Two and a half years ago I started building Ikaria, a personalized performance nutrition service. Three months ago I shut it down.
90% of startups fail, so this was hardly a unique or unexpected outcome. Smarter people than I have written about how failure is overdetermined — i.e. there are dozens of reasons why any given company fails, the reversal of any of which might have changed the outcome. That said, the proximate reason for Ikaria’s shutdown was discrete: our inability to raise sufficient early-stage capital to create a truly viable prototype. So while it may not be illuminating to dive into the myriad internal reasons the company failed to achieve exit velocity (which would read like a stereotypical list of startup sins), dissecting the fundraise process might actually help other early-stage founders with their own journeys.
What was Ikaria?
Ikaria delivered personalized, metabolically determined nutrition. Customers would tell us their ideal avatar — how they wanted their body to look — then tell us their current state, and we would design and deliver the food that took them from one to the other. We’d also monitor interim results and make adjustments as our clients progressed so they got results without having to ever think about what they were eating.
Our idea was to start with physique as a use case (gain muscle, tone, lose weight, etc.) since it’s highly visible and much more objective, then expand to more complex food-as-medicine areas (focus, mood, energy/fatigue, longevity, etc.).
Why Raise Money?
Not every startup needs to — or should — raise money. Investor capital has two basic use cases: (1) it enables companies to make progress faster than they could’ve otherwise; (2) it funds technical development of a product with clear demand. In other words, money can buy time.
After our prototype launched in Los Angeles in early 2024 we saw fitful growth. We attracted some customers and churned others, learning all the time about what would create a magical experience. We got a lot of encouraging feedback and it was clear there was demand but we hadn’t yet created something that would take off.
For a consumer product to succeed you need to create something that people will brag about to their friends, something that’s unlike anything they’ve experienced before. The “viable” in “minimum viable product” doesn’t just mean “functional,” but rather “sufficiently amazes people such that they’ll overlook its flaws.” The first iPhone is a great example of this: it didn’t have copy and paste but most customers thought it was a phenomenal product regardless. Ikaria’s product needed to hit that level.
The blunt reality was that while we’d been making rapid progress, the product needed to be more integrated, polished, and feature-complete. To return to the iPhone analogy: we were at the phase where we’d tacked phone functionality onto an iPod but had no touch screen to make the experience cohesive, seamless, and magical.
While we’d been frugal, my cofounder and I were running out of personal runway. Our core operations were profitable but they couldn’t yet fund the costs of developing the product, and scaling them up more was also going to require more investment in the business. (Physical products, unfortunately, require production facilities, labor, inventory, logistics — all things that cost money, often in chunks paid upfront, as you move up the ladder of scale.)
In sum: we had evidence people wanted our product (both live customers and a half-million dollar backlog); we knew what to build to amaze people; we could see a huge opportunity in front of us; but we didn’t have the money to get from our prototype to product-market fit. So we went out to investors to bridge the gap.
You Have to be Contrarian and Right
We talked to over 120 investors and a half dozen accelerators over 8 months. To cut to the conclusion: you wouldn’t be reading this now if things worked out the way we wanted. The overall investor feedback — both explicit and reading between the lines — left us with three clear takeaways:
- In a high interest rate environment, low-margin, operationally-intensive, capital-intensive businesses were extremely risky. VCs look for investments that can clearly generate the returns their model requires. Infinitely scalable, high margin software does that. Vanishingly few operationally intensive business were getting funded in 2023–2024, and plenty either sold or shut down. From a macro perspective we were in the wrong place at the wrong time.
- Investors weren’t convinced a venture-scale outcome existed in our domain. VCs need to both believe (1) that you can get to your goal outcome and (2) that when you get there, the outcome will matter. Hundreds of vertically-integrated food tech companies launched in the last 15 years but few-to-none achieved venture-scale returns and investors weren’t persuaded we’d be different. (A venture-scale return is one where an investor’s initial check can eventually be worth the value of their whole fund. So, for a $300M early stage fund, they have to believe that it’s possible for their $1M investment to eventually be worth 300x its original value, inclusive of dilution. That’s a tall order.)
- We hadn’t proven our offering cut through the clutter. Our waitlist and usage wasn’t big enough to show that a significant beachhead of customers were super excited about our product. Due to the economics of an atoms-based business (every unit you sell requires capital to make), the ability to get cheap, scalable growth is critical to the business’s survival. We hadn’t cracked the code there.
Every startup’s expected value is a combination of probability of success and magnitude of potential outcome. Starting with a historically low-margin, high-churn, capital-intensive product stacked the odds against us in a difficult macro environment. We weren’t able to overcome that via scrappy execution with highly limited resources. So after more than 2 years of not taking a salary, moving back and forth across the country, racking up debt, losing sleep, and putting close relationships under extreme stress we decided to call an end to the project.
What Could Go Right
There was enough demand that I know there’s the core of a good idea in what we built. Many startups that go under are simply timed poorly. Another team could absolutely succeed where we failed. Here are some ways that might happen:
- Marketing that cuts through the clutter. A lot of consumer companies start with an idea that catches fire. Liquid Death started off as a viral brand concept before they ever sold any water. Glossier started off as a beauty blog that amassed a cult following before it ever sold a single product. Blueprint started off as Bryan Johnson’s longevity self-experimentation journal, and now it’s a supplements company and a movement. Consumer products need marketing leverage: they need a story that people will spread organically. Ikaria didn’t have this, but another team could.
- Timing. We launched a low-margin, operationally-intensive startup into a market with high interest rates, an IPO drought (leading to a lack of liquidity for early-stage investors), and an AI boom. It was basically the worst possible conditions. If we’d launched in 2021 there’s little doubt the story would’ve been different.
- Luck. My friend Jake’s company, Keeper, nearly shut down before one viral Tweet garnered them thousands of signups and enabled them to raise millions of dollars. CookUnity owes its survival in the early days to one idiosyncratic backer who led their first two funding rounds. There are hundreds of stories like this where one chance occurrence separated a company’s survival from its closure. We might have just been on the wrong side of circumstance.
- Starting somewhere else. Amazon didn’t start by selling everything under the sun with free overnight delivery. It’s possible that another company builds this only after they’ve succeeded in higher-margin, stickier, more defensible areas.
- Independently wealthy founding team. Some highly successful companies only existed because one monomaniacal founder invested a bunch of their own money to get their crazy new idea off the ground. SpaceX is perhaps the most famous example of this. Similarly, Reid Hoffman funded much of the initial development of LinkedIn. More recently, Bryan Johnson created Blueprint by spending millions of dollars of his own money — earned from prior exits — documenting his personal longevity experiments. I don’t begrudge any of these founders their successes and what it enabled them to do. We all benefit from their wild experiments.
Why Start a Startup?
Now, a bunch of the above may seem super obvious in retrospect. Yes, building a vertically-integrated performance nutrition startup is clearly going to be difficult, operationally intensive, and low margin. So why do it?
I embarked on this process because in 2022 I experienced my own “aha” moment around my health and fitness that friends — themselves entrepreneurs and early stage investors — had remarked on and been inspired by. I had recently left a successful stint as head of operations at a seed-stage startup and those two things, combined with a recently bullish (though softening at the time) startup market gave me the confidence that not only could I build this, but that I was uniquely qualified to do so. The product was a synthesis of things I already excelled at and because I believed I had unique insight into a customer group and product direction, I pushed forward.
If 90% of startups fail then you’re left with one of two possible conclusions about any founder: they’re either naive about the odds or they’re delusional enough to believe they’ll overcome them. And if a founder succeeds, we don’t typically call them “delusional” but rather “visionary”. The narrative changes based on the outcome — but that’s contrary to how life is lived, looking forward at an uncertain and unwritten future. Many startups look just a little crazy at the beginning, and if they do succeed we’re grateful someone dared to take the risk.
In 2022 I knew I had to do this, no matter the outcome. While it could go well and create a successful business, I accepted that most likely it would not. But that doesn’t mean it was a failure.
There Is No Such Thing As Failure
One of my favorite stories is the parable of the Chinese farmer, as told by Alan Watts:
Once upon a time there was a Chinese farmer whose horse ran away. That evening, all of his neighbors came around to commiserate. They said, “We are so sorry to hear your horse has run away. This is most unfortunate.” The farmer said, “Maybe.” The next day the horse came back bringing seven wild horses with it, and in the evening everybody came back and said, “Oh, isn’t that lucky. What a great turn of events. You now have eight horses!” The farmer again said, “Maybe.”
The following day his son tried to break one of the horses, and while riding it, he was thrown and broke his leg. The neighbors then said, “Oh dear, that’s too bad,” and the farmer responded, “Maybe.” The next day the conscription officers came around to conscript people into the army, and they rejected his son because he had a broken leg. Again all the neighbors came around and said, “Isn’t that great!” Again, he said, “Maybe.”
The whole process of nature is an integrated process of immense complexity, and it’s really impossible to tell whether anything that happens in it is good or bad — because you never know what will be the consequence of the misfortune; or, you never know what will be the consequences of good fortune.
The corollary to this is that if nothing in life is necessarily good or bad, you can choose how you want to interpret things. If you can construct an internal narrative that paints an event in either a positive or negative light, why not create one that empowers you?
While Ikaria isn’t going to serve millions of people the experience helped me build both new and deeper relationships, taught me new skills, uprooted me from a stagnant past life, and planted seeds for future career opportunities. So, was it a failure?
Maybe.