I've seen a lot of similar comments regarding various companies over the last week or so. what exactly is a "tech company", and what makes it different from a normal company (eg, a bank) for whom tech is still an integral part of the product?
> Note the centrality of software in all of these characteristics:
> - Software creates ecosystems.
> - Software has zero marginal costs.
> - Software improves over time.
> - Software offers infinite leverage.
> - Software enables zero transaction costs.
> The question of whether companies are tech companies, then, depends on how much of their business is governed by software’s unique characteristics, and how much is limited by real world factors.
...
> - There is a software-created ecosystem of drivers and riders.
> - Like Airbnb, Uber reports its revenue as if it has low marginal costs, but a holistic view of rides shows that the company pays drivers around 80 percent of total revenue; this isn’t a world of zero marginal costs.
> - Uber’s platform improves over time.
> - Uber is able to serve the entire world, giving it maximum leverage.
> - Uber can transact with anyone with a self-serve model.
> A major question about Uber concerns transaction costs: bringing and keeping drivers on the platform is very expensive. This doesn’t mean that Uber isn’t a tech company, but it does underscore the degree to which its model is dependent on factors that don’t have zero costs attached to them.
He walks through a few other examples as well (e.g. Netflix, Airbnb, WeWork, Peloton), would definitely recommend reading the whole article.
[0] https://stratechery.com/2019/neither-and-new-lessons-from-ub...
But, if your cost structure isn't really like that, then if you're not profitable when you're small, that's a signal that you're not a good investment.
A lot of companies with cost structures more like a conventional company, that weren't profitable, tried to claim that they were a tech company and therefore as they scale up they would become profitable. Some investors fell for this, or thought that someone else would when it was time to IPO.
Whether this logic was ever valid is, IMHO, debatable. But in this case it's a moot point, because Uber (and Lyft, and Lyme, and WeWork, and etc.) don't have a cost structure that looks like a tech company. They may use software, but most of their costs do absolutely scale up as they get more customers.
Uber would have been having layoffs this year regardless, I think, they are just doing it now because they have an external shock to blame it on.
- Founded by IT people (Garett Camp co-founded StumbleUpon) - HQ in San Fransisco - Uses technology to link drivers and consumers
An USP compared to a traditional taxi company is their app, which added convenience to taxi services - don't have to call someone, don't have to worry about handling money, etc.