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Comment by ChicagoDave | Hacker News Reader

I'm just thinking about how many $500k to $1mm seeds could have helped founders get their ideas off the ground in lieu of these debacles.

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.

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WeWork is absolutely not a bad idea. Talk to regus, they’re running a profitable business doing the exact same thing (pre-covid).

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.

I am not trying to bash Uber, but statements like:

>>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.

All companies use accounting to paint the picture they want for investors.

The point is, ridesharing is a viable business. There are numerous profitable companies in Europe and Asia doing the same thing as Uber.

Others may be profitable, but I'm skeptical that Uber is.

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).

There's a huge gap between "the economics of ridesharing are not obviously unprofitable" and "the economics of ridesharing justifies the valuation implied by the investments in uber lyft etc".

I agree it is a viable business, but they still may not be charging enough for it to be profitable. If they need to charge more, growth may slow or reverse.

> There are numerous profitable companies in Europe and Asia doing the same thing as Uber.

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.

>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.

> 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)

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.

WeWork is a terrible idea because it has no advantages over Regus/Industrious except for yoga-babel and a much higher valuation.

It is akin to valuing Ford at 10x General Motors because Ford has a yoga instructor as CEO

I'm sure some people would disagree with you. What you value isn't the same as what others necessarily value. That doesn't make it a terrible idea in itself.

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.

> What you value isn't the same as what others necessarily value. That doesn't make it a terrible idea in itself.

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.

"It is akin to valuing Ford at 10x General Motors because Ford has a yoga instructor as CEO"

so tesla

That's a false equivalency.

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.

s/ford/tesla/. Fixed that for you

Yeah, I had that thought too. Briefly. Clearly, Tesla has bunch of stuff apart from its CEO (who just happens to hit news headlines often).

Maybe not a bad idea but its ludicrous that WeWork was ever considered and valued like a Tech company, it's a real estate company with hipster interior designers nothing more.

This is the design-centric co-working office space:

https://www.canopy.space/

Beautiful and expensive.

> The mistake SoftBank made wasn’t investing in them...

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.

"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."

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.

Uber and WeWork is a capital driven business, not technology driven. The barrier of entry is very low. Anytime if there is a competitor come to the market, they have to compete with price. I'd like to see they transform into a data platform. Rather than providing the service through their apps, why don't they provide APIs for small cab companies.

As long as this companies keep investing in marketing over customer satisfaction and real value generation for shareholders the scenario is going to be the same regardless of covid etc. As you pointed out Refused is a good example: focus on business fundamentals, that's it.

Yes. The difference is Regus doesn't pretend that they're a tech company.

It has to do with the scale of capital. If these are YC scale $150k investments you'd need more than 100k investments. Which means maybe you'd have to vet 10m companies at a 1% acceptance rate (which is less exclusive than YC.)

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.

10m seed stage companies surely don't exist.

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 ?

As someone who has been on funding committees there is a logic for making a few large grants. Monitoring costs and efforts are far smaller with a small number of grants, so sometimes it is less work to give a few large grants than a lot of small ones even if you know that there may be more wastage.

I don't understand how the Uber business model isn't profitable besides mismanagement. Taxi companies all over the world are profitable, and Uber doesn't even have to handle the regulation that they have

The reason Uber initially blew taxi companies out of the water is because taxis greatly limited their service to what was profitable and we're incredibly difficult to work with should you be outside one of their comfort zones. You could always count on Taxis near an airport or for an intra-downtown route but good luck getting a cab to pick you up at your house to take you to another suburban destination. It's not that they'd ignore your call because they sucked at customer service, it's that your call is only worth it to them if there's literally nothing else going on. Even then they might not show up if your request isn't going to end with them back in a profitable starting point for another ride.

You are completely wrong.

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.

Their attractiveness - easy and clear payments.

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)

In civilized places, it was the other way around. Taxis exchange privileged position for certain requirements city demands them to meet as a part of city transportation infrastructure - requirements which include having proper insurance, servicing unprofitable routes, or adapting their vehicles for passengers with disabilities. One of the ways Uber saved money was by completely ignoring these market segments.

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.

Uber definitely increased the availability and coverage of end to end car hire in my region. As far as I’ve seen, the evidence suggests that Uber is more equitable for geographic and demographic access.

Yeah but from Uber's perspective they aren't paying drivers as salaried employees but contractors only for a completed fare. So Uber isn't incurring any overhead expense by having cars in less desirable pick up points, or having a car travel 10-15 minutes for a pick up before they can start a fare.

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.

>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

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.

Exactly, this hits on an incredibly important point that gets constantly ignored in “disruptive” business models: if a particular market segment is “underserved” then it often means that there are poor cost economics in play. Sure, Uber can reduce those costs through algorithmic central routing and planning, but that only goes so far and some markets are just never going to be profitable to serve (at a given quality of service).

>Taxi companies all over the world are profitable,

taxi companies also don't have thousands of software engineers or sales people, they literally just drive taxis.

The model is profitable, the price point isnt. It's predatory pricing, sell at a loss to hurt and eliminate competition, when you prevail you own the market.

Here in London Uber is MUCH cheaper than black cabs.

As a former founder working on the sharing economy/delivery space, UberEats will most likely fail, unless their ATG departments hit home-runs (~5% probability)

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.

If you’ve spoken to so many owners that all want to ditch the platforms mentioned for their own systems, do you feel there is enough interested to justify a venture/product to sell to the owners that gives them the control they are after without having to figure out how to develop an application. Seems like a great opportunity

It should just be a set of protocols.

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.

I think the owners are tired of giving up so much control - your proposal sounds too similar to the platforms they are trying to leave.

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.

The cost of using drivers between restaurants has to be cheaper than each restaurant having it's own exclusive drivers. Labor is a huge component of restaurant costs, and having idle hands is bad. It's no different than time sharing.

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.

Yup, I was working on it myself, but shelved it to work on another startup right now.

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 mean like ChowNow? They manage stuff like that.

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.

I'm sure there are many companies offering them to build put their systems, it's still not that easy. My friend's small company is failing at helping small companies have their own system as we speak. They can always go back to paying some local dude belowe minimim wage to deliver with their own naive paper system

So a Shopify-like Doordash?

Exactly. Except the unit economics work. You don't take a cut, you charge a subscription fee to the service.

FYI: https://get.chownow.com/

I agree with some comments: WeWork is not a bad idea. Try signing a lease for commercial space and you'll understand why.

It's a great arbitrage/cutting the BS opportunity. However it should have been run by someone more grounded in reality.

The idea of WeWork was fine (basically a modernized take on office space rental), the execution and management however was a shitshow/dumpster fire of money being pumped to keep it afloat.

My usual self-torturing thought about numbers like these is "Just give me 0.006% of that" [one of those 17,700 millions] "and I wouldn't have to worry about anything forever." A million invested in safe boring things at 3% (which didn't use to be that hard to achieve... not so sure now) yields a basic income of $30k/yr that could pay rent & food in many places. Take the whole $17.7B and do that for the entire population (~17,700) of one of these towns in 2010:

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!

How on earth is Arcata less expensive than Lake Oswego?

This is a good way to look at it. These investors are supposed to be the smart ones allocating capital to good business ideas. It's insane to me that anyone ever invested any money in WeWork.

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.

Both types of investments are valuable because they cause different skills to be developed in the marketplace.

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.

There are a ton of solid engineers that have never worked for Google or Facebook. That’s a whole other kind of investor hubris.

If they can raise so much money, then perhaps honest people like us should focus on

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

The transfer of this wealth doesn't preclude subsequent investment. It's not like they horded / burned the money.

> WeWork was a bad idea from the start. Uber is a great idea without a functioning (profitable) business model.

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?

This strikes me as a close analog to the old Dropbox "analysis": https://news.ycombinator.com/item?id=9224

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.

So what you're saying is it's not the idea it's great, it's the execution?

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.

> I'm sure you could call a black cab on the phone and ask them for an estimate....?

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

That's basically saying that anything that's not a 100% original idea can not be considered a great idea. There are plenty of things that are built on existing ideas but the execution is part of it.

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.

The core of the idea is "make it frictionless for people to hire cars without having to talk on the phone to Danny Devito." I think the idea is actually meaningfully different and if I'm going to take a black car, it's going to be via an app, not a phone call.

They also executed well.

OTOH, when I take a limo to and from the airport (well, normally), I call their office and do the scheduling. I know there are people here with an aversion to telephones but this works well for me. Much better than rideshare for this purpose as pickups are often zero-dark-thirty in an area without a lot of drivers. (And, yes, it's relatively pricey but this is usually business.)

I would never take a cab in Rio de Janeiro or Sao Paulo, but I take an Uber frequently.

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.

In principle you could also do that with a cab company, right? So the difference is really that you trust Uber. If anything, it's not the idea that's great, it's either the brand or the quality of the service.

In NYC, you can't call cabs. You can call black cars, and schedule them to pick you up for say an early morning ride to the airport where you might not be able to street hail a cab.

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.

The great idea is you don't have to worry about paying the driver, it's all online safely with your credit card. You get a receipt that is easy to expense. There's a record of the trip. The bad things are drivers don't have benefits, there's little or no safety training for those drivers. Contrast with taxis have lots of rules on them, yet still its very common in my experience that they are not clean, the drivers are surly, argue about things like routes, and often don't have working credit card payment systems (and you worry more about a personal transaction stealing something). But many taxis are great, just like many uber drivers are great. There's no perfect system.

Leave it to HN to not understand how a simple idea w/ good UX can be a great idea and worth billions...

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