Smashmallow, Silicon Valley's Failed Marshmallow Startup

https://www.businessinsider.com/smashmallow-lawsuit-marshmallow-failure-silicon-valley-business-growth-2024-1

by pseudolus • 2 years ago

55 33 2 years ago

pseudolus• 2 years ago

throwup2384• 2 years ago

This is the story of the Theranos of marshmallows....
... Sebastiani wasn't an Elizabeth Holmes-style grifter. Marshmallows are real! But he did ignore the experts, and proceeded without having the necessary technology in place....
... But at trial, a Tanis engineer admitted that the samples Tanis had sent to Smashmallow to prove it could produce the product were actually made, in part, by hand. Apparently Tanis, too, had faked it to make it....
... The jury agreed, awarding Smashmallow $20 million in damages. After some legal back-and-forth, the parties settled for an undisclosed amount.

I expected to read this article for some guilty-pleasure schadenfreude but no, this is nonsense. This guy got a little too ambitious with manufacturing artisanal marshmallows and got screwed over when Tanis committed outright fraud. If anything, Tanis was the Theranos of marshmallows (which itself is a dumb comparison).

What this has to do with Silicon Valley is beyond me. It's just a bunch of outrage buzzwords strung together in an article about a failed confection company started by some wino from Sonoma, a city almost a hundred miles north of Silicon Valley. Garbage journalism from BI, as usual.

sxyuan• 2 years ago

Came here to post the exact same comment. It's a fun read, especially since I remember enjoying the occasional bag of smashmallows years ago, but the Theranos comparison is ridiculous. By their definition, any failed startup is no different from Theranos. (If there's any need for clarification: one is a risky endeavor where the parties are properly informed of the risks, the other is fraud.) But yeah, it's BI, so why bother complaining...

throwawaymaths2• 2 years ago

I think you're being harsh. The article was worthwhile, if a bit breathless with the therapist comparisons. I find learning about failure modes, especially in an industry I know near nothing about, to be always interesting

agosta2• 2 years ago

That the author found it fitting to compare this company to Theranos even when it was obviously not comparable spoils the rest of the article for me. Sure, the majority of the text may sound interesting but, given the writer's propensity to make dumb claims in the begining, I have to wonder about what undetected BS is baked into the article.

ro_bit2• 2 years ago

I agree. The otherwise decent writing and interesting topic for the rest of the article was ruined by the breathless journalism hypewords at the beginning, and the insistent negative intonation throughout. I especially didn't like how the author lambasted Sebastian for wanting to expand his business past a regional boutique seller ("Rather than trying to blow the company up into another Krave-size winner, Sebastiani could have just … stopped.")

resolutebat3• 2 years ago

Even "outright fraud" is pushing it. Smashmallow asked Tanis if they could automate production, Tanis said yes and delivered a sample that was partly automated as a proof of concept. Was it really "fraud" that it didn't come off a fully formed factory line?

throwup2384• 2 years ago

Was it really "fraud" that it didn't come off a fully formed factory line?

When your business is selling fully formed factory lines? Yes!

raverbashing• 2 years ago

So less Theranos and more Juicero it seems

Still 100% ZIRP delusions

gnicholas4• 2 years ago

The factory was a bit of Theranos (machines that didn't do what they claimed). Juicero was different — their machines worked fine but were just unnecessarily expensive contraptions, when you could literally squeeze the stuff out by hand.

But the Smashmallow company wasn't a Theranos at all. And I'm not sure that they're a sign of ZIRP delusions either. The reason they failed is that their particular type of manufacturing process couldn't scale. They could have kept making the stuff by hand and built up a successful company that perhaps could have found a way to mechanize things later.

ClassyJacket• 2 years ago

Yeah this would have been an interesting article if it wasn't overdone with hyperbole.

ro_bit2• 2 years ago

Smashmallow fired the teams who had been slabbing its product. But when the Tanis machine finally arrived at the Wolfgang facility in August 2019 and Hoj's team spun it up, the marshmallow printer failed to print.

Is this a normal practice in food manufacturing when bringing up a new technology? Why wouldn't they keep the hand production for as long as it took to get Wolfgang up? The company was making 15MM, but maybe the margins were still too slim for them to do both?

agosta2• 2 years ago

This article borders on slander. To call Smashmellow the "Theranos of Marshmallows" is outrageous - even the article says they didn't commit fraud so how would it be even vaguely appropriate to compare them? Absolute garbage journalism

thomasjudge• 2 years ago

It's Business Insider, what did you expect

jahsome2• 2 years ago

Business Insider is a blog with good branding. Nothing more. Certainly not journalism in any reasonable sense.

ineedaj0b• 2 years ago

It’s funded by some anti-tech people/groups. They really don’t like Elon or Silicon Valley in general.

If anyone wants to dig more into that, there’s probably a decent exposé for someone’s Substack.

petesergeant• 2 years ago

Quite. If the founder isn’t in jail, and nobody died, then it’s just a startup that didn’t scale.

Another pet peeve is people describing Adam Neumann as flying too close to the sun. If you made a list of people who have historically flown exactly, to a micrometer, the idealest distance from the sun, he’s in the top ten. He enriched himself beyond measure and the people who’s money he took seem keen to give him more of it.

unwise-exe2• 2 years ago

The actual comparisons from TFA:

That meant he had to grow fast and figure out the engineering on the fly — the classic entrepreneurial strategy of Silicon Valley. When it works, you get Tesla; when it doesn't, you get Theranos.
But if Theranos taught us anything, it's that a business model won't work if it hinges on a technology that doesn't exist. Sebastiani wasn't an Elizabeth Holmes-style grifter. Marshmallows are real! But he did ignore the experts, and proceeded without having the necessary technology in place. If there wasn't a machine that could mass-produce his marshmallows, he would just build one. How hard could it be? In Silicon Valley parlance, he would fake it until he could make it.

The article is severely whitewashing the Theranos fraud. That's why it sees the comparison as legbitimate; it doesn't actually understand what Theranos did that was wrong.

whoitwas• 2 years ago

In context it made perfect sense. They compared 2 companies who had a product without the technology to enable it.

gnicholas4• 2 years ago

But at trial, a Tanis engineer admitted that the samples Tanis had sent to Smashmallow to prove it could produce the product were actually made, in part, by hand. Apparently Tanis, too, had faked it to make it.

So Smashmallow weren't the ones doing the Theranos-ing — they were the ones getting Theranos-ed.

jszymborski• 2 years ago

I came here to say precisely the same thing. The theranos comparison seems unfair to smashmellows, but tanis did exactly what theranos did when it said blood chemistry reports were generated by its machines when in fact it was being run through conventional machines.

unwise-exe2• 2 years ago

I read that as B.I. taking the problems at Theranos as being entirely that the tech didn't work out, and ignoring the whole thing about lies and fraud.

dailo10• 2 years ago

I remember trying Smashmallows, and they were delicious! Now I know why I can no longer find them... sigh.

gnicholas4• 2 years ago

Is it me, or does the article not mention whether they were ever making a profit, or if not, how much money they were losing every year?

It's great to be generating millions in revenue, but if you're losing money on every order and there's no way to cut costs (because automation is currently impossible), that's a very different story than "we were making money as a boutique but tried to grow to fast and ended up failing".

csours• 2 years ago

Manufacturing is hard. Continuous manufacturing is harder. Continuous manufacturing of a new product using new methods is really really quite hard.

Whenever I read about things like this, I wonder why they didn't start by automating only part of the process, and expanding from there.

The other thing that I will say about automation is that "Automation does not solve your problems; In order to automate, you must solve all of the problems that your automation will run into"

jareklupinski• 2 years ago

He walked into the store and found the clerk, who went behind the counter and handed him a bag of gourmet marshmallows. But they weren't Smashmallows. These were made by a small Colorado company called Hammond's, which sells cube-shaped premium marshmallows in toasted coconut, chocolate chip, and a two-layer strawberry créme, among other flavors.

seems like 'winning' would have been a safer bet if, instead of scaling vertically, they just copy-pasted their small-profit formula to multiple locations around the country. like a franchise?

Smashmallow, Silicon Valley's Failed Marshmallow Startup

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