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Venture Predation

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Re: Venture Predation

#131

Post by nobody9999 »

jjeaff wrote: post #56
conjecTech wrote: post #43

Earlier quoted context omitted.

No, there isn't much nuance here. Accounting has notions of fixed costs and marginal costs. The startups you are referring almost all lose money on fixed costs, but sell things at per-unit economics which make sense at scale because they are below marginal cost/COGS. Things like Uber are a typical dumping cases. For years, they charged below their COGS and eventual profitability depended on driving out competition an…

The only issue is that companies like Uber are lying to themselves and their investors that costs will go down significantly in the future. Both through scale and advances in technology. Which is true. But rarely true to the extent to which they believe it.

>The only issue is that companies like Uber are lying to themselves and their investors that costs will go down significantly in the future. Both through scale and advances in technology. Which is true. But rarely true to the extent to which they believe it.

Uber and other folks who sell whatever it is they sell at a loss -- with no real expectation (other than driving their competition out of business so they can then hike prices well beyond where those who can actually make a profit charge) always reminds me of this[0].

The ridiculous part is that the link below was a parody when created. Now it's a "business model." Sigh.

[0] https://www.youtube.com/watch?v=KodqIPMbyUg

Re: Venture Predation

#132

Post by otikik »

abigail95 wrote: post #87
degreesoffun wrote: post #78

And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries due to their position as a stock market darling. They use ultra-cheap money and a willingness to run negative margins which they refer to "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon d…

They have money because of AWS, which is a fantastic product in an extremely competitive market, competing against players who lose money like GCP and Azure. Amazon.com as a store makes next to nothing as profit. Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They basically run amazon.com for no profit and consumers get fantastic deals and cheaper produ…

I care because once Amazon kills all their competitors then they are the only ones selling diapers. And then they can charge 10 bucks per diaper.

Re: Venture Predation

#133

Post by joefourier »

abigail95 wrote: post #87
degreesoffun wrote: post #78

And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries due to their position as a stock market darling. They use ultra-cheap money and a willingness to run negative margins which they refer to "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon d…

They have money because of AWS, which is a fantastic product in an extremely competitive market, competing against players who lose money like GCP and Azure. Amazon.com as a store makes next to nothing as profit. Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They basically run amazon.com for no profit and consumers get fantastic deals and cheaper produ…

How on earth do GCP and Azure lose money when they (just like AWS) are ridiculously expensive? Like frequently >3x the competition for VMs and for bandwidth egress, I’ve sometimes seen 10x, or charging for things that competitors don’t.

Re: Venture Predation

#134

Post by busseio »

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.

Still?

Re: Venture Predation

#135

Post by wmf »

revelio wrote: post #109
arcticbull wrote: post #93

Earlier quoted context omitted.

Recovering your costs through advertising isn't really dumping. Chrome definitely makes Google way more money than they put into it.

I recall that it wasn't seen that way when Microsoft used Windows revenues to push IE and crush Netscape. It was called product tying back then. You don't hear much about it anymore.

Chrome and IE did not have the same business model. If we look back at Netscape vs. IE they both had predatory nonexistent business models.

Re: Venture Predation

#136

Post by likeclockwork »

Robotbeat wrote: post #61

Pricing below costs is the opposite of a problem for consumers (in the short term…). “Predation” in this case refers to competing businesses, who often have enjoyed a long period of monopoly rents.

As you said "in the short term". Once the competition is destroyed the consumer is at the predator's mercy.

Re: Venture Predation

#137

Post by dumbfounder »

dghlsakjg wrote: post #47
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…

I think the problem is that making a user or service provider create an account on an app isn't the moat that they think it is. A lot of these market domination moves only last as long as the VC money then the competitors are more than happy to swoop back in. Consumers are super fickle, and I will happily check a different app to see if I can save a dollar on a $10 car ride

You aren't the norm. If you were then Lyft would be doing much better. How many rideshare apps do you check? 5? 10? My guess is maybe once in a while you check Lyft if uber seems high. That's what I do.

Re: Venture Predation

#138

Post by balozi »

Wait, it's predatory pricing traditionally understood to be aimed at consumers/customers. Applying the term to sketchy pricing practices aimed at competitors is a bit novel in my book. I feel like words are being misused here.

Re: Venture Predation

#139

Post by MichaelZuo »

mdgrech23 wrote: post #116
spaceman_2020 wrote: post #112

I'm so jaded by modern startups and venture industry. There are people who've built entire careers building unprofitable companies that only sell products to other unprofitable startups and eventually get acquired by other unprofitable startups. It's a gigantic game of hot potato that swallows up a gigantic pool of human talent, all for producing stuff that really adds little to no positive to the world. If they're n…

This is our world right now. My wifes father was a plumber. She said as actual plumber, you know someone who provides water and ensures your shity is sanitarily drained away he didn't make really good money. He got a job working for the auto industry running pipes for hydraulics to the machines on the factory floor and made way more money. How is that worth more to our society?

Why wouldn't factory machine hydraulics for the auto industry be more important then an individual's toilet?

Re: Venture Predation

#140

Post by hgomersall »

jjeaff wrote: post #56
conjecTech wrote: post #43

Earlier quoted context omitted.

No, there isn't much nuance here. Accounting has notions of fixed costs and marginal costs. The startups you are referring almost all lose money on fixed costs, but sell things at per-unit economics which make sense at scale because they are below marginal cost/COGS. Things like Uber are a typical dumping cases. For years, they charged below their COGS and eventual profitability depended on driving out competition an…

The only issue is that companies like Uber are lying to themselves and their investors that costs will go down significantly in the future. Both through scale and advances in technology. Which is true. But rarely true to the extent to which they believe it.

Uber aren't selling taxi rides, they're selling shares in Uber, which is actually what the investors care about. The bezzle will continue as long as they can convince people there's a path to profitability.
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