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Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

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Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#101

Post by rm_-rf_slash »

mindcrime wrote: post #19
delecti wrote: post #3

It's really weird how this article tries to frame the situation. It's almost like the startups feel entitled to the funding. The point of funding should really be to enable faster growth than they might otherwise have been able to achieve, but if a business can't at least survive without huge influxes of investments then is it really a business that they should be investing in in the first place?

Here's the somewhat ironic "catch 22" to the whole thing: If you're a startup and you don't take VC funding, then you have the luxury of simply enjoying organic growth and funding expansion by re-investing profits into the company. Well, as long as you can do that in the face of competitive pressure. Strictly speaking, unless it's a "network effect" situation like a social network, you probably don't need to grow fas…

A billionaire serial entrepreneur once gave me two great gems of advice:

"My greatest regret is taking other people's money."

"Don't take money unless you are losing your window of opportunity and there's nothing else you can do about it."

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#102

Post by dwightgunning »

ChuckMcM wrote: post #13
pritianka wrote: post #7

I've been in tech only 6 years and I am already bored of these cycles of VCs becoming frenetically exuberant followed by cautious times. Their advice to startups changes depending on what time it is. It's all so predictable yet people are surprised every time. Any entrepreneur building a business factors these in and approaches fund raising based on that knowledge. I don't even know the point of these articles any mo…

Well as the saying goes, "It is always new to someone." :-) And that is largely true. Here in the second decade of the 21st century people are getting funded who were blissfully unaware children in the dot com crash, or the semi-conductor recession, or the great social is the new webvan pullback. A publication can get a lot of clicks and buzz from folks for who it is new, and so they report it as new. But the article…

This is really a great explanation.

Earlier today I gave a friend a 5min primer on venture funding. After we'd parted ways and I walked back to my office I had that phrase "you can't teach some of this stuff" rolling around in my head for a while. You can't teach all of it but you have to get people started with something.

It's evolution.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#103

Post by usrusr »

oneloop wrote: post #40
freyr wrote: post #22

Earlier quoted context omitted.

> unless it's a "network effect" situation like a social network, you probably don't need to grow fast. Uber seems like a weird example of this. It was said (and remains said) that they're operating in a winner-take-all space, and they expanded as if they were a social network. Despite the aggressive expansion and marketing, a majority of people I know in the Bay Area now use Lyft exculsively. The last few times I've…

Can anyone make a rational argument why uber-type companies are winner takes all?

Precedents. EBay, Amazon, Facebook and Google pretty much did take it all in their respective core markets. Uber and their investors seem to be taking a similar market capture as a given, freyr (your parent post, if I'm not mistaken) was questioning that. For reasons we seem to agree with.

What might still move uber from a fluent market into a winner takes all position some day would be a shift to their own fleet, either driverless or with employees. That would then be real investment and as such would be much harder to match by a newcomer than the day to day underselling they are currently doing to artificially to balloon themselves up.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#104

Post by bsbechtel »

mindcrime wrote: post #37
freyr wrote: post #22

Earlier quoted context omitted.

> unless it's a "network effect" situation like a social network, you probably don't need to grow fast. Uber seems like a weird example of this. It was said (and remains said) that they're operating in a winner-take-all space, and they expanded as if they were a social network. Despite the aggressive expansion and marketing, a majority of people I know in the Bay Area now use Lyft exculsively. The last few times I've…

I am a perfect example of somebody who was a "loyal Uber user." They were here (Raleigh/Durham/Chapel Hill) before Lyft, and I was already familiar with them and had an account and all from having used the service while I was in San Francisco visiting. And so when my car broke down and I decided to go car-less for a while, I started using Uber all the time (along with walking and bicycle riding). And then... Uber low…

This is interesting because much of what has been written about Uber and lowering prices + surge pricing is the idea that Uber is trying to perfectly match supply and demand. If rides are consistently unavailable, that would be an indicator to me that their pricing is too low, and they aren't doing as good of a job as expected with this.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#105

Post by s_q_b »

mindcrime wrote: post #37
freyr wrote: post #22

Earlier quoted context omitted.

> unless it's a "network effect" situation like a social network, you probably don't need to grow fast. Uber seems like a weird example of this. It was said (and remains said) that they're operating in a winner-take-all space, and they expanded as if they were a social network. Despite the aggressive expansion and marketing, a majority of people I know in the Bay Area now use Lyft exculsively. The last few times I've…

I am a perfect example of somebody who was a "loyal Uber user." They were here (Raleigh/Durham/Chapel Hill) before Lyft, and I was already familiar with them and had an account and all from having used the service while I was in San Francisco visiting. And so when my car broke down and I decided to go car-less for a while, I started using Uber all the time (along with walking and bicycle riding). And then... Uber low…

Their service here in Washington, D.C. is awful. I used to love Uber, evangelized it to friends, was even the first to show Sanju Bansal how it worked when we were at a gala. Everyone else was fumbling for their S-Class keys while our twin black Navigator vehicles proceeded to pick us up at the entrance.

That, to me, was the Zenith of Uber. The entire VC set of the city was waiting for cars and drivers gridlocked in the garage and lot, while some kid with an app summoned two fully appointed SUVs as if from nowhere.

I wore Uber shades, tried the various promotions. I was thrilled, absolutely certain that they were one partnership away from Google to automate city transport and leapfrog our ailing transport grid.

Then something changed. The lines between Uber and UberX blurred, and UberX drivers changed from well-dressed folks owner-operating, or working for car fleets, to guys with Jack Daniels hats, ponytails, and (this is literal) body odor.

Uber decreased in quality, both in fleet and drivers. Ubers used to be spit-polished tire-black shined towncars, and the drivers were excellent. Never an open door missed, a bottle of water offered, mints stocked, radio preference, and an AC at a comfortable temperature, which the driver would immediately offers to adjust.

It wasn't just the network that made Uber. It was the service. It literally outclassed the transportation of millionaires, with service options of the Four Seasons at the price of a Motel 6.

The service has now become so bad, that power users are like sailors following the rats off a sinking ship.

Then it's disclosed that one of the main showrunners has been spending all his time on some fucking branding project? And when it's finally released, the material he produced looks like it was created by a sentient bag of cocaine.

"We're particles that unite to form atoms, to something... something... interaction between meatspace and cyberspace.... unity, and particles and shit. Yo, you gonna hit that?"

Are you serious?

In summation: No moat, no network effect. It was nice of you to pave the way for self-driving car fleets, but unless you reorganize management from the bottom of the floor up, your balloon's about to deflate faster than Napster. Peace guys.

*Full disclaimer: I did turn down a second round interview at Uber due to their policies regarding the Americans with Disabilities Act. My consulting rate is $500/hr, and I'd consider fixing this mess with the ADA for half that.

I wish I had the opportunity to speak to your board for five minutes about the damage their ADA policies are causing.

Imagine a girl, unable to move unassisted, alone in the snow, as her driver throws her wheelchair to the curb screaming at how he doesn't accept people "like her."

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#106

Post by woah »

pfarnsworth wrote: post #76
prostoalex wrote: post #53

Earlier quoted context omitted.

Network effect usually implies some kind of lock-in. Unless Uber is willing to go exclusive and qualify the drivers as employees, getting more drivers out on the road also means getting more Lyft and Gett drivers on the road, as most will just have multiple apps running.

It's hard to switch between apps. I've asked all my drivers the same question, and they all say that it's more trouble than it's worth because at least in the Bay Area, there work is constant as an Uber driver.

I feel like almost every über I see has a lyft sticker too. The UX of switching apps seems like a minor inconvenience given that most of them use waze to navigate anyway.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#107

Post by s_q_b »

Their service here in Washington, D.C. is awful. I used to love Uber, evangelized it to friends, was even the first to show Sanju Bansal how it worked when we were at a gala. Everyone else was fumbling for their S-Class keys while our twin black Navigator vehicles proceeded to pick us up at the entrance. That, to me, was the Zenith of Uber. The entire VC set of the city was waiting for cars and drivers gridlocked in the garage and lot, while some kid with an app summoned two fully appointed SUVs as if from nowhere. I wore Uber shades, tried the various promotions. I was thrilled, absolutely certain that they were one partnership away from Google to automate city transport and leapfrog our ailing transport grid. Then something changed. The lines between Uber and UberX blurred, and UberX drivers changed from well-dressed folks owner-operating, or working for car fleets, to guys with Jack Daniels hats, ponytails, and (this is literal) body odor. Uber decreased in quality, both in fleet and drivers. Ubers used to be spit-polished tire-black shined towncars, and the drivers were excellent. Never an open door missed, a bottle of water offered, mints stocked, radio preference, and an AC at a comfortable temperature, which the driver would immediately offers to adjust. It wasn't just the network that made Uber. It was the service. It literally outclassed the transportation of millionaires, with service options of the Four Seasons at the price of a Motel 6. The service has now become so bad, that power users are like sailors following the rats off a sinking ship. Then it's disclosed that one of the main showrunners has been spending all his time on some fucking branding project? And when it's finally released, the material he produced looks like it was created by a sentient bag of cocaine. "We're particles that unite to form atoms, to something... something... interaction between meatspace and cyberspace.... unity, and particles and shit. Yo, you gonna hit that?" Are you serious? In summation: No moat, no network effect. It was nice of you to pave the way for self-driving car fleets, but unless you reorganize management from the bottom of the floor up, your balloon's about to deflate faster than Napster. Peace guys. *Full disclaimer: I did turn down a second round interview at Uber due to their policies regarding the Americans with Disabilities Act. My consulting rate is $500/hr, and I'd consider fixing this mess with the ADA for half that. I wish I had the opportunity to speak to your board for five minutes about the damage their ADA policies are causing. Imagine a girl, unable to move unassisted, alone in the snow, as her driver throws her wheelchair to the curb screaming at how he doesn't accept people "like her."

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#108

Post by saalweachter »

Symbiote wrote: post #82
audleman wrote: post #39

Earlier quoted context omitted.

I took a look and it is very nice, but $1500 for a toaster oven? Holy shit no.

I've never seen a countertop oven, except as a "feature" of an expensive microwave. As I understand it, results for baking especially would be poor, as the oven has less air mass and less heat capacity. (At least, that's the reason my mum gave for not using the feature on her fancy microwave. She used to be a professional cook.)

Wait, really? Never one of these? http://www.amazon.com/Better-Chef-Toaster-Broiler--Stainless...

Besides the price, the low thermal mass is a selling point -- throw a couple chocolate chip cookies in there and you don't heat up the entire house in the middle of summer just for a fresh baked treat.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#109

Post by tdaltonc »

patmcguire wrote: post #66
tdaltonc wrote: post #62

In other news, "Suits Make a Comeback!"[0]. Investors can't just sit on money. They have to get returns, and that means that they have to put capital to work. [0] http://www.paulgraham.com/submarine.html

Macro-scale deflationary spirals happen in real economies, it's definitely a thing that can happen for investment in an industry. If there's a general belief that VCs can get more for less tomorrow, they'll wait, at which point they can probably get more for less the next day... Also, don't forget the money's all locked up for multiple years.

True. And the textbook solution for a deflationary spiral is to increase inflation. VC's have to raise rounds that run for finite periods of time. At the end of the time the have to return the money with their big returns. That means that the money is like grain rotting in a granary. There is a looming data at which all of the money becomes useless the the VC's. That's one hell of an inflation rate. It would be hard for VC's to resist that level of inflationary pressure for long.

Re: Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

#110

Post by [deleted] »

khalloud wrote: post #98

If we look at this from a risk-reward perspective and define 10 as the maximum reward for the maximum amount of risk then we have the entrepreneur who is a 10 for obvious reasons, an Angel who invests in the entrepreneur (maybe not the idea really because it might pivot a few times) maybe at an 8, then VCs at 7, bigger institutional investors at 5, and so on and so forth until the average teacher in Michigan who's pe…

[deleted]
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