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On-Demand Startups Are Hemorrhaging Tens of Billions a Year

bloomberg.com

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Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#121

Post by digitaltrees »

roenxi wrote: post #98
digitaltrees wrote: post #79

Earlier quoted context omitted.

This does not explain why VCs are willing to invest in business models tha light cash on fire for growth in the hope of reaching a dominant market share and establishing a moat around the business. VCs believe in network effects, VCs believe monopolies are worth burning cash to achieve, VCs believe operating businesses can achieve what software businesses like google and Facebook achieved. Question their belief but d…

> This does not explain why VCs are willing to invest in business models tha light cash Lyft just IPOd with a market cap of ~20 billion on net income of minus 1 billion that is part of a 3-year down trend. If monetary policy is causing inflated stock prices (and it isn't causing consumer inflation, so it probably is pooling in asset markets) then it seems quite rational for a VC to invest in Lyft for the sole purpose…

So you’re saying that VCs are investors in private companies with a 10 to 12 year path to going public because...”low interest rates”? And that monentary policy is a larger driver of their investment decisions than a belief that there is a credible path to building a viable business?

I think that is confusing second and third order considerations with first order considerations that actually drive investors choices.

Perhaps monetary policy affects the macro environment by making investment money available, but each investment is a micro decision by one firm, driven by a thesis. I find it hard to believe that investors think monetary policy is an important basis for betting on Lyft or the like.

That’s like say “I won’t start a company unless tax rates are lower”. No one does that, no one cares, maybe we care later. But when you’re thinking about the founding decisions paying taxes is several orders removed from: product, team, financing, revenue, break even etc.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#122

Post by subjectHarold »

b_tterc_p wrote: post #6

I asked in the recent thread how Meituan could possibly be affording to subsidize restaurant meals to be significantly below cost at restaurant as that didn’t make any sense. Turns out according to this article that it’s simply that. It doesn’t make sense. They lost $17 Billion in 2018 for a shallow moat around an ugly castle. The next recession is going to hit hard, and I’m guessing a lot of the gig economy jobs wil…

I am confused. Is Meituan's ticker 3690? This looks like the company referred to and the actual operating loss is 11bn RMB (so about ~$1.5bn)...which is a lot but revenue doubled, and this is kind of a scale-ish business...so?

The number quoted by Bloomberg (quoting from Nikkei) is comprehensive income including the conversion of pre-IPO securities...so not really reflective of operations.

What is kind of staggering is the cumulative losses to equity ~170bn RMB or $25bn. And presumably, there are options and all sorts. Tbh, I am not even sure how this number is correct given the business isn't even ten years old...I don't look at HK companies very often (and I am aware funny stuff happens in HK)...but how the equity account be wrong?

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#123

Post by Ericson2314 »

soVeryTired wrote: post #118
patmcc wrote: post #116

Earlier quoted context omitted.

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

> Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that. The VCs are gambling with someone else's money though. They raise money from institutional investors: pension funds and insurance companies. Ultimately the little guy will pay via government bailouts, pension reductions, and higher insurance premiums.

I get they raise others' money, but which pension funds are being into this high risk stuff?

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#124

Post by [deleted] »

lordnacho wrote: post #33

It's a strange age to be living in. On the same day I've visited people in a WeWork, been driven around in an Uber, and had food delivered by Deliveroo. All of them blowing a huge load of money for the privilege. If they don't make back this money, it will represent a huge waste of resources. It's private money behind, but I still wonder whether this a reasonable way for the economy to run. For one, it means the litt…

[deleted]

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#125

Post by generated »

roenxi wrote: post #94
afarah wrote: post #83

Earlier quoted context omitted.

Of course they're creating value, Uber and the like is of great value for its users. The service is merely being subsidized by investors who believe in such practice. Is it a bad investment? Maybe, their investors did not think so and they were free to compare it with other options you deem obviously better, considering you're even saying Uber and the like are stealing these other business would-be money...

If they aren't making a profit they aren't creating value. They are destroying some value and transferring other value from investors to customers. The difference here is when you add everything up you have less, when for a good investment the total should go up. In principle, in a fair market economy, that is OK because someone has to take the risk of being wrong about what is a good idea. The concern being voiced i…

It is possible to create value and not profit.

Economic value exceeds or matches market value. Market value drives revenue. Profit is a function of revenue and cost.

These are well defined terms; please be careful saying things like "If they aren't making a profit they aren't creating value." It detracts from your otherwise strong argument.

If that line were true, non-profit organizations wouldn't exist.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#126

Post by noobermin »

patmcc wrote: post #116
lordnacho wrote: post #33

It's a strange age to be living in. On the same day I've visited people in a WeWork, been driven around in an Uber, and had food delivered by Deliveroo. All of them blowing a huge load of money for the privilege. If they don't make back this money, it will represent a huge waste of resources. It's private money behind, but I still wonder whether this a reasonable way for the economy to run. For one, it means the litt…

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

More like a transfer from VCs and from desperate gig workers in the form of cheap labor to founders who get to write medium posts about how entrepreneurial they are.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#127

Post by mathattack »

patmcc wrote: post #116
lordnacho wrote: post #33

It's a strange age to be living in. On the same day I've visited people in a WeWork, been driven around in an Uber, and had food delivered by Deliveroo. All of them blowing a huge load of money for the privilege. If they don't make back this money, it will represent a huge waste of resources. It's private money behind, but I still wonder whether this a reasonable way for the economy to run. For one, it means the litt…

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

All it takes is one or two IPOs and the VCs have all been made whole.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#128

Post by fromthestart »

noobermin wrote: post #126
patmcc wrote: post #116

Earlier quoted context omitted.

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

More like a transfer from VCs and from desperate gig workers in the form of cheap labor to founders who get to write medium posts about how entrepreneurial they are.

Gig workers do not transfer money to founders, and the vast majority of them are being profitably compensated for their labor.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#129

Post by maxxxxx »

Ericson2314 wrote: post #123
soVeryTired wrote: post #118

Earlier quoted context omitted.

> Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that. The VCs are gambling with someone else's money though. They raise money from institutional investors: pension funds and insurance companies. Ultimately the little guy will pay via government bailouts, pension reductions, and higher insurance premiums.

I get they raise others' money, but which pension funds are being into this high risk stuff?

Quite a few. Due to underfunding they are under a lot of pressure to produce higher returns so they invest into VC and private equity.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#130

Post by maxxxxx »

noobermin wrote: post #126
patmcc wrote: post #116

Earlier quoted context omitted.

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

More like a transfer from VCs and from desperate gig workers in the form of cheap labor to founders who get to write medium posts about how entrepreneurial they are.

VCs are not investing their own money.
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