Dmitry Fink. It operated in the restaurant space. Its primary service was photographing food. Many restaurants have photos of their dishes. The photos appear on their menus, on their smartphone apps, on their social media pages, and on in-store video monitors. Dishero raised \$2.8 million in funding. It put together a strong engineering and business team, topping out at 17 people in six cities and three countries. The company had revenue and happy customers almost from day one. It scored a major hire about two-thirds of the way through its existence. Dishero hired a VP of Sales, who was the first VP of Sales at OpenTable. At OpenTable, he hired the company's first 45 salespeople and acquired their first 1,000 restaurants. Sadly, in 2016 Dishero ceased operations. What went wrong? Dishero's expertise was photographing food, and by all objective measures it was very good at it. If you'd like to see a sample of Dishero's photos, go to Google Images and type Dishero into the search bar. Most restaurants take photos of their dishes, and use them in various ways. For example, Spreadz Deli & Café, located in Santa Clara, CA, was a Dishero customer. The deli has side-by-side video monitors that customers see as they stand in line. When Dishero first approached Spreadz, both monitors displayed menu items---one for sandwiches and the other for salads and coffees. Dishero helped Spreadz transition to using one monitor for the menu and the other to display high-quality photos of their menu items. This allowed the deli staff to recommend items that were shown on the monitor. It also sped up their lines. The 30 or so photos that rotated on the screen showed the menu items along with their names. So someone would see the BBQ Salmon Sandwich on the display and if they liked what they saw, when they got to the counter would say, "I'll take the BBQ Salmon Sandwich." Dishero provided similar services for other restaurants. For instance, Dragon Rouge restaurant in Alameda, CA was another Dishero customer. Dishero photographed its food for video monitors scattered throughout the restaurant. The monitor at the bar created a lot of conversation. People would see dishes they hadn't tried before, and would order something they wouldn't normally have ordered. In an Internet post titled "My Cofounder Said 'I love what we're doing' And We Shut Down Our Startup," Dishero cofounder Alex Fishman wrote about the reasons Dishero failed. In short, Dishero just couldn't grow fast enough. When the firm closed, it was bringing in about \$9,000 a month and its expenses were \$100,000 a month. That's not unheard of for start-ups. Many start-ups take time to reach breakeven and then start making money. But in Dishero's case, revenue growth was painfully slow and unpredictable. Fishman said that Dishero was in the worst possible place. When things work out, it's obvious what to do. When things don't work out, it's hard, but again it's clear what do. Dishero found itself right in the middle. It wasn't failing and it wasn't succeeding. It was a judgment call regarding what to do. In his post, Fishman elaborated on some of the challenges Dishero encountered. First, selling to restaurants is hard. Restaurant owners are busy, they run low margin businesses, and they experience high employee turnover. They've also been prospected many times by start-ups trying to sell something, whether it's a reservation app, a meal delivery service, an electronic menu tablet, or a new social media strategy. Many of the start-ups promise the moon, and then either under-deliver or fail. As a result, it was hard to get restaurant managers' or owners' attention and even harder to get them to refer Dishero to another restaurant if they became a satisfied customer. Second, Dishero had to employ a sales force to approach restaurant owners to try to sell their service. That strategy resulted in a high cost of customer acquisition. Before deciding to close Dishero, the cofounders sat down and identified three options. They still had investor money in the bank so the situation was not dire. Option A was to continue to iterate. Option B was to pivot with the restaurant industry. Option C was to shut down. They didn't seriously consider an Option D, which would have been pivoting outside the restaurant industry. They had cherry-picked their team for the restaurant space. They made the difficult decision to pick Option C. In Fishman's Internet post (URL is provided below), he includes transcripts of e-mail exchanges between himself and Dishero's investors about the decision to close the company. The exchanges are interesting and civil. At the time Dishero closed, the company had \$1.8 million in the bank. The investors told them to keep the funds, which eventually led to the creation of Bugsee, a company started by two of Dishero's three cofounders, Alex Fishman and Dmitry Fink. Bugsee (www.bugsee.com) creates tools for app developers. Questions for Critical Thinking =============================== If you were the owner or manager of a restaurant, would you have used Dishero's service? Why or why not? What, if anything, could Dishero's cofounders have done in advance of launching the company to discern the level of sales to expect? Do you think Dishero had achieved product-market fit prior to trying to grow the firm? Do you think Dishero's cofounders made the right decision in picking Option C---which was to shut down the firm? Explain your answer. What can entrepreneurial firms learn about the dynamics of growing a firm via Dishero's experience? Sources: My Cofounder Said "I love what we're doing" And We Shut Down Our Startup, available at https://entrepreneurs.maqtoob.com/my-cofounder-said-i-love-what-were-doing-and-we-shut-down-our-startup-80d5e710c2b2\#.f9l2d77vc (posted June 17, 2016, accessed March 17, 2017); Dishero Testimonial---Spreadz Deli & Café, available at https://www.youtube.com/watch?v=Sy61jyXxKao (posted May 5, 2015, accessed March 18, 2017); Dishero Testimonial---Dragon Rouge, available at https://www.youtube.com/watch?v=-1xG\_TT\_CeI (posted May 15, 2015, accessed March 18, 2017).