The problem with profitless startups
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The problem with profitless startups
1–10 of 52 posts
Re: The problem with profitless startups
#2tl;dr the author argues that the ultra-cheap venture backed services are a problem because while they're using money from VC firms and being patient, they're driving out local businesses, and they'll ultimately fail, leaving a hole in the local service ecosystem.
Re: The problem with profitless startups
#3tl;dr the author argues that the ultra-cheap venture backed services are a problem because while they're using money from VC firms and being patient, they're driving out local businesses, and they'll ultimately fail, leaving a hole in the local service ecosystem.
If that's the problem, it should eventually autocorrect when the investors give up permanently and local businesses return.
Re: The problem with profitless startups
#4tl;dr the author argues that the ultra-cheap venture backed services are a problem because while they're using money from VC firms and being patient, they're driving out local businesses, and they'll ultimately fail, leaving a hole in the local service ecosystem.
They also argue that this poses a long-term potential problem for VC as well. Eventually an institutional investor wants their money back. Eventually they have to settle up and see who the Amazons are vs. the Pets.com. That forces businesses to transition towards exit in some fashion, if they move to IPO, this shift forces them to make a shift (to become profitable) which will kill some.
I don't see how that's a controversial point, but it's a distinction that a lot of people who aren't in tech, or around startups don't get.
Re: The problem with profitless startups
#5tl;dr the author argues that the ultra-cheap venture backed services are a problem because while they're using money from VC firms and being patient, they're driving out local businesses, and they'll ultimately fail, leaving a hole in the local service ecosystem.
If that's the problem, it should eventually autocorrect when the investors give up permanently and local businesses return.
That word "autocorrect" masks quite a lot of suffering on the part of local business owners who close up and lose their livelihood and investors (including pension funds, retirement accounts, etc.) which lose their money.
Sure, in the long run it all works out, but in the short term there's quite a lot of turmoil.
Re: The problem with profitless startups
#6Does Uber Black Car really subsidize UberX?
I find it hard to believe that UberX isn't profitable alone - Uber just takes 20% of fare.
Re: The problem with profitless startups
#7Does Uber Black Car really subsidize UberX? I find it hard to believe that UberX isn't profitable alone - Uber just takes 20% of fare.
If they don't pay the drivers enough, there won't be any drivers. 20% is probably not a hard rule.
Re: The problem with profitless startups
#8How do we know that some of these businesses are losing money? Looking at the menu of SpoonRocket that the author listed, you could make the same meal for less.
I have a feeling that the profit margins are very low, but I do not think they're in the negative.
Re: The problem with profitless startups
#9The article actually missed one angle: increasing cost of living. It's not just that prices are dropping for services like food/trasportation/etc, but that it's happening while rent prices are going up. If anything, local service prices ought to be rising along with rent. It's doubly striking that they are dropping.
Re: The problem with profitless startups
#10tl;dr the author argues that the ultra-cheap venture backed services are a problem because while they're using money from VC firms and being patient, they're driving out local businesses, and they'll ultimately fail, leaving a hole in the local service ecosystem.
If that's the problem, it should eventually autocorrect when the investors give up permanently and local businesses return.
Even if that invariably happens it's not much consolation to the local business owners bankrupted because their skinny margins couldn't compete with the "disruptive" idea of running at a massive loss for two years. Venture capitalists make a loss inducing formerly marginally profitable businesses to make a loss represents a deadweight loss to society overall even if the service gap gets filled.
That said, most of the named business lines are those particularly easily replaced even if the threat of other VC-backed businesses coming into the market still exists: those inclined to open sandwich shops or market themselves as handymen aren't likely to be too worried about more online threats emerging in future, and the savvier ones are instead figuring out how to get profitless startups to provide them with low cost marketing.