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VCs are scared when they should be greedy

blog.aaronkharris.com

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Re: VCs are scared when they should be greedy

#91

Post by ProfessorLayton »

blueboo wrote: post #66
btown wrote: post #45

Earlier quoted context omitted.

Figma's incredibly hard to replace because its tools are highly customized for specific design workflows. Notion, I'm not nearly as sure about. With Google Workplace having pageless Google Docs now, and other shops having content centralized on Office 365, a lot of cost-cutting companies will ask "we just use Notion for a wiki anyways, can we migrate over to the system we're already paying for?" And sure, Notion is m…

This is a 2000s mindset as well. Designers are a few YouTube tutorials away from jumping from Figma to Dingus or whatever will come next. Notion’s moat erodes with every iteration of Google Docs and Office — it’ll be the WordPerfect of 2025. Maybe, anyway

I won't disagree here. Before Figma it was Sketch, and before Sketch it was Photoshop etc.

Re: VCs are scared when they should be greedy

#92

Post by rileymat2 »

missedthecue wrote: post #32
vkou wrote: post #26

Earlier quoted context omitted.

Driver fees are already so low that between depreciation, gas, and your time, you're barely making ends meet driving. They can't squeeze the drivers any further, unless they only want people to be driving 15-year-old beaters.

Boy, this is an evergreen narrative on HN, but I don't really think it's true. The total all-in cost of a Prius (depreciation, maintenance, gasoline, etc...) is about 30 cents per mile. Uber drivers make about $1-$2 per mile which is a pretty big margin. Uber has been around for over 10 years now. Sure, not everyone is an accountant, but if Uber drained every driver's wallet, they'd have noticed by now. Interesting t…

From the Uber fare estimator for a trip in East Lansing Michigan. Per-minute $0.17 Per-mile $1.20

----

What is the catch? Drivers do not make any money while driving to pick someone up or after dropping someone off. Often, when I tried out driving, about half the miles driven were without a fare.

Subtract the service fees from those numbers and it gets less lucrative.

Re: VCs are scared when they should be greedy

#93

Post by JumpCrisscross »

christophilus wrote: post #74
throwk8s wrote: post #27

Earlier quoted context omitted.

> If your unit economics don't work then you're fucked... From the company's perspective that's certainly true. As a regular person I'm more worried about the companies whose unit economics work too well. Companies like Amazon have so much momentum that it seems like they could go on indefinitely, instead of eventually failing and making room for new entrants. Companies whose unit economics don't work transfer wealth…

It's never happened, though. Buffett likes to say something along the lines of, "I like to invest in businesses that could be successfully run by a monkey, because eventually they will be." My prediction is that every behemoth of today will be tomorrow's Sears Roebuck, GE, West India Trading Company, etc. At some point, they'll become mired in bureaucracy. Enough incompetence will eventually rise to the top to allow…

I agree with the premise. Success is never immortal. The gap, however, is in societies being intended to be immortal. If you let companies run amok, so the thinking goes, when goes the company so goes the country. Limiting companies’ power let’s them creatively destroy one another without threatening the culture at large.

Re: VCs are scared when they should be greedy

#94

Post by lurkervizzle »

upupandup wrote: post #81
gumby wrote: post #67

Earlier quoted context omitted.

> How many of today's startups are just servicing each other with VC money? IMHO this is mostly the a phenomenon of the SAAS/platform space. Those practices don’t really apply to more traditional businesses (including high tech ones). But you made me think of something else: this phenomenon was definitely booming in the 2000 crash, when net-related hardware companies were underwriting their own sales, which ended qui…

Isn't this what YC does essentially? YC backed SaaS companies buy each others products, write favorable case studies and use that to convince other enterprises to buy in, and to IPO quickly they raise lot of money to have the market share that commands the multi billion valuations with insane revenue multiples? Seems like this model is beginning to fail, most YC backed IPOs are now trading in deep red. ex) coinbase e…

100% this - a good chunk of initial traction for YC companies is other YC companies - which is great in some ways to bootstrap initial growth/credibility, but the uncharitable view is that it's a Ponzi scheme in a way.

Re: VCs are scared when they should be greedy

#95

Post by KptMarchewa »

PeterisP wrote: post #16
christkv wrote: post #13

Earlier quoted context omitted.

In a recession they provide a luxury good that might be down prioritized by customers to save money.

In a recession some people suddenly are eager for any job, no matter how bad, driving down Uber's "cost of goods sold" i.e. driver fees.. But in general economic downturns are tricky, as they affect different groups differently - are the people who would suffer in a recession the same people who are currently using Uber?

Yeah - Uber both eats and taxi part was extremely cheap during any restrictions. Now it's easily 100-150% more expensive here.

Re: VCs are scared when they should be greedy

#96

Post by rileymat2 »

rileymat2 wrote: post #92
missedthecue wrote: post #32

Earlier quoted context omitted.

Boy, this is an evergreen narrative on HN, but I don't really think it's true. The total all-in cost of a Prius (depreciation, maintenance, gasoline, etc...) is about 30 cents per mile. Uber drivers make about $1-$2 per mile which is a pretty big margin. Uber has been around for over 10 years now. Sure, not everyone is an accountant, but if Uber drained every driver's wallet, they'd have noticed by now. Interesting t…

From the Uber fare estimator for a trip in East Lansing Michigan. Per-minute $0.17 Per-mile $1.20 ---- What is the catch? Drivers do not make any money while driving to pick someone up or after dropping someone off. Often, when I tried out driving, about half the miles driven were without a fare. Subtract the service fees from those numbers and it gets less lucrative.

Often pickup traffic was very "directional" people going to the bar at one time, people leaving at another, so often you would have to drive back to where you started the last fare for the next one.

Re: VCs are scared when they should be greedy

#98

Post by [deleted] »

lpolovets wrote: post #22

(Context: I'm a VC) Some great points in the post, but I also see a few additional dynamics at play: 1) The last 10 years have been great for VCs and startups, but now VCs are thinking about how to make their funds last longer. Two reasons for this: first, time diversification matters. If you think markets might go down even more, you don't want to deploy the rest of your fund quickly, you want to spread it out over…

[deleted]

Re: VCs are scared when they should be greedy

#99

Post by ceeplusplus »

georgeecollins wrote: post #25
dahdum wrote: post #11

Earlier quoted context omitted.

> I mean if we really look at some of the business models for these companies, they're clearly unsustainable. Uber is a prime example of a company that seems destined to fail. Lyft and Uber are both very near profitability and things are looking pretty good for them over the next couple years. Why do you believe they are destined to fail? Established markets have been profitable for a while.

>> Lyft and Uber are both very near profitability As they have been for over a decade. Just not actually GAAP profitable, except maybe a one off sale to DiDi. >> Established markets have been profitable for a while. So what market is Uber not established in? Are they pouring their oceans of profit from New York, Los Angeles and London into building a business in La Paz? I am sure they are trying to grow in places but…

Uber's net GAAP loss, excluding losses from investments in DiDi and other companies, is around 300m last quarter [1] which is a ~1% loss on their gross bookings. Most of that is stock based comp. Their FCF loss was only 47m last quarter.

I know HN likes to hate on Uber and other gig apps but a 1% margin is something they can easily make up given their stated take rate on mobility and delivery is around 20%.

> So what market is Uber not established in

If you follow their earnings calls (or that of DoorDash as well), advertising is a huge growing market for these companies. My guess is they take on an airline business model: zero to slim margins on the core offerings, but huge money on advertising and ancillary sources of revenue (for airlines, this is credit card points).

[1] https://investor.uber.com/news-events/news/press-release-det...

Re: VCs are scared when they should be greedy

#100

Post by xmprt »

givemeethekeys wrote: post #71
lpolovets wrote: post #22

(Context: I'm a VC) Some great points in the post, but I also see a few additional dynamics at play: 1) The last 10 years have been great for VCs and startups, but now VCs are thinking about how to make their funds last longer. Two reasons for this: first, time diversification matters. If you think markets might go down even more, you don't want to deploy the rest of your fund quickly, you want to spread it out over…

As much as VCs and founders hate down rounds - if the public market has dropped in value by 50% for mostly macroeconomic reasons - isn't it fair to then suggest that properties on the private market should be similarly worth less? We all hate for our homes to be worth 10% less in 2023 compared to 2022, but it is what it is, no?

When you raise funding at a startup, you're usually creating new shares which dilute old shares. If a seed round VC is able to get out with a 20% loss then they might be happy, but what will actually happen is that the seed round VC's 10% share turns into a 8% share AND they look like they've taken a loss because the 8% share is worth less.

In growing markets, the 10% turning into 8% doesn't matter because it was 10% of a $1M company vs 8% of a $10M company. You're still richer (at least on paper) than you used to be.

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