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Soon we will see uber, airbnb and dropbox added to this list. The problem is the new VC-funded startup model is a sham to rip off the public. Basically build

Soon we will see uber, airbnb and dropbox added to this list. The problem is the new VC-funded startup model is a sham to rip off the public. Basically build a bunch of hype around fad-based, unprofitable companies with unsustainable business models and capture massive valuation of ~50x sales before going IPO and then insiders dump all the overvalued shares on the naive dumb money and only stick around long enough to dump the majority of their stake by SEC regulations. Then proceed to shout about how you changed the world and how it wasn't for the money from your yacht.

darawk 11y ago
I don't think Uber and Airbnb are particularly comparable to these companies. Uber and Airbnb have very clear business models.
- edgyswingset 11y ago
  I'd say Zynga has a pretty clear business model.
  - supster 11y ago
    It's pretty hard to produce new viral games at low cost in a consistent fashion.
    - tracker1 11y ago
      GP didn't say it was a good, effective or predictable business model.. ;-)
- danieltillett 11y ago
  They have very clear business models, but even if they capture 100% of their market the possible revenue can’t support their current valuations. I think both these businesses are fantastic businesses that will make a lot of money, but I would not buy at their current valuations.
  - RKoutnik 11y ago
    The annual revenue for taxis in SF was ~$100MM. Uber's annual SF revenue is estimated to be $500MM. So Uber has "captured" 500% of the market. Does that explain their valuation? They're not trying to capture an old market, they're building a new one.
    - danieltillett 11y ago
      Do you really believe that Uber is capturing $500 million out of SF alone? This number is totally unbelievable (and unverifiable), but even if it were true where is the evidence that this is not the result of a pathologically defective taxi market in SF. edit. The comments on this story sum up the ludicrous nature of this $500 million dollar revenue [1] - $625 per person per year! 1. http://sfist.com/2015/01/19/uber_says_sf_revenues_are_500_milli.php http://sfist.com/2015/01/19/uber_says_sf_revenues_are_500_mi...
      - panorama 11y ago
        Why is that number not believable? Like the comments you pointed out mention, it's likely gross not post-driver cut, likely includes more than just the 7-mile diameter of SF, includes tourists, surge pricing can be pricy, corporate comping, etc. I never incur surge pricing and infrequently take Uber yet I can easily pay $100-200 in Uber costs per month. Then you factor in the non-UberX options that are way more expensive, UberEATS, etc. etc...
        danieltillett 11y ago
        It is not believable because it is comparing oranges to apples. It is comparing the revenue of the SF taxi industry (not the dollars going through the drivers hands) to the dollars going through Uber for some area of unknown size around SF. It is also unbelievable if you try to do the bottom up revenue numbers. Uber claims to have 11,000 drivers in SF [1], but most of them are part time. This implies a monthly revenue per driver of ~$3800 at the $500 million revenue number. Actual data from surveying SF Uber drivers working more than 41 hours a week showed they only generated revenue of $2971 a month [2]. The drivers working part time (20 − 25 hours a week) only generated revenue of $1376 a month. I can’t think of a way of making the top down and bottom up numbers agree. Edit. I fixed the broken link [1]. 1. http://archives.sfexaminer.com/sanfrancisco/uber-releases-driver-data-for-first-time-and-its-not-pretty-for-taxi-industry/Content?oid=2917635 http://archives.sfexaminer.com/sanfrancisco/uber-releases-dr... 2. http://www.sfgate.com/business/article/Lyft-Uber-drivers-turnover-high-wages-low-6585229.php http://www.sfgate.com/business/article/Lyft-Uber-drivers-tur...
- sauere 11y ago
  And Box? They had a simple, clear defined business model.
  - supster 11y ago
    Great business, great model, simply overvalued (expectations exceeded reality). Probably a winner in the long run IMO.
    - dkarapetyan 11y ago
      Their product is a bloated nightmare but maybe that doesn't matter.
w1ntermute 11y ago
> The problem is the new VC-funded startup model is a sham to rip off the public. That has always been the VC-funded startup model. The difference between now and the dotcom boom is that the public isn't so gullible anymore (or at least not so soon after the financial crisis). Your grandma in Wisconsin has long since shut down her brokerage account, and has no intention of reopening it.
- smacktoward 11y ago
  > That has always been the VC-funded startup model. No it hasn't. Intel, Apple, 3Com, Compaq, DEC, and Lotus are all companies that took venture capital to get started. They are also all companies whose business model was "make things and then sell them for more than they cost to make" instead of "aggregate a lot of eyeballs and then figure out how to make money off them later." There's nothing special about venture capital that requires one model or the other. What's changed is the underlying need for venture capital in the first place. It was originally needed because the things startups wanted to make and sell required a huge up-front investment to get started -- building fabs or factories, hiring lots of engineers and programmers, etc. There was just no way to bootstrap a business that needed so much cash up front, so VC money made businesses possible that otherwise could not have ever gotten off the ground. Nowadays the cost lots of that stuff that people had to expensively do for themselves has been commoditized down to nearly nothing, so nobody really needs VC just to get started anymore. What they need VC for is to get big faster than their competitors, in order to muscle those competitors out of the marketplace. And VCs need horses to bet on, so when all the horses are running the "get big fast" game, their money is going to flow towards the companies that show the best possibility of getting big fast. Which is to say, companies that make stuff and then give it away for free. And there's a prisoner's dilemma element to that -- if you are the one VC who's still interested in funding companies that make stuff to sell at a profit, your investments will get clobbered by competitors funded by all the other VCs who are giving it away. So you have to play the game, whether you want to or not.
- kzhahou 11y ago
  Not trying to SJW here, but please note that the "grandma" meme is based on the idea that women and old people are unsavvy.
jamisteven 11y ago
I highly doubt this will be happening to the likes of Uber or AirBNB anytime soon, for one Travis Kalanik is one of the brightest guys on the planet and relentless in his efforts, much like Jobs in his prime. AirBNB will face more challenges but the amount of monetary funds it collects in transactions and fee's it is collecting will keep it at the top for a long long time. Anytime a company puts money back into the hands of the people, you have a good product. Etsy lost its shit because they decided to start letting every one and their mother sell on its site, and it ruined their core business model, which was selling vintage artisan goods.
- ken47 11y ago
  "Travis Kalanik is one of the brightest guys on the planet" That is a strong statement. Care to justify?
  - puredemo 11y ago
    He resold cereal dammit, he's practically a miracle worker. /s
- jsprogrammer 11y ago
  AirBNB (and Uber) don't own or control any of the property that they are collecting transactions and fees on. They rely on extraction of value from independent contractors; if a viable alternative exists, those contractors can dump them in seconds (or however long it takes to download the alternative app/website).
  - danieltillett 11y ago
    Yes the disruptors are at risk of being disrupted.
  - alexhu11 11y ago
    The barriers to entry for any competitors are highly behavioral. Consumers are used to using (and implicitly trusting) AirBnB and Uber. Any new entrants would have to replicate that. This is part of the reason why Jet.com will never beat Amazon.
criley2 11y ago
Disagree entirely. Twitter? No good way to monetize. Groupon? Failed to monetize effectively after virality faded and without a moat competitors did the same thing. Yelp? A web version of the BBB protection scheme whose profit comes from the shake down protection racket against small businesses, not from users. Zynga had no moat and other companies quickly did the same thing with much leaner overhead, like King and a dozen other cheap but profitable game makers. Box was just overvalued for what it is. On the flip side, every time someone takes an Uber or rents a room on AirBnb, they pay the company. As in, those companies accept money for every transaction and profit on them. Twitter, box, groupon, yelp don't do that. And Dropbox doesn't and they aren't publicly traded and if they did sell stock it would probably be overvalued and shrink over time like Box.
- xianb 11y ago
  >profit on them. Nope. http://gawker.com/here-are-the-internal-documents-that-prove-uber-is-a-mo-1704234157 http://gawker.com/here-are-the-internal-documents-that-prove... Granted that businesses like Amazon are unprofitable, but Uber is not nearly going to be as stable
  - jethro_tell 11y ago
    Isn't uber a long play on self driving cars that can be summoned with an app? That's why GM invested in lyft. They need someone to buy their fleet since the number of car owners is going to drop to a few companies in the next 20-50 years.
- amelius 11y ago
  > On the flip side, every time someone takes an Uber or rents a room on AirBnb, they pay the company. Yes, but Uber and AirBnB do not have (from a technical perspective) innovative products, nor strong lock-in businessmodels. Everybody could start a competitor. In fact, Uber faces a lot of competition already; see e.g. [1], [2]. [1] http://www.forbes.com/sites/liyanchen/2015/09/09/uber-wants-to-conquer-the-world-but-these-companies-are-fighting-back-map http://www.forbes.com/sites/liyanchen/2015/09/09/uber-wants-... [2] http://www.wsj.com/articles/uber-meets-its-match-in-france-1442592333 http://www.wsj.com/articles/uber-meets-its-match-in-france-1... (paywalled)

darawk 11y ago

I don't think Uber and Airbnb are particularly comparable to these companies. Uber and Airbnb have very clear business models.

edgyswingset 11y ago
I'd say Zynga has a pretty clear business model.
- supster 11y ago
  It's pretty hard to produce new viral games at low cost in a consistent fashion.
  - tracker1 11y ago
    GP didn't say it was a good, effective or predictable business model.. ;-)
danieltillett 11y ago
They have very clear business models, but even if they capture 100% of their market the possible revenue can’t support their current valuations. I think both these businesses are fantastic businesses that will make a lot of money, but I would not buy at their current valuations.
- RKoutnik 11y ago
  The annual revenue for taxis in SF was ~$100MM. Uber's annual SF revenue is estimated to be $500MM. So Uber has "captured" 500% of the market. Does that explain their valuation? They're not trying to capture an old market, they're building a new one.
  - danieltillett 11y ago
    Do you really believe that Uber is capturing $500 million out of SF alone? This number is totally unbelievable (and unverifiable), but even if it were true where is the evidence that this is not the result of a pathologically defective taxi market in SF. edit. The comments on this story sum up the ludicrous nature of this $500 million dollar revenue [1] - $625 per person per year! 1. http://sfist.com/2015/01/19/uber_says_sf_revenues_are_500_milli.php http://sfist.com/2015/01/19/uber_says_sf_revenues_are_500_mi...
    - panorama 11y ago
      Why is that number not believable? Like the comments you pointed out mention, it's likely gross not post-driver cut, likely includes more than just the 7-mile diameter of SF, includes tourists, surge pricing can be pricy, corporate comping, etc. I never incur surge pricing and infrequently take Uber yet I can easily pay $100-200 in Uber costs per month. Then you factor in the non-UberX options that are way more expensive, UberEATS, etc. etc...
      - danieltillett 11y ago
        It is not believable because it is comparing oranges to apples. It is comparing the revenue of the SF taxi industry (not the dollars going through the drivers hands) to the dollars going through Uber for some area of unknown size around SF. It is also unbelievable if you try to do the bottom up revenue numbers. Uber claims to have 11,000 drivers in SF [1], but most of them are part time. This implies a monthly revenue per driver of ~$3800 at the $500 million revenue number. Actual data from surveying SF Uber drivers working more than 41 hours a week showed they only generated revenue of $2971 a month [2]. The drivers working part time (20 − 25 hours a week) only generated revenue of $1376 a month. I can’t think of a way of making the top down and bottom up numbers agree. Edit. I fixed the broken link [1]. 1. http://archives.sfexaminer.com/sanfrancisco/uber-releases-driver-data-for-first-time-and-its-not-pretty-for-taxi-industry/Content?oid=2917635 http://archives.sfexaminer.com/sanfrancisco/uber-releases-dr... 2. http://www.sfgate.com/business/article/Lyft-Uber-drivers-turnover-high-wages-low-6585229.php http://www.sfgate.com/business/article/Lyft-Uber-drivers-tur...
sauere 11y ago
And Box? They had a simple, clear defined business model.
- supster 11y ago
  Great business, great model, simply overvalued (expectations exceeded reality). Probably a winner in the long run IMO.
  - dkarapetyan 11y ago
    Their product is a bloated nightmare but maybe that doesn't matter.

w1ntermute 11y ago

> The problem is the new VC-funded startup model is a sham to rip off the public. That has always been the VC-funded startup model. The difference between now and the dotcom boom is that the public isn't so gullible anymore (or at least not so soon after the financial crisis). Your grandma in Wisconsin has long since shut down her brokerage account, and has no intention of reopening it.

smacktoward 11y ago
> That has always been the VC-funded startup model. No it hasn't. Intel, Apple, 3Com, Compaq, DEC, and Lotus are all companies that took venture capital to get started. They are also all companies whose business model was "make things and then sell them for more than they cost to make" instead of "aggregate a lot of eyeballs and then figure out how to make money off them later." There's nothing special about venture capital that requires one model or the other. What's changed is the underlying need for venture capital in the first place. It was originally needed because the things startups wanted to make and sell required a huge up-front investment to get started -- building fabs or factories, hiring lots of engineers and programmers, etc. There was just no way to bootstrap a business that needed so much cash up front, so VC money made businesses possible that otherwise could not have ever gotten off the ground. Nowadays the cost lots of that stuff that people had to expensively do for themselves has been commoditized down to nearly nothing, so nobody really needs VC just to get started anymore. What they need VC for is to get big faster than their competitors, in order to muscle those competitors out of the marketplace. And VCs need horses to bet on, so when all the horses are running the "get big fast" game, their money is going to flow towards the companies that show the best possibility of getting big fast. Which is to say, companies that make stuff and then give it away for free. And there's a prisoner's dilemma element to that -- if you are the one VC who's still interested in funding companies that make stuff to sell at a profit, your investments will get clobbered by competitors funded by all the other VCs who are giving it away. So you have to play the game, whether you want to or not.
kzhahou 11y ago
Not trying to SJW here, but please note that the "grandma" meme is based on the idea that women and old people are unsavvy.

jamisteven 11y ago

I highly doubt this will be happening to the likes of Uber or AirBNB anytime soon, for one Travis Kalanik is one of the brightest guys on the planet and relentless in his efforts, much like Jobs in his prime. AirBNB will face more challenges but the amount of monetary funds it collects in transactions and fee's it is collecting will keep it at the top for a long long time. Anytime a company puts money back into the hands of the people, you have a good product. Etsy lost its shit because they decided to start letting every one and their mother sell on its site, and it ruined their core business model, which was selling vintage artisan goods.

ken47 11y ago
"Travis Kalanik is one of the brightest guys on the planet" That is a strong statement. Care to justify?
- puredemo 11y ago
  He resold cereal dammit, he's practically a miracle worker. /s
jsprogrammer 11y ago
AirBNB (and Uber) don't own or control any of the property that they are collecting transactions and fees on. They rely on extraction of value from independent contractors; if a viable alternative exists, those contractors can dump them in seconds (or however long it takes to download the alternative app/website).
- danieltillett 11y ago
  Yes the disruptors are at risk of being disrupted.
- alexhu11 11y ago
  The barriers to entry for any competitors are highly behavioral. Consumers are used to using (and implicitly trusting) AirBnB and Uber. Any new entrants would have to replicate that. This is part of the reason why Jet.com will never beat Amazon.

criley2 11y ago

Disagree entirely. Twitter? No good way to monetize. Groupon? Failed to monetize effectively after virality faded and without a moat competitors did the same thing. Yelp? A web version of the BBB protection scheme whose profit comes from the shake down protection racket against small businesses, not from users. Zynga had no moat and other companies quickly did the same thing with much leaner overhead, like King and a dozen other cheap but profitable game makers. Box was just overvalued for what it is. On the flip side, every time someone takes an Uber or rents a room on AirBnb, they pay the company. As in, those companies accept money for every transaction and profit on them. Twitter, box, groupon, yelp don't do that. And Dropbox doesn't and they aren't publicly traded and if they did sell stock it would probably be overvalued and shrink over time like Box.

xianb 11y ago
>profit on them. Nope. http://gawker.com/here-are-the-internal-documents-that-prove-uber-is-a-mo-1704234157 http://gawker.com/here-are-the-internal-documents-that-prove... Granted that businesses like Amazon are unprofitable, but Uber is not nearly going to be as stable
- jethro_tell 11y ago
  Isn't uber a long play on self driving cars that can be summoned with an app? That's why GM invested in lyft. They need someone to buy their fleet since the number of car owners is going to drop to a few companies in the next 20-50 years.
amelius 11y ago
> On the flip side, every time someone takes an Uber or rents a room on AirBnb, they pay the company. Yes, but Uber and AirBnB do not have (from a technical perspective) innovative products, nor strong lock-in businessmodels. Everybody could start a competitor. In fact, Uber faces a lot of competition already; see e.g. [1], [2]. [1] http://www.forbes.com/sites/liyanchen/2015/09/09/uber-wants-to-conquer-the-world-but-these-companies-are-fighting-back-map http://www.forbes.com/sites/liyanchen/2015/09/09/uber-wants-... [2] http://www.wsj.com/articles/uber-meets-its-match-in-france-1442592333 http://www.wsj.com/articles/uber-meets-its-match-in-france-1... (paywalled)