Also, Rides had already reached profitability at Uber (pre-covid).
They are both totally viable businesses, post-covid.
The mistake SoftBank made wasn’t investing in them, it was investing at a valuation that grossly overestimated the size of the opportunity, and how quickly they would see their return.
Uber & Wework aren’t going to be Apple/Google market cap any time soon, if ever. And that was true pre-covid.
>>Also, Rides had already reached profitability at Uber (pre-covid).
Need to be taken with a grain of salt. There are so many ways to game accounting in general, and even more ways to game the accounting of business unit. So when they say Rides is profitable, it may be true, or close enough to be true to be so. But you should doubt. If a company has $14b in revenue and $8b in losses (2019) and a profitable unit like Rides. That means some other part of the company is lost $8b+. I am sure they spend a lot on delivery, and self driving cars, but do they spend that much.
The reply to this will be "that involved a one time write down.." or some such. But when a company has never turned a profit, its hard to tell when the one time costs will stop.
That said, I believe there is a viable business in Uber. It has just been overvalued.
The point is, ridesharing is a viable business. There are numerous profitable companies in Europe and Asia doing the same thing as Uber.
If you talk to many drivers, you'll find a common theme that "bonuses" make up a substantial fraction of their overall income (bonuses are things like "Drive XX rides in a week and get $YYY").
To my understanding, most/all of these bonuses are placed under the accounting budget (under the premise that these bonuses are intended to bring new drivers onto the platform), not the rideshare budget.
So rideshare cost of operations doesn't properly reflect the true cost of operating the rideshare business, which means that unit economics are worse than they appear in Uber's reporting (possibly even negative).
How can Uber be doing the same thing if Uber is losing money doing the thing and the other companies make money doing it?
Even if one or more sections of Uber are profitable, it's likely that those sections rely on functions performed by unprofitable sections of the company. Disentangling those elements isn't simple. It's possible that Uber as-it-exists-now can never transition to profitability but a company-like-Uber-in-some-ways could be profitable in the future.
In a sufficiently dense area, there is clearly a market for app-summoned taxis (for various values of who owns/maintains/pays for said cab). Prices may be higher than today's rideshare and volume lower. But there's a market for it. Just probably in fewer areas/at fewer times/with more expensive rates than today.
Oh well. For sure, but it's a pretty vague statement, isn't it? We're not talking about some modest value that can keep some small company running; we're talking about $75 billion value. I'm sure that not one, but many small companies can thrive providing local services to taxi drivers collecting and dispatching hails. But that's a far cry from that to a single global company valued at almost a hundred billion dollars.
It is akin to valuing Ford at 10x General Motors because Ford has a yoga instructor as CEO
The experience of a WeWork and Regus are very different. They can both co-exist because some people like a more community type environment, and some people just want a modular space that is affordable.
WeWork tried a bunch of things that you might not find at a typical coworking space but I personally would pay 2x for a WeWork space over the same Regus space because I will get more value out of the WeWork space which is meeting people. I have spent plenty of time in my career in WeWork and Regus spaces, and WeWork has been much more fruitful in terms of the network effect.
It does not matter what people value, it matters what market values. And for the market having a yoga CEO is not a selling point for a car.
so tesla
Tesla shares are expensive compared to other car manufacturers because investors are placing a bet on the future of the automobile being electric and Tesla having the first mover advantage and becoming almost synonymous with Electric Car. Same way we now tell each other "just Google it".
If it was just for having a yoga instructor as CEO and all you can drink Kombucha at it's charging stations then it is eye roll worthy.
Beautiful and expensive.
The mistake Softbank made was investing in direct competitors without enough control to make those competitors play nicely.
Instead you get companies both buying marketshare using softbank's money that are forced to do so because the other has softbank's money. That's just lighting money on fire. The majority of the investment should have gone to R&D and developing durable assets that bring value in perpetuity. Buying marketshare through promotions is the opposite of that.
That doesn't say much. When you're off by 20X for a close-to-IPO company that's a huge mistake and the diff in funds would've been better spent on spray and pray R&D. Many companies are good investments at 20X lower valuations than what they recently raised at.
There aren't 10m seed stage companies, and the effort involved there would be insane.
I still think you're right that they should have gone for more smaller investments to the greatest extent that it was practical.
As you go for larger and larger investments there is less risk and less reward. Also a bigger chance of one mistake wiping out a huge chunk of the return.
Warren Buffett also has this problem and why his investment returns trend down over time as the amount of capital at play goes up.
Banks historically gave 10m loans, to businesses. And today we have really good knowledge management tools. So isn't it possible to build some process for that for seed investment ?
I worked for 3 years as a part time taxi driver in first world mega city while doing my post grad at University. Taxis are heavily regulated. If I had refused a fare, I could be taken to court. Especially if the passenger belonged to a certain category like disabled or children needing a ride home after school.
This was pre GPS days so I had to pass 4 different computerised exams about the city and major roads. I had a through police check and had to display my taxi driver license on the dash.
There was proper commercial driver & vehicle insurance that was automatically taken out the day's earning. There was camera in the car including infrared mode. There was a panic button to start broadcasting location, video and audio.
Uber's advantage was completely ignoring any regulations. No insurance. No driver check. No driver safety infrastructure.
And their best move was the marketing bullshit. Even now people like you spout the same talking points.
I put in my card and boom! Done! I see the number on the screen - I pay that number, not that number plus customary tips.(99% of the time completely unearned, BTW)
But of course, the major way Uber "blew taxi companies out of the water" is through their ability to offer below-market-rate prices by losing money on each ride, thanks to unending supply of VC money.
Also keep in mind that the majority of Uber's revenue is from metropolitan areas, not rural areas. And in the metro areas there was a lot of convenience to be gained from their app and matching supply and demand side of the equation and a lot of those areas were underserved by the TLC and specifically car services because taxis didn't even operate there. So they actually took the pent up demand and created a better system.
Now they are still grossly unprofitable, but not for the reason you cited here.
Yes, people forget about the pre-app days when hailing a taxi involved finding a suitable street corner and sticking your hand in the air while often competing with others doing the same. And even in midtown Manhattan, perhaps the best-served area in the country, try hailing a cab during rush hour when it's raining. Taxi services have largely caught up and have apps now, but it was a nightmare for a long time.
taxi companies also don't have thousands of software engineers or sales people, they literally just drive taxis.
The economics are impossible to sustain, and I've been on the ground first hand talked to over 1000 owners at restaurants, grocers etc. Every single one of them has a timeline to get rid of Eats, Doordash, Instacart etc. They're just waiting for the right time to build out their own systems.
There was an enormous opportunity to help them build their systems out that I might pursue if my current venture fails.
1) Your domain has a dns op (order placement) record like an mx record. Your op record points to your online pos system. A standard chunk of data is sent by the customer browser and received by your system.
2) You pay a company for marketing+online menu services. You optionally grant them the right to list/crosspost the same data on competing services. You have the choice which menu-fronts are allowed to use your name and advertise your product.
3) The order comes into your system like any other order. This triggers a separate signal to a p2p dispatch network. The dispatch network load balances all the incoming orders, assigning them to drivers in a logical way that hits restaurants and destinations with minimal extra travel.
4) The delivery driver chooses any client they want, that is compatible with the dispatch network. Tasks are routed to their client.
The order placement, pos, and the dispatch network are totally separate technologies, not proprietary vertically integrated institutions.
Without having the first-hand knowledge of parent comment, my assumption is restaurateurs want more control of both the marketing and the delivery process. I don't think there is enough $ in the pie to pay a third party for marketing and a 3rd party for delivery. I believe the desire is to go back to something they can more directly manage (traditional delivery worked for them), but have an online ordering/POS tool that is easy to use/find from a google search. The consumer does not care if the order is delivered by an employee or someone on a network.
There's no reason they have to use a third party marketing company, if they want to build their own menu and run their own ads.
I wrote a complete system like a Shopify for small retailers integrated with delivery etc. But the code is locked in a private repo for me to get back to if my current startup fails.
You do understand that the problem with food delivery isn't the online bit. It's fairly easy to manage the online bit.
Expectation management is a big issue in food delivery business - that turns people away real easy. Miss delivery timing twice and people are much more likely to drop you. Get swamped with calls - people drop you. It's a hellhole of customer service.
Building out a reliable delivery network - is not easy. The farther the delivery goes out - the more complex it gets.
Out of all - Uber has the best solution to evaluate speed of delivery using a car... and OK for bicycles.
It's a great arbitrage/cutting the BS opportunity. However it should have been run by someone more grounded in reality.
Arcata, CA
Orinda, CA
Central Point, OR
Monroe, WA
Tumwater, WA
Make it "only" $500K each ($15K/yr) and now you're talking more like
Hollister, CA
Martinez, CA
Los Baños, CA
Keizer, OR
Lake Oswego, OR
Longview, WA
Puyallup, WA
But life apparently doesn't work that way!
And I agree with Uber, it's a great idea, but they subsidized their rates to gain market share. Too bad they don't have a plan for how to actually increase their rates to a sustainable level without losing that market share.
I think Uber failed in realizing that it's not that hard to create a clone of them.
All those $500k to $1M ideas, if successful, will eventually need to hire the kind of talent that honed their skills at companies like Facebook and Uber.
WeWork I can agree on. Not sure what transferrable engineering skills one can learn and improve on at that company.
What skillset did they have that allowed them to raise so much money with a model that is not viable or sustainable
And learn to raise money ourselves
Instead of being batty, learn to raise money
What's the great idea? That you can call a cab using a mobile phone? That already existed before Uber. Or is the idea that you don't have to hire those people?
Calling a cab with a mobile phone is miles apart from the ridesharing experience.
With Uber or Lyft, I get an idea of when the car will show up, what the ride will cost me, I know they'll take my credit card, they won't tell me the machine is broken after trying my card-make me pay cash-only to find out the charge did actually go through, I won't get taken on a grand tour of the city to run the meter up, I won't be subsidizing the ridiculous protectionist racket that is the medallion system, I'll get a nice easy-to-use receipt for expense purposes, and the ride will probably be cheaper. I can also order a car for someone else and send them home on my bill with no hassles on either side (sending a babysitter home, for example).
Since most of my rides are reimbursed anyway, I don't even care that much about the cost spread though it is nice to be prudent with the company's money as well as my own. Even if Uber were the same price, I'd prefer it over cabs. Because it's so much cheaper, I use it more often.
To be entirely honest, I'm not the best person to make these "analysis". I never took a cab before Uber because they were outrageously expensive. I took Uber's cabs because they're dirt cheap. All the things you mentioned are really irrelevant to me. (I'm sure you could call a black cab on the phone and ask them for an estimate....?)
And when Uber eventually runs out of VC money, I'll go back to never taking cabs.
You could but sometimes the driver is end up 30 minutes late and you have no way of knowing where they are.
Sometimes the driver shows up, sees your ethnicity and drives off.
Sometimes the driver takes inefficient routes to make more money off you.
Sometimes the driver checks your destination, says its too far and goes away.
There were many problems with the "call a cab and cross your fingers" service in many counties that Uber helped solve
An idea is useless without good execution and there's no real reason to credit people on ideas, lots of people have good ideas but almost none execute well on it. For example there were plenty of online mapping companies available, but when Google Maps came out they completely dominated because their execution was so good. It's crazy to just reduce that down and say it wasn't a good idea just good execution.
They also executed well.
The really big difference for me here in Brazil, is that I can communicate to someone in case the route is bad, something is stolen, etc. Taking a cab is so ephemeral that I don't even have time to complain or ask for help.
The system went like this:
You call some number like 777-7777.
A man with a heavy accent answers gruffly. You tell him where you live and when you want to be picked up. He says "OK", and then you just hope and pray that someone shows up.
It was not a great system at all.
17,700,000,000
17,700 at $1mm 35,400 at $500k
That's a lot of ideas getting fuel and a lot of people being put to work. Even if you filter through for high quality ideas and teams, this is still a better use of those funds.
WeWork was a bad idea from the start. Uber is a great idea without a functioning (profitable) business model.
As an entrepreneur, this kind of news drives me batty.