Tópico: [EN] Profitless Start-ups
12-04-2014, 22:32 #1
[EN] Profitless Start-ups
... the backbone of a strange urban economy: one in which massive venture-capital injections allow money-losing start-ups to flourish, while providing services that no traditional, unsubsidized business can match. It’s an economy built on ... the hope that someday ... a better business model will emerge.
Yesterday, I ordered lunch from a gourmet meal-delivery start-up called SpoonRocket – a takeout container of sirloin au poivre and roasted cauliflower that was shuttled to my door in exactly 11 minutes, costing me $8. I then took an UberX car to a meeting across town, paying roughly $10 for a 15-minute ride. On my way, I pulled out my phone to see about getting my broken dryer fixed through Handybook, which provides on-demand repairs in the Bay Area for less than a local handyman would charge.
There are dozens more services like these operating in and around San Francisco – Homejoy for cleaning, BloomThat for flowers, Postmates for courier service, and on and on. Most of them provide cheap, convenient amenities at the tap of a smartphone app. Few of them are profitable on a corporate level. And together, they’ve formed the backbone of a strange urban economy: one in which massive venture-capital injections allow money-losing start-ups to flourish, while providing services that no traditional, unsubsidized business can match. It’s an economy built on patience, and the hope that someday, after the land grab is over and the dust has settled, a better business model will emerge.
It’s hard to know which of today’s new start-ups are unprofitable. But in some cases, losing money is kind of the point. I have no inside information on SpoonRocket's financials, for example, but I imagine that the company books a loss of a few cents every time I click the order button. (There’s just no way, short of a supply-chain miracle, that my $8 covers the cost of preparing a gourmet lunch, driving it to my house, and paying all the drivers and cooks and engineers and assorted other costs associated with running their business.) But SpoonRocket doesn’t have to make money, because it’s just raised $10 million in venture capital expressly so it can keep its prices low. The metric its investors care about right now is user growth, not profits. And if, indeed, the company is selling meals for less than they cost to make, those investors are willing to fill the gap.
This business model is great for consumers. As a result of start-ups’ willingness to lose money for months or years at a time, I get cheap, fast services that come with an effective subsidy that can add up to thousands of dollars a year. But they're problematic for the businesses themselves. Unlike Amazon or Google (which have profitable core operations that subsidize the money-losing services elsewhere in their business), or Uber (which uses the profits from its high-margin Uber Black and Uber SUV lines to subsidize its low-margin UberX service), many of today’s start-ups have no profitable parent company pouring in money. They’re simply taking millions of dollars in venture capital with the hope of keeping prices low, pushing rivals out of the market, and eventually finding a way to turn a profit.
There are several worrying things about this new, profitless-on-purpose way of doing business. First is that the while some of the money used to fund money-losing start-ups comes from rich Silicon Valley investors, some large amount of it comes from public pensions, college endowments, and other, more modest sources. Lyft backer Andreessen Horowitz, for example, has gotten investments from the Imperial County, California, Employee Retirement System and the University of Michigan; the Tennessee Consolidated Retirement System invests money with SpoonRocket backer General Catalyst. If you asked them, I'm sure that firefighters in Memphis and public schoolteachers in El Centro would have no idea that their retirement funds are being used to lower the price of my delivery lunches and rides across town. But that’s exactly what’s happening. And when these venture-backed price wars happen in dozens of high-end service sectors all at once, you have a strange cultural phenomenon in which Main Street dollars are being used to finance the lifestyles of cosmopolitan yuppies.
The second issue with the venture-backed service economy is the Amazon problem – specifically, the practice of selling goods at or near a loss creates a deeply unfair competitive terrain for regular businesses. A start-up can sell a $10 lunch for $8 because it has money in the bank and investors who will rush in with more when the supply runs low. But if my local sandwich shop tries to do the same thing, it won’t make next month’s rent. The same goes with non-retail service businesses. Taxi companies had a decent chance of competing with UberX in its early days. But now that UberX and Lyft are both slashing prices to the bone with the assistance of millions of dollars in venture capital, the fight simply isn’t fair.
In the context of international trade, this kind of predatory pricing (selling goods at or below cost in order to drive out rivals) is often illegal. There’s a reason why it should trouble us domestically, too – trying to compete in the VC-backed economy as a profit-conscious business is like running a triathlon with ankle weights.
The third problem is that, as companies like Kozmo and Webvan learned in the first dot-com crash, the music stops eventually. At some point, investor patience wears thin, and the businesses that are still losing money on a per-unit basis tend to shrivel and die. When that happens, what’s left? A hole in the local economy where the local sandwich shop used to be, and nothing to fill the void. Given enough time and enough venture-backed land grabs, we could end up with an oddly configured service sector that contains a fraction of the jobs and utility it did before the subsidized prospectors moved in.
Cushions for emerging business models aren't all bad – not every company should be forced to make a pretty P&L right out of the gate, and without patient investors and other forms of subsidy, we wouldn't have companies like Twitter or Amazon, or things like electric cars and solar panels. And, as I said, the venture-backed economy is amazing for the people who live in it. In the history of the world, there’s never been a better time to be a consumer in San Francisco or New York than today, what with our cornucopia of cheap, on-demand services. I would miss my cut-rate sirloin and cheap Ubers to the airport if a regulatory authority or a market crash took them away.
But you can see how, on a grand scale, the existing model could become problematic. The only way the loss-making venture-backed economy can keep chugging along is if there is a constant supply of new money coming in at ever-higher valuations, subsidizing low prices and making earlier investors whole. Eventually, as in Amazon's case, the public markets may have to bear some of the subsidy. It’s a kind of benevolent Ponzi scheme, one that results in a lot of very cool services being provided at or below cost to a select group of urban consumers, and a lot of traditional businesses being forced to paddle hard to stay afloat. The profitless start-up model should worry us about the future of commerce and competition, even as we take advantage of its gifts.
12-04-2014, 22:47 #2The metric its investors care about right now is user growth, not profits.
Última edição por 5ms; 12-04-2014 às 22:56.
12-04-2014, 23:32 #3
- Data de Ingresso
- Oct 2010
- Rio de Janeiro
Nada de novo no Reino da Dinamarca. Os norte-americanos só pensam no curto prazo e em ganhos imediatos. É muito "deslumbro" pruma pessoa só...
12-04-2014, 23:46 #4
Nos negócios baseados na Internet, o objetivo predominante dos americanos parece ser criar uma empresa para vender para uma outra maior, ou, no caso de capitalizadas por vc, abrir o capital para despejar papel colorido em bolsa de valores para micar na mão dos trouxas, com a devida orquestração e cumplicidade dos amigos dos amigos do mercado financeiro.
No Brasil, é diferente. O modelo de negócio é bem definido. Os espertos criam empresas para iludir trouxas através do mecanismo de franquia ou para mamar nas tetas do governo. O mercado acionário aqui é irrelevante.
12-04-2014, 23:56 #5
- Data de Ingresso
- Oct 2010
- Rio de Janeiro
Isso é bem importante de mencionar. Vários conhecidos brasileiros (entre eles o Winger) não conseguem pôr na cabeça como funciona e sempre têm um pé atras com estes M&A freqüentes por exemplo na área de Hosting. Conheço outros que ficam com cagaço e insegurança se mudar o dono (achando que o serviço vai piorar, encarecer ou, no caso de colocation, que o equipamento está em risco de ser roubado). Querem uma "estabilidade" garantida pela pessoa do dono da empresa (ou mesmo do vendedor, que nos EUA se troca como se troca de roupa) de que nada vai mudar, para sempre; e a mentalidade americana é exatamente a inversa.
13-04-2014, 10:43 #6
Comparando Rio e São Paulo, percebe-se que essa resistência à mudanças é bem maior no Rio, que é fundamentalmente uma cidade de funcionários públicos. Desde a vinda da familia real portuguesa para o Brasil até a mudança da capital para Brasilia, a economia da cidade do Rio foi fortemente dependente da renda dos funcionários de órgãos públicos e de estatais, as maiores do Brasil: Petrobras, Vale, Banco do Brasil, Correios, Banco Central, Casa da Moeda, Eletrobras, Furnas, etc. Não apenas os melhores empregos do Brasil estavam na cidade do Rio, como eram para toda a vida. Naturalmente as familias desejavam para os filhos uma posição de prestigio e estabilidade alcançada através da entrada no serviço público. Infelizmente, o salário do funcionalismo foi achatado pela inflação e pelos sucessivos mal sucedidos planos economicos; sedes de um buzilhão de estatais e órgãos públicos foram transferidos para Brasilia; grandes grupos empresariais migraram para outros estados devido a inépcia dos politicos locais; a indústria naval e o sistema financeiro não resistiram. Resultado: A cidade empobreceu, cariocas classe média mudaram de Copacabana para Icaraí (Niterói), e depois para Itaipu (região oceânica de Niterói), mas não mudou a mentalidade de emprego público ser "seguro", "estável" -- ao contrário, nunca a procura por um emprego público foi tão grande como agora. Nesse cenário, em que professores universitários continuam a dizer coisas como "eese tópico é importante porque cai na prova da Petrobras", a universidade forma empregados, não profissionais liberais, quanto mais empreendedores, e o resultado é visivel em cada rua do Rio, em cada birosca, em cada padaria, papelaria, tinturaria: estabelecimentos comerciais parados no tempo, trabalhadores desmotivados, miséria. Muitos negócios no Rio só sobrevivem por estarem no Rio, pela tolerância dos cariocas com mau serviço, mau atendimento, má administração. Em qualquer outro lugar já teriam fechado há décadas. Deu no que deu.
Última edição por 5ms; 13-04-2014 às 10:57.
14-04-2014, 08:54 #7
The Art of ‘Something From Nothing’
Richard Barton’s formula for success seems pretty simple: Give consumers access to information
By NICK WINGFIELDAPRIL 13, 2014
SEATTLE — Entrepreneurs are lucky to have one big score. Richard Barton has had a string of them, by repeatedly asking the same simple question: What piece of marketplace information do people crave and don’t have?
His answers have led to Internet businesses that seem to have little to do with one another. But the information they provide has often provoked anxiety among professionals in the categories his sites serve.
Nearly 20 years ago, back in the web’s Cambrian Period, Mr. Barton cut into the business of travel agents by giving consumers a way to see airline ticket prices with Expedia, the online travel agency he founded inside Microsoft. With Zillow, he rattled real estate agents by showing the market values of homes. And Glassdoor, a top employment site, revealed employee satisfaction, salaries and other workplace data, making some executives squirm.
Mr. Barton’s successes have not brought him the multibillion-dollar returns of the latest tech sensations, or the name recognition of some of tech’s leaders. But by producing and investing in a series of successful start-ups, Mr. Barton, 46, has managed to accomplish something few others have done.
“You can name people who are richer than Rich, but you can’t name very many people who have his track record,” said Nick Hanauer, a Seattle venture capitalist who was an early investor in Amazon and is a close friend of Mr. Barton’s. “You will find very few people in this country who have as many times created something from nothing.”
Mr. Barton, a tanned and athletic Stanford graduate, can make the formula for success seem pretty simple. He is a staunch believer in the opportunities afforded by giving consumers access to data, including Yelp-like reviews and prices, that did not exist before or were closely guarded by professionals.
In conversation, he blends business buzzwords like “transparency” and “opacity” with the language of liberation movements, using the slogan “power to the people” to describe the philosophy behind many of his businesses.
“If we’re doing things for regular folks that make their lives better and save them money and give them transparency, we’re on the side of the angels,” he said.
In 2007, for example, Mr. Barton was brainstorming ideas for a new company with Robert Hohman, a former colleague from Expedia, when the two began discussing how Mr. Barton had once inadvertently left the raw results of an Expedia employee survey that detailed workplace satisfaction on a printer at the office.
That led to a thought experiment: What if the results had gotten out?
In that case, the Expedia survey did not get out; Mr. Barton’s assistant grabbed the document before anyone else. But Mr. Hohman and Mr. Barton ultimately decided it would not have been a bad thing if it had. While employee data, including salaries and workplace, are often hoarded by a tight circle of executives and officials in human resources departments, the men felt that the information would help the public make better career choices.
Not too long after, the two started Glassdoor. The website makes it easy for current and former employees of a company to review the good and bad of working there, rate the company’s leadership and reveal compensation information — all valuable information to job seekers and entertaining reading for the merely curious. The site now has more than 22 million members and has raised nearly $93 million. It plans to eventually go public, said Mr. Hohman, the company’s chief executive.
Not all of Mr. Barton’s ideas have panned out. King of the Web, a start-up he co-founded that ran a social media game which included cash prizes, shut down last year, for example.
Still, he has enjoyed a series of big paydays. Mr. Barton declined to discuss his net worth, but his shares in Zillow alone, where he remains executive chairman, are worth more than $400 million.
Despite his success, he has managed to maintain a relatively low profile. While he sits on the board of Netflix and has a role as a venture partner with Benchmark Capital, a prominent venture capital firm, Mr. Barton is not as well-known as some members of tech’s “it” crowd. In part that is a conscious decision, as Mr. Barton has decided to live in Seattle to keep some distance from the hubbub of Silicon Valley.
“Personally, I like living here better,” said Mr. Barton, sitting in a restaurant near his office downtown. “People do other things. I can go to a soccer game, and I’m not standing with the co-founder of this and a venture capitalist at that.”
He arrived in Seattle in the 1990s to work at Microsoft, and wrote the original business plan for Expedia at Microsoft in 1994. Eventually, he yearned for more freedom when the company balked at spending large sums on advertising.
He persuaded Microsoft to spin out Expedia into an independent company in 1999. It was acquired by IAC in 2003 and became a stand-alone company again two years later. It is now a $9 billion company. Nearly all of the companies he has co-founded, and most of the ones he has invested in, were started with fellow Expedia alumni.
Most of his investments are also built around the idea of giving consumers information. RealSelf, for example, gives people a way to review liposuction and other procedures, along with the doctors who perform them, while Avvo helps them find reputable lawyers.
But he does not just help the companies he invests in ask the right question. He often gets involved in advising on the operations, too, according to people who know him.
“There are a lot of V.C.s that talk about the whole lot of value they will end up adding, then it turns out they don’t have operating experiences or currency,” said Erik Blachford, a venture capitalist and former Expedia executive. “In Rich’s case, it’s true.”
Tom Seery, the chief executive of RealSelf, said Mr. Barton’s counsel was crucial early in RealSelf’s life when it was sued by a company, Lifestyle Lift, that markets a type of face-lift. Lifestyle Lift accused RealSelf of trademark infringement, though Mr. Seery viewed it as an effort to stifle criticism of Lifestyle Lift’s procedure on the site. The companies reached a settlement in 2008.
“It was incredibly disruptive, a horrifyingly bad thing for an early-stage company,” Mr. Seery said of the lawsuit.
Mr. Barton was calm about the matter, though, reasoning that fighting the suit could only enhance RealSelf’s integrity in the eyes of its users and earn it a spate of publicity. Mr. Barton was correct, Mr. Seery said.
Mr. Barton says his start-ups are able to make money by selling advertising to real estate agents, plastic surgeons and professionals in other markets only because they attract an audience with desirable information.
“We live in fear and awe of consumers,” he said. “The only reason professionals answer our phone calls is because they know consumers are there.”
16-04-2014, 13:47 #8
17-04-2014, 02:09 #9
Is Mark Zuckerberg Too Old to Run Facebook?
When the prevailing business model is if-you-grow-it, we-can-monetize-it it's only natural to be concerned about what happens if the hockey stick-shaped graph starts to droop. No one has yet invented a magical new way of making money besides advertising, e-commerce, or subscriptions.
The fable of the dropout prodigy is so widely-told in Silicon Valley that it even came back to bite the enfant terrible who inspired it. In a new Q&A in the New York Times, Farhad Manjoo asks 29-year-old Mark Zuckerberg if he's out of touch with teens.
It takes two strains of Silicon Valley folklore to get the point where the CEO of a $148 billion company is being politely nudged out to pasture before his 30th birthday. There's the notion that Facebook's success was due to Zuckerberg's age and phenotype. As Y Combinator founder Paul Graham put it:
"The cutoff in investors' heads is 32," Graham says. "After 32, they start to be a little skeptical." And Graham knew that he had his own biases. "I can be tricked by anyone who looks like Mark Zuckerberg. There was a guy once who we funded who was terrible. I said: 'How could he be bad? He looks like Zuckerberg!' "
Nevermind that WhatsApp, Facebook's $19 billion hope for the future, was built by a pair of industry veterans, ages 38 and 42.
Then there's the tech sector's version of a teenage dream. When the prevailing business model is if-you-grow-it, we-can-monetize-it it's only natural to be concerned about what happens if the hockey stick-shaped graph starts to droop. No one has yet invented a magical new way of making money besides advertising, e-commerce, or subscriptions. Advertisers, because let's be honest it's still mostly advertising when the product is free, like them young.
But the youth complex is more desperate in social networks or apps. Technology evolves rapidly and so does the way it's used. The logic is that any teen is a prognosticator of tech trends, just by virtue of being a teen. Scraps of information about their online habits are greeted in the tech press like the App Oracle of Delphi.
No such slavish attention is heaped on other untapped demographics, like non-white, rural, or foreign users, except for the occasional nod to China and now India. The lesson of the WhatsApp acquisition, however, seems to be all about the latter.
When Manjoo asks whether Zuckerberg knows his audience, he reframes it as question of growth for a corporation with 1.2 billion users and points to emerging markets where future Facebook users are not yet online.
But rather than whether Facebook can innovate, the question I'm more curious about is whether any company with a focus on social interactions will be around in 20 years. If a tech wunderkind is washed up by 30, what is the lifespan of the products and companies they build?
Última edição por 5ms; 17-04-2014 às 02:11.
17-04-2014, 09:31 #10
Weibo Sold Fewer Shares Than Expected in IPO
The company sold 16.8 million shares, fewer than the 20 million expected.
The offering comes amid broad weakness in the U.S. IPO market and a month-long pullback in stock prices for both Chinese and U.S. Internet companies, including Twitter, whose shares have fallen 18% since the beginning of March.
Many of those companies saw their valuations soar, even as they didn't produce profit, because of an explosion in user growth in recent years—a view that some investors may be reconsidering.
Weibo Corp., China's version of Twitter Inc., raised $286 million in an initial public offering in New York, falling short of expectations because of a reduced offering size, in a big test of demand for Chinese Internet stocks ahead of a hotly anticipated Alibaba Group Holding Ltd. listing.
Weibo—which means "microblog" in Chinese—allows users to send brief public messages to followers who can comment on or repost them. Since its 2009 launch, Weibo had grown to 144 million monthly active users as of March, making it the closest thing China has to a public forum in a country where the media is strictly controlled by the government.
Weibo is among a wave of Chinese tech companies flocking to the U.S. to list. In part these companies are drawn to the market because the U.S. allows some insiders to have outsize voting power in a company, such as a dual-class share structure, which Weibo uses.
Weibo's parent, Sina Corp., has worked to make the service profitable with a cautious rollout of advertising on the platform. Weibo generated a profit of $22 million in the fourth quarter of last year, but lost money in the year overall. Like other social media services, it is trying to capture a new generation of users who primarily access the Internet via smartphones, tablets and other non-PC gadgets. China now has more than 500 million mobile users, according to official data, more than four times the amount in 2008.
Weibo is caught in a rising battle between much larger companies—including Alibaba, Internet conglomerate Tencent Holdings Ltd. and search provider Baidu Inc. —to dominate the future of the Chinese Internet.
Another major challenge: the Chinese government. Last year, following a change in top leadership, Chinese officials began what they called an anti-rumor campaign that in part targeted some of Weibo's most popular and controversial posters. The campaign also set up new rules to more quickly punish Weibo users who spread information that the government said was untrue. Activists have said the moves were designed to tighten the government's control over the flow of information on the service, which sometimes runs counter to the narrative in official, state-run media.