That seemed obvious to everyone though so how did they ever get valued so highly? Is the whole point of companies like this to fool investors into giving them money and then keep the sham up for as long as possible?
When it's not, it may seem like they are deluded or scammers. Maybe they are, but a more charitable interpretation is that business -- especially new businesses -- are like six blind men and an elephant, which means people can strongly disagree about the nature of the beast while both parties are simultaneously right about the pieces they know and understand and both are equally wrong in the aggregate.
You make a paper airplane. You toss it into the wind and see if it flies. No amount of debate (concerning what should fly) changes whether it did or did not actually fly.
There's no way it's that low. Maybe 90% of VC-backed startups, and even then I think it depends on how you massage the definition of 'fail'
90% failure rate comes from research by Small Biz Trends
Also real estate businesses only have a 42% failure? So I have a greater than 50% chance of becoming a real estate mogul? I just don't buy it, and I don't believe those other numbers either.
And the only source they cite on the website, http://www.moyak.com/papers/business-startups-entrepreneurs...., doesn't really lend any explanation to their numbers.
I think their data is wildly skewed by sampling bias, as they claim to get their data from interviewing failed founders. Welp, they never interviewed me - how many other people have they never interviewed because they simply never knew the company existed? How many founders, after failing, go out of their way to talk about their failure?
VCs have a strong incentive to create a story that starting a company has a greater chance of success than it does, because it's low-risk for them and they want a churn of potential investment prospects.
I think 1% is a much more realistic number than 10%, unless we're limiting ourselves to Sequoia-backed post-Series A companies.
The informal definition we think of day-to-day is fairly fuzzy. There's nuance in differentiating a small business operated by a few people from a startup. Being venture-backed is a simple differentiator but there are still legitimate startups this would exclude, e.g., serial founders who don't need to raise or products that make money early.
With respect to "fail"... is an acquihire or an even-money, 1-3x exit etc a "failure". Probably, yes for the VC, but not necessarily for the founder. Accelerators are incentivized to count "successes" liberally as well.
With a more broad definition of startup, it's easy to see the failure rate at 99%+.
1) compelling if it all works out. Invest clear-eyed and hope the founding team figures out the roadblocks. Greedy but not stupid; most successful startups start by 'doing things that don't scale.'
2) Pattern-matching / top-down portfolios. Mobile apps. Sharing economy. Subscription businesses. Electric Vehicles. Internet of Things. A lot of investors decide on themes for portfolio before they look at investments. Scooter sharing ticks a lot of boxes.
3) Adverse selection. It's a simple idea - anyone can grasp scooters as subscription. So the simplest-minded investors chose this rather than more subtle ideas.
4) as another comment suggested, investors are playing a game of musical chairs between funding rounds. Chamath Palihapitiya claims this as the reason his firm is stepping back from VC -- so he's walking the talk here https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-...
If you think of VCs as totally independent, open-minded, critically thinking professionals, dutifully providing a financial service, then no. You pick the VC for the idea rather than the idea for the VC.
The second case is the ideal, but assumes highly-competent VCs and founders with equalish leverage. I think the perverse incentives for VC partners (read Palihapitiya) and the lack-of-prestige factors for first-time founders break the model. But this seems to be more true for second-time founders with moderate success under their belt.
I have come to the realization that VCs are really bad at distributing resource. For all these pedigrees to show for, they all seems to be playing musical chairs.
Part of the problem I see is that most VCs don't have a founder background and most of them you meet are pretty arrogant.
I am not joking-- I'm willing to bet that there is a direct correlation between inequality and stupid products/business models making it to market. When you can just keep trying new things until something sticks, you're not going to try very hard or act with much caution.
Bird isn’t WeWork. Yes, they’re unviable on a unit basis now. But that’s a hardware problem. They’ve grabbed market share; now they must build margins through R&D. The traditional model is R&D first market capture second, but there isn’t a fundamental reason not to go the other way when the R&D is reasonably feasible.
They mostly replace walking, which people do year-round, throughout the day, and well into the late night. At least this is true in my neighborhood.
Strong operations will allow bird to continue to cut costs.
(I'm hoping) There's still room to innovate on winterized, electric, single person products.
If I start seeing them around enough I might go to the trouble, but that requires a fair amount of density to start working.
If some new company with deep enough pockets starts promising No Unlock Fee and $0.15/min, they could quickly capture a lot of Bird, Lime, etc's market share. They'd be burning cash at an unsustainable rate, but there is no moat between these businesses at the moment.
I think it's a social engineering problem. If the scooters didn't get routinely destroyed by people 1. smashing them into curbs because it's fun or 2 tossing them in the river because they're obnoxious / blocking the sidewalk, I believe they'd be already be profitable, or at least close.
People hate the scooters. People who ride the scooters hate the scooters. Hell, I like the scooters, and I hate the scooters. :-)
I would also like to see them ticketing the riders for reckless driving/endangering of the people. I almost had an accident 2 weeks ago because some stupid riders decided to race on the street. I also see some of them riding in the sidewalks zipping through pedestrians and many times hitting their bags.
And you’ll see that most scooter riders on sidewalks are going max speed. It has made walking in cities with these things a lot more annoying, and it was already bad enough with cars but at least cars are separated from walkers.