Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Venture Predation

papers.ssrn.com

Post reply on HN
Print view View original

31–40 of 231 posts

Re: Venture Predation

#31

Post by version_five »

satvikpendem wrote: post #25
seanhunter wrote: post #21

Earlier quoted context omitted.

I can't escape the feeling that it boils down to the old classic 3 stage business model: 1. collect underpants 2. ? 3. Profit Uber and Lyft are great examples. They haven't established long-term stickiness with drivers or passengers. So if either of those groups get offered a better deal they will switch. Therefore it's just a relentless race to the bottom with no sustainable business in sight.

Exactly. Well, I'm not complaining at my VC funded rides though, it's a great transfer of wealth from the rich to the poor, ie me, lol.

There's an interesting article somewhere about a pizza place that iirc arbitraged VC subsidies by ordering pizza from itself through some delivery app that was buying the revenue by selling the pizza below the actual price.

Edit: https://www.readmargins.com/p/doordash-and-pizza-arbitrage

Re: Venture Predation

#32

Post by brookst »

nico wrote: post #20

In international trade this is called “dumping”, and it’s often considered illegal and most definitely unfair It’s usually used as a reason for regulating imports/exports https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum... .

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices.

If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping.

So I think it probably makes sense to treat VC-subsidized startups as a different economic phenomenon that needs different rules than if e.g. Goodyear sells tires at far below cost in California until competitors leave and then they raise the price.

Re: Venture Predation

#33

Post by brookst »

glutamate wrote: post #17

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

I don't see the problem. They apparently believe in a low margin, high volume play with support being a volume driver. They might be right or wrong, but I wouldn't want it to be illegal as a business model. Investors and companies have to be free to lose money or else we've just got a centrally planned economy where every business has to offer the same product at the same price.

Re: Venture Predation

#34

Post by satvikpendem »

version_five wrote: post #31
satvikpendem wrote: post #25

Earlier quoted context omitted.

Exactly. Well, I'm not complaining at my VC funded rides though, it's a great transfer of wealth from the rich to the poor, ie me, lol.

There's an interesting article somewhere about a pizza place that iirc arbitraged VC subsidies by ordering pizza from itself through some delivery app that was buying the revenue by selling the pizza below the actual price. Edit: https://www.readmargins.com/p/doordash-and-pizza-arbitrage

This was satirized in Silicon Valley too, funnily enough:

https://www.youtube.com/watch?v=LYu-d6y5HRo

https://www.youtube.com/watch?v=rdJifVNEKnE

Re: Venture Predation

#35

Post by lesuorac »

brookst wrote: post #32
nico wrote: post #20

In international trade this is called “dumping”, and it’s often considered illegal and most definitely unfair It’s usually used as a reason for regulating imports/exports https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum... .

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

I don't think you have to squint very hard to see VC as dumping. It's why they all follow that common trend of low-price growth hacking and immediately follow up by raising prices.

Re: Venture Predation

#36

Post by maerF0x0 »

james-revisoai wrote: post #19

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,…

This rise of PPC should be matched with targeting efficiency through tools like Segment etc that are aimed in increasing the ROI on adspend. It's a resource allocation strategy that drives the limited supply (ad space above search) to the highest bidder (ie highest return usage).

Just like a competition for any other limited resource in a capitalist market driven society.

Re: Venture Predation

#37

Post by frithsun »

I believe a lot of this was driven by fed rate shenanigans creating far more investment wealth than there were organic opportunities for investing it. All of these market-distorting startup deals were just symptoms of that broader systemic monetary policy error.

While the mom and pop taxi companies and others impacted by it have my sympathy and support, all the regulatory alternatives other than waiting until they achieve a monopoly and then breaking them up seem to cause as many problems as they aim to solve.

Re: Venture Predation

#38

Post by nathan_compton »

brookst wrote: post #32
nico wrote: post #20

In international trade this is called “dumping”, and it’s often considered illegal and most definitely unfair It’s usually used as a reason for regulating imports/exports https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum... .

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

"even bootstrapped garage efforts" this doesn't seem to follow. Bootstrapped efforts don't have the funding to absorb a lot of loss to get market share. They have to make a product people will pay for, typically.

Re: Venture Predation

#39

Post by maerF0x0 »

bityard wrote: post #5

This is essentially how Carvana has decimated the private used car market in my area. Only instead of low product prices, they offer well-above market value for used cars to private sellers so that Carvana becomes the only source for a car that fits your criteria.

if their theory holds true that means private sellers were massively under negotiating, or that there is a large arbitrage value between when a seller wants to sell and the days on market.

ie assume seller is willing to pay $50 a day to have car sold today (and not have to field calls etc). That means selling a car a month faster is worth $1500. Carvana can borrow the $25K car value at ~5% to pay $100 interest to hold the asset for a month playing the time arbitrage.

I'm finding one thing that seems to be happening generationally (or just in my experience) is that folks are far more willing to pay for convenience/now. That means they'd rather have the $25k and car sold today than have the $1500 in their pocket a month later (and field calls etc).

Post reply on HN