Case study: Juicero

One of Silicon Valley’s most infamous recent failures was Juicero. In 2016 the startup received $120 million in venture capital from leading investors, including Kleiner Perkins and Google Ventures, and then proceeded to go bankrupt within three years.

The Juicero press was a wifi-connected device that sat on your kitchen counter and made delicious fruit and vegetable juice on demand. It used proprietary single-serving packets of pre-juiced fruits and vegetables, which were sold exclusively by the company on a subscription basis. In other words, once you bought the machine, the only way you could use it was by buying a subscription to receive shipments of their little juice packets to go inside. 

The founder compared himself to Steve Jobs and hired very expensive industrial designers to create a beautiful machine (beware of any founder who compares himself to Steve Jobs).

The machine initially sold for $699 (eventually dropping in price), and the juice packets sold for around five dollars apiece. The juicer wouldn’t work unless it could scan the packet’s printed QR code and connect to the internet to validate it and check the experation date. People love fresh fruit and vegetable smoothies, and the startup was sure that people would love the convenience of a machine like this in their own homes. 

Plus, investors were certain this was a  very profitable business model, since the high-margin packets were required in order to use the machine and could only be from the company.

But, as you’ve probably already guessed, it failed miserably. The machine was too expensive, too unreliable, and couldn’t be used for anything else (there was no way to press your own fruits and vegetables, for example).

The death knell came when Bloomberg ran an article pointing out that the machine itself was completely unnecessary—you could just buy the juice packets and squeeze them by hand, yielding exactly the same result. The company shut down in 2017, just seventeen months after launching (and after $120 million in investor capital had been flushed down the toilet).

In retrospect, the business model was fatally flawed from the beginning. Juicero had an expensive solution to a problem no one really had, and the profit margin was based on the consumer lock-in of a proprietary machine and consumables that could only be bought from the company.

What consumers really want (and continue to buy) is juicers that you can toss your own fruits and vegetables into—no internet connection required. Remember, in the previous chapter we talked about how your product exists in a landscape of competitors and alternatives. Juicero may not have been competing with other wifi-connected, stupidly expensive juicing machines, but it was certainly competing with all sorts of different ways of juicing!

It’s hard to understand how venture capitalists sank $120 million into this project, but on the other hand, VCs do all sorts of inexplicably stupid things.  I suppose the investors fell in love with the economic model, the subscription lock-in, and the whole health/nutrition trend. But when something fails as immediately as Juicero did, it’s clear that the market didn’t like the product nearly as much as the founders and investors did. 

As a startup founder, please don’t launch something you think is cool and then later find out that customers don’t like it. Be smarter than that.  

Key takeaways:

The Schadenfreude runs strong on this one. It’s easy to laugh at the whole thing and feel as if the investors got what they deserved. But let’s look at the story through our Launch Path lens:

Most great startups begin with a founder who notices a problem worth solving. It seems like the fundamental flaw in the Juicero journey is that juicing wasn’t really a problem that customers were willing to pay much to solve.

Consumers have lots of ways to make frush juice. So Juicero’s  competitive landscape included not only head-to-head competitors, but also all the alternative ways to make juice (including buying it from a juice bar). Within that broader landscape, comsumers just didn’t find the expensive Juicero machine all that compelling (something the company clearly should have tested earlier).

Engineers develop features, but customers buy benefits. The Juicero engineers might have thought that it was cool that the device used a wifi connection and QR codes on each juice packet, but by all accounts consumers didn’t care about features that didn’t provide any particular benefit to them.