Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition • Hacker News Board

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

#31

Post by BinaryIdiot » Thu, Mar 10, 2016, 1:59 AM UTC

justinlardinois wrote: post #14

gooserock wrote: post #6

> Valley VCs Sit on Cash, Forcing Startups to Dial Back Bullshit FTFY

This is amusing accurate. Wayyy too many startups, even YC funded ones, have products that are difficult to profit on, or worse, don't really have a market in the first place. For every "next Uber or Airbnb," there's hundreds of Shutdownifys.

Yeah I never understood the idea around "we'll figure out monetization later!". Yeah maybe you will but you're operating a business. Shouldn't you, I don't know, have a good idea or 3 to do that out of the gate?

Startup culture is weird sometimes.

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

#32

Post by flashman » Thu, Mar 10, 2016, 2:02 AM UTC

freyr wrote: post #22

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> 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…

Uber's version of achieving loyalty/lock-in is literally to run the competition into the ground and make sure their customers have no other options. That's a long way from achieving it by offering the best service, and I don't think driver/passenger ratings bridge the gap: it's the difference between encouraging or rewarding good behaviour, and subtly threatening people for breaking the rules.

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

#33

Post by TheAceOfHearts » Thu, Mar 10, 2016, 2:04 AM UTC

freyr wrote: post #22

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> 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…

This is really interesting to me, because I've noticed the same thing in the Bay Area.

I would conjecture that Uber constantly being under attack (i.e. having lots of negative articles about them) has played a significant role in this. So when people have to pick between Lyft and Uber, they go for the one that seems "less evil". Perhaps the reason Lyft doesn't come under fire as much is because they haven't grown enough to divert attention from Uber?

If we consider the long-term outcome, is this actually a problem for Uber? If you move between places where both Lyft and Uber are available, and places that only have Uber, it doesn't seem unreasonable that you'd just stick to using Uber. But anyway, once you have an account with one of the two services, what incentive do you have to create an account with the other one?

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

#34

Post by mindcrime » Thu, Mar 10, 2016, 2:04 AM UTC

erikpukinskis wrote: post #29

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> there is pressure to grow fast, but it comes from the investors and not from the market per-se I don't even think the pressure comes from the investors per-se, it comes from the capital investments you make which necessitated the funding. Excess staff, buildings, tools, etc, all have ongoing costs and also depreciate in value. You are by definition building out excess capacity based on a growths model. If sales don…

Fair enough, there's an element of both I think. But there definitely is pressure from the investors, due to the time boxed nature of VC funds.

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

#35

Post by cstejerean » Thu, Mar 10, 2016, 2:05 AM UTC

freyr wrote: post #22

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> 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 think it's popular now in the SV circles (and this site) to hate on Uber. I'm not even sure why, but I'm fairly certain it's localized. I have traveled and used Uber all over the country and internationally as well. They seem to be doing just fine.

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

#36

Post by audleman » Thu, Mar 10, 2016, 2:08 AM UTC

erikpukinskis wrote: post #29

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> there is pressure to grow fast, but it comes from the investors and not from the market per-se I don't even think the pressure comes from the investors per-se, it comes from the capital investments you make which necessitated the funding. Excess staff, buildings, tools, etc, all have ongoing costs and also depreciate in value. You are by definition building out excess capacity based on a growths model. If sales don…

I agree that the internal costs are a factor, but I also agree with the original point. I'll share an anecdote of the CEO of my company.

We're a 2-year-old startup that hasn't reached profitability yet. We asked when that might happen, and he said we actually don't want to do that. We asked why, and he said that as soon as we start making a profit our investors will immediately start focusing on it. They will ask why we're not leveraging our profit to the maximum, what can we do to grow revenue? Whereas as long as we're losing money we can continue to experiment.

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

#37

Post by mindcrime » Thu, Mar 10, 2016, 2:08 AM UTC

freyr wrote: post #22

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> 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 lowered their rates. Good for me, right? Rides are cheaper now. BUT... it appears that as a result, a LOT of local Uber drivers have quit doing Uber and over the past month, it's become increasingly difficult to even get an Uber here. More and more often, I fire up the app and get "No UberX available" (and usually no UberXL or UberSelect either). So I installed the Lyft app, and I consistently find that Lyft can get me a ride when Uber can't.

I still usually at least try Uber first just out of habit, but they're definitely ceding ground to Lyft in this area, just due to availability if nothing else.

OTOH, Uber does do some neat stuff... like I noticed that in Portland, they have "UberPedal" where you can get a car with a bike rack. I find myself hoping they expand that to our area, as it would be nice to be able to bike to work, knowing that if it's raining or cold or something later, I can call up an UberPedal bike-rack equipped car for the trip home.

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

#38

Post by audleman » Thu, Mar 10, 2016, 2:12 AM UTC

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…

This gave me a chuckle.

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

#39

Post by audleman » Thu, Mar 10, 2016, 2:15 AM UTC

sjg007 wrote: post #30

cenal wrote: post #25

Earlier quoted context omitted.

Valuations are out of whack. They are smarter to sit back and let the unsustainable ventures die out and then invest in the viable ones after things level out. I mean, even a touch screen toaster that costs $1,500 got invested in. Who is going to pay $1500 for a touch screen toaster? http://www.juneoven.com

It will sell. It's just the beginning of the IoT revolution.

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

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

#40

Post by oneloop » Thu, Mar 10, 2016, 2:23 AM UTC

freyr wrote: post #22

mindcrime wrote: post #19

Earlier quoted context omitted.

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…

> 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?