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Venture Predation

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Re: Venture Predation

#11

Post by vharuck »

zeroxfe wrote: post #3
cs702 wrote: post #2

From the abstract: "A venture predator is a startup that uses venture finance to price below its costs, chase its rivals out of the market, and grab market share. Venture capitalists (VCs) are motivated to fund predation—and startup founders are motivated to execute it—because it can fuel rapid, exponential growth. Critically, for VCs and founders, a predator does not need to recoup its losses for the strategy to suc…

It's the playbook of any well funded organization trying to break into a new market. This is the entire premise of loss leaders, and they're effectively risking their entire capital.

>This is the entire premise of loss leaders

I thought "loss leaders" were specific products sold below cost so customers would buy accessories or subscriptions that have nice profit margins. Like selling cheap printers but expensive ink.

Re: Venture Predation

#13

Post by bombcar »

vharuck wrote: post #11
zeroxfe wrote: post #3

Earlier quoted context omitted.

It's the playbook of any well funded organization trying to break into a new market. This is the entire premise of loss leaders, and they're effectively risking their entire capital.

>This is the entire premise of loss leaders I thought "loss leaders" were specific products sold below cost so customers would buy accessories or subscriptions that have nice profit margins. Like selling cheap printers but expensive ink.

The technical term for "loss leader" usually refers to a place like a grocery store selling some necessity like milk at or below cost, because they know if you compare milk prices and decide to buy there, you'll get other things once you're in the store.

That's different from "sell a dollar for fifty cents until all competitors are dead".

There's also loss leader applied to things like consoles, where they lose money (at first) but make it back on the games.

Re: Venture Predation

#14

Post by ivansmf »

You. don't. say. Really?!? OMG, what an insight! What are they going to say next? That startups also use the good will of the internet to create their IP to then take it private as a way to get free labor? I'm shocked! And because this is also the internet, that was sarcasm.

Re: Venture Predation

#16

Post by fnord77 »

satvikpendem wrote: post #9

Are there any that are actually successful with this strategy? Uber and Lyft, for one, but they still don't make profit and aren't really that sticky, honestly, given that people will use other services if they're cheaper, like Waymo and some new ride sharing upstarts I've seen around recently.

amazon did this early on

Re: Venture Predation

#17

Post by glutamate »

Other thing we need to talk about is when funded startups run customer service that is not sustainably financed. Everybody apparently loves this and celebrates that the great service and listening to its customers.

But it is just the same thing: predatory pricing applied to a product delivered with high-end customer service.

Edit: Example: $5/month Todo list SaaS that has a 24h customer support telephone helpline

Re: Venture Predation

#18

Post by ohgodplsno »

ivansmf wrote: post #14

You. don't. say. Really?!? OMG, what an insight! What are they going to say next? That startups also use the good will of the internet to create their IP to then take it private as a way to get free labor? I'm shocked! And because this is also the internet, that was sarcasm.

[dead]

Re: Venture Predation

#19

Post by james-revisoai »

A flipside effect to this is advertising and PPC which has trended up so high overtime, especially in education.

Strategies viable in 2019 are largely useless to bootstrapped businesses in 2023: the costs of ads even to acquire customers with low spending power is two to three times what it was (e.g. students)

As someone working on a NLP product for education, the pricing and subscriptions are also dropping rapidly, lead by the funded companies entering this niche (the founders almost entirely are non technical recently). The combination of the two is like a jaw - it's unclear what to do when your technology becomes a trend, other than grab and deploy your own funding and use marketing strategies and technical efficiencies to outlast your competition.

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