For some reason, theres this streak on HN of people that think that VC's are just complete idiots, and are completely just pissing away money.

Yes it’s good that they charge the customer more than they pay the driver, but that doesn’t translate into a “profitable transaction” from a business standpoint. If it takes $X millions in engineering costs to build and maintain an app required for that ride to have occurred then one needs to prorate that cost across each ride as a cost and so on. There are lots of examples of these creative “our transactions are profitable” claims like WeWork’s much ridiculed “Community Adjusted EBITDA” metric.

The fancier your metrics need to be to show you are “profitable” the bigger the red flag should be that all is not well in Oz.

Like I said, I don't know. I don't think the questions can be dismissed just by assuming that VCs know what they are doing.

Edit: I went and looked at GrubHubs 2019 Q4 results [1]. They operated at a $30M loss. Most of the expenses were "operations" related. I'm not sure if that includes engineering, but I guess it doesn't.

[1] https://investors.grubhub.com/investors/press-releases/press...

2019: -18M

2018: +78M

2017: +99M

2016: +49M

2015: +38M

2014: +24M

2013: +7M

2012: +8M

2011: +15M

They are not. But they are banking on the general public to buy shares without scrutinizing the business sustainability and be left holding the bag.

Since IPO:

Shopify? $28 to $754

ServiceNow? $25 to $361

Alibaba? $93 to $199

Splunk? $36 to $149

DocuSign? $39 to $119

Teladoc? $28 to $188

Atlassian? $27 to $175

MongoDB? $30 to $194

Square? $12 to $73

Twilio? $26 to $187

Workday? $48 to $153

Veeva? $44 to $195

Zoom? $62 to $167

Facebook? $38 to $205

Palo Alto Networks? $53 to $215

Okta? $23 to $177

Wix? $17 to $166

Wayfair? $32 to $183

The Trade Desk? $27 to $292

Coupa? $29 to $205

RingCentral? $18 to $283

Zendesk? $15 to $73

Zscaler? $33 to $75

PayPal? $34 to $143

CyberArk? $30 to $96

Proofpoint? $13 to $115

Qualys? $13 to $101

Smartsheet? $19 to $52

JD.com? $20 to $47

Anaplan? $24 to $40

Zillow? $26 to $46

Roku? $26 to $117

Or more recently:

CrowdStrike? $58 to $76

Cloudflare? $18 to $27

Fastly? $24 to $36

Maybe they're holding one of the older bags.

Fortinet? $8 to $137

Tesla? $20 to $790

Salesforce? $4 to $169

Baidu? $8 to $95

Netflix? $1 to $438

Google? $50 to $1,349

Oh the horror.

Several broke regulated public utility or near utility functions like housing and transport.

Some are just scofflaws (uber, Airbnb)

Many are extra territorial trans national tax avoidance

These left and right columns distort the actual net effect on the economy.

Sure: my pension fund will be in all of them

Some of us think they're hypebeasts in search of a greater fool.

Well sometimes they are, sometimes they aren't. Softbank Vision Fund justifies at least questioning some VC strategies.

Grubhub has taken a profitable share of the market which makes sense.

Some people believe that new entrants are using private funding to subsidize the price of delivery to gain market share. By doing so, they are expanding the market beyond what the economics of the market support.

Those new entrants would argue that they are doing so because once they lock in customers and restaurants, they can raise their prices or lower their costs and turn a profit.

Where this all ends up is an interesting thought exercise , but it certainly isn't an easy question to answer.

Easier to pay a kid $7.50 per hour to drive around than to pay $12 per order to a third-party.

I delivered pizza for years before and during college. Looking back, I sometimes think the drivers were the ones who were subsidizing the big chains.

This was very early 2000s. I was paid about $6/hour and $0.70 per delivery plus tips which averaged $2 per delivery @ 3 deliveries per hour, 90% tax free as credit cards weren't used much then. I would walk home with $14 / hour, after taxes, which seemed like a great deal back then when the only other option for an introverted average looking guy who wasn't gonna make it as a waiter / bartender would have been $12/hour working awful data entry jobs or $8/hour doing retail.

It helped that gas was $1/gallon then, though within the next 8 years it would rise to almost $5/gallon.

But in those few years, I put on tons of miles of the worst kind of stop-and-go driving. I had a relatively decent 5 year old Honda, but after 4 years of delivering pies, it needed replacing. So essentially, I thought I was making $14/hour in a pretty cool job (driving around, listening to CDs, eating free pizza), but I'm guessing it was more like $10/hour after accounting for the wear and tear on my car.

I'd imagine most Uber, Lyft, Grub Hub, etc. drivers are all gonna see similar costs of doing business when they tally up their profits & losses over the lifetime of their car.

The shadow restaurants opening up to serve these markets that massively lower the quality of the food in shared terrible kitchens (most not zoned for that and with little to no safety equipment) but using the restaurant name anyway?

It's the whole thing end-to-end that is unsustainable.

Or as a recruiter recently pitched it to me, Travis Kalanicks next billion dollar opportunity!

https://www.google.com/amp/s/www.businessinsider.com/cloud-k...

https://twitter.com/susie_c/status/1255971900599046144

$1042 becomes $346.

That's exactly the VC playbook isn't it? Subsidize the market until you achieve lock-in, then stop the subsidies.

Now the market has nowhere else to go but to pay almost whatever you want. A restaurant can't afford to not be on GrubHub. A diner doesn't even consider non-grubhub options due to habit.

But, yeah, you're right. The problem is, the harder you squeeze a lemon, the less juice is left in it. And in times like this, they're squeezing harder and they've nearly squozen their whole supply.

An apt definition of a number of the world's current issues, unfortunately. I've never heard it described that way before but I really like how simple the imagery is to grasp, thank you!

https://www.chicagobusiness.com/joe-cahill-business/restaura...

https://www.newyorker.com/culture/annals-of-gastronomy/are-d...

When I mentioned GrubHub and DoorDash to my wife when I say this article posted, I got a 30 minute rant about how much she hates them. She couldn't even give me a fixed fee she paid from these companies, she started listing off different fees and charges, but she said it was more than 20% per order. These companies have absolutely shot themselves in the foot with how they have treated their customers. What a lot of people really want is to be able to order online or through an app, that's the value these companies provide. For us we already had a WordPress website, so I paid a small fee to install the Woo Restaurant plugin to handle the online menu and ordering. It really wasn't much trouble to setup and it's been way less trouble than any of these middle men, and we get to continue to keep the profits.

There was a 24hr local place that had things like marinated beef + rice for $30 ubereats total, which is exorbitant compared to my usual $12 meals. But I'd order there 2-4 times a week because of deliciousness, habit and convenience.

I guess most of the restaurants I go to in SF don't actually have waiters any more, just runners. None of them are particularly well positioned to take advantage of how we eat food now, either. They are in expensive locations for foot traffic with large dinning rooms and small kitchens when you'd want just the opposite.

Also this is anecdotal, but I’m way more likely to place a pickup order through GrubHub than any of the other apps (if they even offer that). I think it might have to do with the Yelp integration, and me associating that experience with in-person dining... so maybe I’m just naturally in a “find a place to physically go to” mode when browsing Yelp?

The takeout side of this business would obviously have no issues being profitable.

Easy. Take away the VC funding and see if anyone wants to try or can manage to start a similar company.

In most cases, these companies are just middlemen. Many folks do not see middlemen as "legitimate" businesses, even though the middlemen make money.

Hosts and parasites can each thrive. However only one can survive on its own. Ideally hosts would prefer to live free of parasites.

It should be expected that some consumers or producers will want to cut out the middlemen. We cannot reasonably expect everyone to appreciate those middlemen for the success they may have in taking a cut (and collecting data on consumer behaviour).