Hans Christian Andersen published The Emperor’s New Clothes in 1837 as a fairy tale for children. The story can now be recast for entrepreneurs and venture capitalists. San Francisco-based Juicero, after all, built an entire company around a $400 high-tech juice machine. But Bloomberg uncloaked the enterprise when its reporters demonstrated that Juicero’s swank fruit-juice packs could be squeezed more quickly by hand, than by the countertop device. An angel investor or two could be forgiven for acting in haste, but the firm raised $120 million in venture funding to build a “new model of food delivery.” Its so-called model is a subscription service for overhyped, if not overpriced, fruit-juice packs, allegedly dependent on an over-engineered kitchen gadget. The fact that major names, including Google Ventures, failed to expose the business in their due diligence says something about the state-of-affairs in Silicon Valley. Investors are hesitant, in the words of the Danish author, to be seen as “unfit for their positions, stupid, or incompetent.” ■
Our Vantage Point: Venture capitalists should make a cash commitment based on independent, if not nitty-gritty, business analysis. The size of allocations from lofty lead investors can be irrelevant.
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Image: Nutritionists argue that juicing fruit removes most of its fiber. Credit: Kesu at Can Stock Photo Inc.