SoftBank fails again

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If you are going to start a new company in a mature industry, think hard about the strategy to differentiate your business from others in the market.

A good example would be Tesla, which entered the auto market with a fully electric car to compete against the tens of millions of gas and diesel-powered vehicles that are sold every year. At the time when Tesla sold its first car in 2008, EVs were not mainstream, but a fringe market. Last year, Tesla’s Model Y was the most purchased vehicle in the US. EVs now make up 7% of all vehicle sales and the EV market is growing at 50%+ per year. Traditional auto makers are still playing catchup trying to electrify their product lines.

A bad example would be Zume, which entered a different mature market: pizza delivery. This startup took the humble idea of pizza and decided to slap some Silicon Valley fairy dust on it. The pitch? Robots making pizza.

Zume's story starts with a classic tech-world promise: disrupt an industry (like Tesla did with cars). This time, it was pizza delivery. Instead of your friendly local pizza joint, Zume wanted to create a fleet of trucks where robots would whip up pies en route to your house.

In theory, it sounds like the future. In practice, it was a logistical nightmare. The company somehow convinced SoftBank to hand over $375 million to scale this concept. Yes, $375 million—for pizza-making trucks.

Let’s break it down. First, the tech wasn’t revolutionary. Sure, robots assembling pizzas sounds futuristic, but it’s not rocket science. And guess what? The cost of maintaining the robot army was astronomical.

On top of that, Zume overcomplicated the simple act of delivering pizza. You know what works? A pizza shop with a delivery guy.

You know what doesn’t work? A mobile robot kitchen that needs a team of engineers just to roll down the street.

Oh, and the trucks? They faced regulatory headaches, couldn’t scale effectively, and were ultimately more expensive than just, you know, running a regular pizza chain. By the time Zume realized the dream of robot-made pizza wasn’t going to fly, it had already burned through mountains of cash.

Zume spent money like it was going out of style—leasing fancy offices, hiring hundreds of employees, and investing in unproven technology. SoftBank’s Vision Fund was notorious for encouraging reckless spending (ever hear of WeWork?), and Zume took that advice to heart. They bet big on a concept nobody asked for and ignored the glaring practical challenges.

And let’s not forget the market itself. People don’t want complicated pizza delivery. They want their pizza fast, hot, and cheap. Zume failed to deliver on all three.

Hindsight is 20/20, but why not offer a premium pizza product, rather than go head-to-head with Domino’s, Little Caesar’s, and others that were dominating the low-end and low-margin pizza delivery market?

Zume might have done better with a product that cost 2X or 3X of what Domino’s charged. Artisanal pizzas, fancy side dishes, etc. Offering something that the market had not yet seen might have been a better strategy.

Key Takeaways

• Just because you can raise a war chest does not mean you can compete with big players in an established market.

• Many successful businesses start at the fringe of an existing market and then create demand for their products. See Tesla above.

• Make sure the market really needs your product. I can use my phone and have 10 different ways to get a pizza in 30 minutes by clicking a few buttons. Adding an 11th method to get an ordinary pizza does not whet my appetite.

Things I think about

Some people report getting 1,000+ miles on a single tank of gas in their hybrid vehicles.

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