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> There was a common sentiment that speed was everything in VC over the past several years.

And for the VCs it has often worked out. If you're fast enough to get something IPOed before the bubble pops, who cares if there's a real business model?

Personally, as somebody who thinks actually delivering value is important, I'm delighted that this era of easy money and massive hype might be ending. Hopefully companies soon will have to be able to actually turn a sustained profit before IPO.

And I don't know about you, but I'm immensely enjoying WeWork's fall. It never made any sense, and since the wheels came off before the IPO, it's not retail investors who are taking the loss here.

> And I don't know about you, but I'm immensely enjoying WeWork's fall. It never made any sense, and since the wheels came off before the IPO, it's not retail investors who are taking the loss here.

I agree with everything else, but I'm not a fan of this modern era of schadenfreude that seems to be ever present on tech sites. Theranos and WeWork were certainly fraudulent enough to laugh at, but it's created this effect of fraud-voyeurism that feels more tabloid than news; more celebrity gossip than business news. It also encourages shallow misunderstandings. Real estate can be a profitable business, and certainly many developers turn a profit by reasonably financing and pricing their offerings. But a lot of people are opining about WeWork being unprofitable. Unprofitability is not the same as an exaggerated market cap.

Still, I hope Theranos and WeWork are good, cautionary tales of the downsides of easy money.

You may not be a fan, but that's not going to stop me.

I have spent years having to endure the horseshit from places like Theranos, WeWork, and the entire cryptocurrency industry. I knew it was horseshit. The people spouting it could have known it was horseshit if they had bothered, but they did what was in their short-term interests without regard to harm to others.

I am going to enjoy seeing them get whatever paltry and belated comeuppance that karma visits upon them. If they ever suffer as much pain as they've inflicted, I might change my tune, so feel free to come back to me then. But in the meantime, I will enjoy whatever sense of justice served I can extract.

How exactly have you had to endure anything from these companies other than voluntarily reading about them?

Was it voluntarily, or was it the fraudsters polluting the news channels (such as this site) with their horseshit as a result/part of the hype they built around itself?

For sure. The whole "yet you participate in society" [1] retort doesn't impress me. Is my participation in society, in my profession, in my industry voluntary? In the sense that I have chosen not to fuck off to a remote cabin and live via backbreaking subsistence agriculture, sure. But I don't think I should have to cede my life, both professional and intellectual, every time fraudsters come around.

[1] https://knowyourmeme.com/memes/we-should-improve-society-som...

> I have spent years having to endure the horseshit from places like Theranos

You don't need to read the articles. Your sense of mistreatment seems out of proportion.

The issue I have is that both were not really tech companies but rode frothy tech hype and marketed themselves as such. Apps and pretty websites, by themselves, do not magically make a sector more profitable, and that era was peak “everything needs to be disrupted by tech.”

WeWork is unprofitable, but mostly because we’ve known for hundreds of years that paying long term liabilities (e.g. leases) with short term funding is a model that quickly goes belly up.

You are claiming that Theranos, which claimed to be using novel technology to revolutionize medical diagnostics, was not a tech company? That seems very "no true scotsman" to me.

Tech, and biotech, have one big major difference, namely the FDA and other equivalent regulatory agencies, which have strict standards and approval timelines measured in years. You see this in the differences in their balance sheets and valuations, and biotech is not generally part of the tech conversation from an investment perspective.

People had to endure the hero worship of people like Adam Neuman and SBF on the way up. Being as some people called it out as a bubble on the way up, they are probably entitled to a little bit of ‘schad when the wheels come off.

Except Neumann's a billionaire and isn't involved with WeWork anymore after all that, so I'm not sure there's even that much to be had. What's left is the little people who eked by to get a job at WeWork and then got boned by Neuman as well.

The schadenfreude is reserved for the geniuses at A16z and other 'vibes' VCs that continue to throw money at him.

The best heist Neumann pulled was blackmailing SoftBank into buying out his WeWork shares.

It was fairly obvious the musical chairs had stopped, and yet he managed to sell his standing-only-spot at chair-valuation.

SoftBank should be sued by its investors over that farce.

The bit with him renaming the company We, while owning we.com and then leasing it back to the company was a pretty good one though.

don't worry, he will lease you your next flat. You don't deserve to own it:

https://nypost.com/2022/08/15/wework-founder-adam-neumann-sc...

> but I'm not a fan of this modern era of schadenfreude that seems to be ever present on tech sites.

I equally don't like the schadenfreude as you, but I also equally don't like the propping up of ridiculous business models like WeWork and Juiceros of the world that the media does.

Live by the sword, die by the sword.

I agree. I think these business models do more harm than good for the variety of actors involved with them (employees, equity holders, real estate, naive investors, etc.) I just find a sober look at why they're injurious is a lot more instructive than sneering schadenfreude.

We can do both! I have written serious analyses and swear-loaded mockery. I will continue to do both, and more besides. You can too.

> but it's created this effect of fraud-voyeurism that feels more tabloid than news; more celebrity gossip than business news.

Publicity giveth, publicity taketh away.

The schadenfreude does not happen in a vaccuum. Silicon Valley is addicted to the Steve Jobs messiah narrative, which is why they constantly deify 'personality' CEOs like Holmes, Neumann, Kalanick, Musk, even out and out frauds like SBF.

You do not see gloating about people getting busted for PPP fraud, because those are anonymous nobodies, that have not had a PR machine behind them pushing Galt-esque tales about their exploits and soapboxing their bizarre ideas about the future of millions, dreamed up from their NYC penthouse bubble.

If you dress someone up as Superman, there will be chuckles when he's found out to be a guy in muscle suit wearing his underwear on the outside.

I have an unpopular opinion that tech workers, especially in the west, are increasingly being perceived by everyone else like investment bankers or consultants were in the 90s (or forever, honestly).

There's not a lot of clarity about what value they bring to the table (since the companies that pay their salaries are often unprofitable) and it's not always obvious what work they actually do (hence the prevailing meme that no one works at FAANG).

Of course, the reality is that numerically, most tech workers don't work for FAANG or hot startups, but public perceptions are usually colored by the most visible subgroup, which happens to be overpaid startup bros.

i'll repost here the twitter worker who does nothing at work and i suppose now has been fired: https://www.theblaze.com/news/twitter-day-in-life-video

forgive the link, i guess the original tiktok was deleted.

I would have less “schadenfreude” if it wasn’t Saudi blood money being lit on fire. Happy to see oil money from Saudi Arabia being flushed down the toilet.

s/era/cycle/

The period of exuberance will return wearing different clothes.

It always does!

It's worse than that. VCs are mostly investing other people's money and earning management fees. Even if all the investments go bust they do well If they've managed to amass a big fund.

> And for the VCs it has often worked out. If you're fast enough to get something IPOed before the bubble pops, who cares if there's a real business model?

It sure does give me a really good and warm fuzzy feeling about the stability of our economy to see VCs repeating the same hyped up exaggerated valuation and bubble that was already done in the 1995-2000 era "dotcom 1.0" boom and bust cycle.

> Personally, as somebody who thinks actually delivering value is important, I'm delighted that this era of easy money and massive hype might be ending. Hopefully companies soon will have to be able to actually turn a sustained profit before IPO.

You sound like me in 2001 or shortly thereafter.

2001-2004 or so was one of my favorite periods in tech. Most of the extractive people fucked off to wherever they came from and the people left were the ones sincere about building things. May we have another time like that, but longer!

>… and into their own personal net worth, while building businesses that couldn't have possibly been profitable.

I disagree with this characterization of WeWork. Were they extravagantly blowing money on stupid things? Yes. Was the CEO directly enriching himself through his leadership? Yes. However, the business of being a landlord and renting office space is a pedestrian and profitable venture. It’s just not a sexy startup idea worth billions.

Being a taxi company or takeout business doesn’t seem sexy either, but several giant “tech” startups existed in those spaces space.

Uber has never been profitable

Most startups are never profitable especially in the unsexy spaces like travel agents, used car dealerships, etc.

I recall someone on HN pointing out years ago a curious detail about financial metrics, and how they made food delivery apps look FAR better for VC capital than they in reality are. The underlying reason: pass-through billing.

The food delivery startups accept payments, take their cut, and pay out to restaurants & drivers. From a purely financial viewpoint they're paying out a lot of money, perfectly normal in VC land. But they are also taking in an absolute mountain of money, and if you squint, can all look quite a bit like top-line revenue. If you then slice open the business operating costs, and look at how much it costs them internally (accounting only for salaries, rents and operating costs) to service a delivery, the per-unit revenue/cost figures are off the charts.

Physical retail intake, and virtual goods unit production costs. What's not to drool over?

It was an interesting point - and being thoroughly cynical, likely based in reality.

Being a commercial office landlord can be an ok business, but that doesn't mean WeWork was ever viable. They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment. That made them vulnerable to shifts in demand and rents. Given how cyclical the office space market has been for decades, I suspect they were always doomed.

In a recession a real commercial landlord has existing tenants on long-term leases, limiting their downside. But WeWork's big selling poing was flexibility, so even if the pandemic hadn't happened I think the next recession would have wrecked them. And that's before we get to how it was basically a giant bet against remote work.

> They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment.

I put that as the CEO self dealing. He purchased buildings and rented them out to WeWork. Had WeWork purchased the buildings themselves, the model would have been on far firmer footing. Again, I agree there was too much glamorous spending and living in the limelight, but landlords can obviously turn a profit if they keep the expenses reasonable.

The same business model weakness would exist -- in a recession, short term renters will stop showing up.

While they'd avoid having to pay rent in empty units, they'd still not any leases

Sorry, what's your evidence that the bulk of WeWork's leases were with Neumann? My understanding is that they were leasing from many building owners, something the article supports.

I never said it was the majority? It was just an example of grift. The only correct number of buildings a company should be leasing from the CEO is zero. In a similar vein, the company should not be leasing the We branding from the CEO.

WeWork was not operated in a way to succeed. I am only taking issue with the notion that the core business model (renting real estate) is flawed. Had there been a willingness for modest, organic expansion and not jet-fueled-VC-hypergrowth, the company could have succeeded.

The WeWork core business model is not just "renting real estate". It's paying for long-term leases and then subleasing on short-term ones. The business model was always bad because office space is sensitive to the economic cycle and boom-bust cycles in office building. The closest it gets to working is a company like Regus, who services the fringes of the market, like companies that aren't big enough to get a regular lease, but they provide a bunch of add-on services.

> However, the business of being a landlord and renting office space is a pedestrian and profitable venture.

Right, but that’s what Adam Neumann did for himself, then made WeWork his tenant.

Neumann is collecting the rent. WeWork is paying rent.

He took the profitable part out of the company and gave it to himself (for a subset of properties, at least).

That’s the scandal.

Not sure why we put WeWork, Theranos, and FTX in same bucket?

Holmes is in jail, SBF probably on his way, but that Adam Neuman, for what it worth, is apparently not accused in any fraud. He's "just" a failed founder that costed his investors $$$, not unlike many, many others.

Think he's suggesting bad faith is what they all have in common? Trying to get money from investors rather than by actually building a business, which can be done legally or illegally.

> Amazing to see how efficiently some of the biggest grifters exploited this dynamic to funnel money straight from investors and into their own personal net worth, while building businesses that couldn't have possibly been profitable. It didn't matter, though, because they needed the sense of scale and growth to continue grifting investors.

Matt Levine had a great theory on this. It basically boiled down to:

"If I wanted to short the VC market how would I do it?"...and basically point to what Adam Neumann did:

I can’t quite say that Neumann improved the allocation of capital, but there are certain parallels. Neumann too … look, here I am speculating, and I don’t mean to speak for Neumann’s subjective experience of his WeWork career, but from the outside, in hindsight, objectively, one could describe it like this: He spotted a bubble in venture-subsidized fast-growing money-losing capital-intensive low-margin tech-adjacent companies, noticed in particular that SoftBank seemed to be on the long side of that bubble, and set himself up to profit on the other side—by raising money for his own ultra-unicorn, by setting up the governance of that unicorn in a maximally self-interested way, and by selling and margining a bunch of his personal shares. 6 When investors like SoftBank were frenziedly buying unicorn stock, he was frenziedly selling it. He set himself up to profit from the collapse of the unicorn bubble, and accelerated that collapse. Lessons were learned, and he taught them. Now he’s rich.

https://www.bloomberg.com/opinion/articles/2019-10-23/how-do...

Interesting perspective, thanks for sharing.

Out of curiosity, why wouldn't Pipe's model have worked? To my knowledge, invoice factoring has been around since ancient times, and became a key (albeit exploitative) part of the textile industry among others. If a SaaS has a degree of lock-in to the extent that churn rates can be modeled predictably, I don't see how churn risk couldn't just be modeled alongside the traditional risk that the customer becomes insolvent on existing invoices. Now, if Pipe was subsidizing those risk-adjusted prices with VC money, then squandering that by being an inexperienced operating team, I can see how they themselves may have failed. But is that a death knell for the entire model? Is it that VC backed companies are themselves at higher risk of default in a correlated way that wasn't being taken into account?

> while building businesses that couldn't have possibly been profitable

All of these businesse can easily be profitable. Shared offices have been a thing forever and easily turn handsome profits. As do cab companies, courier companies, restaurants...

What isn't possible is turning in enough profits to justify the mammoth valuations.

The venture campitalists are in on the grift too; They follow the FTX playbook fairly often; It's just legal.

They'll invest in a series of companies, as those companies are failing, they'll buy them out with one of their successful companies (possibly a later stage investment, cheaper in a less costly market) then the once successful company also can't survive.

On paper, it looks like they have 3-4 successes to balance out their one failure. For their personal portfolio, it's also great too, and helps them raise more money.

If they're really successful, they'll oust the CEO of one of the once successful but in down market companies, really boost their shares; and if lucky that investment will exit.

Why doesn't pipe make sense?

So Pipe basically to the kickstarter model and ydes it ob VC?