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Venture Predation

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Re: Venture Predation

#171

Post by dceddia »

maxk42 wrote: post #99

Funny to see nobody's mentioned Cloudflare yet. They're not making any money: This is presumably their exact plan: Offer CDN services and other web infrastructure services at a loss for a prolonged period of time until the competition is destroyed, then jack up rates and eat the market.

This coupled with their device attestation stuff scares the hell out of me. Once enough of the internet is shielded by Cloudflare, and they only allow access to authorized (read: uniquely identifiable) devices (or else you have to answer a captcha on every request)… I just don’t see a very good future for the free internet.

Re: Venture Predation

#172

Post by junofan »

daveguy wrote: post #145
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…

> Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?

Threatening to compete harder is anti-competitive?

Re: Venture Predation

#173

Post by willcipriano »

junofan wrote: post #172
daveguy wrote: post #145

Earlier quoted context omitted.

> Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?

Threatening to compete harder is anti-competitive?

When China makes threats to dump steel at below cost in the US, politicians call it anti-competitive.

Re: Venture Predation

#174

Post by pyrale »

boeingUH60 wrote: post #94
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…

Quidsi founder Marc Lore sold his next company, Jet.com, to Walmart for $3.3 billion [1]. Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation, so hardly any pity from me. To add, Lore's current startup is a premium food delivery service called Wondery that raised $350 million at at $3.5bn valuation last year [2], and it's not profitable too. None of Lore's compan…

> Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation

I don't know about the books in this specific case, but losing money doesn't mean you're into venture predation. You could very well be losing money but also have sound unit-cost to price.

Re: Venture Predation

#175

Post by teaearlgraycold »

maxk42 wrote: post #99

Funny to see nobody's mentioned Cloudflare yet. They're not making any money: This is presumably their exact plan: Offer CDN services and other web infrastructure services at a loss for a prolonged period of time until the competition is destroyed, then jack up rates and eat the market.

Aren’t there other CDN providers like AWS that are pretty stable?

Re: Venture Predation

#176

Post by edmundsauto »

dynrzk wrote: post #148
otikik wrote: post #132

Earlier quoted context omitted.

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.

And then someone sees that people are buying diapers for 10 bucks and starts selling them for 5.

The latency between the observation of a market opportunity, and actually realizing lower prices at the consumer level, is significant. Millions of people would be charged monopolistic prices for the year it would take.

This also assumes Amazon doesn’t buy any competitor early on, such as happened with Warby Parker.

Re: Venture Predation

#177

Post by winphone1974 »

dynrzk wrote: post #148
otikik wrote: post #132

Earlier quoted context omitted.

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.

And then someone sees that people are buying diapers for 10 bucks and starts selling them for 5.

Except Amazon has the the diaper production locked up, and we're back where Amazon temporarily sells them for 2 bucks while you try and get your diaper factory off the ground.

Re: Venture Predation

#178

Post by pixodaros »

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.

As long as the founders get to borrow lots of other people's money to use this strategy, they have won. Even if the company goes bankrupt or is bought at a low valuation, they collected big wages and benefits for years and get to put their startup experience on their pitches for their next project.

Subsidizing a project to make it grow and drive competitors out of the market has been fundamental to the US 'tech sector' since 2008 (eg. YouTube).

Re: Venture Predation

#179

Post by winphone1974 »

dboreham wrote: post #82
mrguyorama wrote: post #77

Earlier quoted context omitted.

Uber was charging riders less than they paid drivers for a long time. That's not "residual in the drivers car", that's subsidizing their drivers

It's both because they also weren't paying drivers enough to cover their (actual) costs.

That doesn't make sense. If the drivers were operating at a loss they were subsidizing Uber, not the other way around.

Re: Venture Predation

#180

Post by pixodaros »

likeclockwork wrote: post #136
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.

Sometimes that is true, but if the barrier to entry is low (eg. ridehailing services), as soon as the predator raises prices, competitors will appear. If the barrier to entry is high (eg. telecommunications), there is usually some antitrust regulation.
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