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That seemed obvious to everyone though so how did they ever get valued so highly? Is the whole point of companies like this to fool investors into giving them m

That seemed obvious to everyone though so how did they ever get valued so highly? Is the whole point of companies like this to fool investors into giving them money and then keep the sham up for as long as possible?

deleted 7y ago
[deleted]
docker_up 7y ago
VCs are generally greedy and stupid at the same time. They follow the herd more than any other industry. The fact they invest in something means little as to how savvy they are or how successful the product will be. 90% of all startups fail, and there have been plenty of spectacular implosions in the past and there will be plenty of spectacular implosions in the future. Bird will be the WebVan of this business cycle.
- MegaButts 7y ago
  > 90% of all startups fail There's no way it's that low. Maybe 90% of VC-backed startups, and even then I think it depends on how you massage the definition of 'fail'
  - jeron 7y ago
    https://www.failory.com/blog/startup-failure-rate https://www.failory.com/blog/startup-failure-rate 90% failure rate comes from research by Small Biz Trends
    - MegaButts 7y ago
      A cursory glance at that data tells me it makes no sense. They cite several industries with failure rates substantially below 90%, don't give a single instance of a failure rate greater than 90%, but tell us it averages out that way. Also real estate businesses only have a 42% failure? So I have a greater than 50% chance of becoming a real estate mogul? I just don't buy it, and I don't believe those other numbers either. And the only source they cite on the website, http://www.moyak.com/papers/business-startups-entrepreneurs.html http://www.moyak.com/papers/business-startups-entrepreneurs...., doesn't really lend any explanation to their numbers. I think their data is wildly skewed by sampling bias, as they claim to get their data from interviewing failed founders. Welp, they never interviewed me - how many other people have they never interviewed because they simply never knew the company existed? How many founders, after failing, go out of their way to talk about their failure? VCs have a strong incentive to create a story that starting a company has a greater chance of success than it does, because it's low-risk for them and they want a churn of potential investment prospects. I think 1% is a much more realistic number than 10%, unless we're limiting ourselves to Sequoia-backed post-Series A companies.
  - tedmiston 7y ago
    It also depends on how you define "startup". The informal definition we think of day-to-day is fairly fuzzy. There's nuance in differentiating a small business operated by a few people from a startup. Being venture-backed is a simple differentiator but there are still legitimate startups this would exclude, e.g., serial founders who don't need to raise or products that make money early. With respect to "fail"... is an acquihire or an even-money, 1-3x exit etc a "failure". Probably, yes for the VC, but not necessarily for the founder. Accelerators are incentivized to count "successes" liberally as well. With a more broad definition of startup, it's easy to see the failure rate at 99%+.
- mushufasa 7y ago
  (edited to consolidate my comments) Here are the reasons I can think of 1) compelling if it all works out. Invest clear-eyed and hope the founding team figures out the roadblocks. Greedy but not stupid; most successful startups start by 'doing things that don't scale.' 2) Pattern-matching / top-down portfolios. Mobile apps. Sharing economy. Subscription businesses. Electric Vehicles. Internet of Things. A lot of investors decide on themes for portfolio before they look at investments. Scooter sharing ticks a lot of boxes. 3) Adverse selection. It's a simple idea - anyone can grasp scooters as subscription. So the simplest-minded investors chose this rather than more subtle ideas. 4) as another comment suggested, investors are playing a game of musical chairs between funding rounds. Chamath Palihapitiya claims this as the reason his firm is stepping back from VC -- so he's walking the talk here https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-scheme-says-chamath-palihapitiya.html https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-...
  - hef19898 7y ago
    So, point two would mean that, in an environment that regards VC finding as success, any good idea, in the sense of getting VC funds, would optimize to tick the right boxes, wouldn't it?
    - mushufasa 7y ago
      If you think of VCs / founders as a marketplace, which it kindof is, then yes. You have a larger 'market' for selling your startup idea, and optimize the 'product' for 'fit'. If you think of VCs as totally independent, open-minded, critically thinking professionals, dutifully providing a financial service, then no. You pick the VC for the idea rather than the idea for the VC. The second case is the ideal, but assumes highly-competent VCs and founders with equalish leverage. I think the perverse incentives for VC partners (read Palihapitiya) and the lack-of-prestige factors for first-time founders break the model. But this seems to be more true for second-time founders with moderate success under their belt.
  - tenpsafdl 7y ago
    I agree with Chamath Palihapitiya. VC money is like taking steriods. You get the muscles, but it will disappear once you stop taking them. I have come to the realization that VCs are really bad at distributing resource. For all these pedigrees to show for, they all seems to be playing musical chairs. Part of the problem I see is that most VCs don't have a founder background and most of them you meet are pretty arrogant.
- tedmiston 7y ago
  Given the high percentage of startups that fail, I wonder what percentage of VC funds fail, where perhaps we can define fail as "return less than the S&P 500 over the same timeframe". I imagine the true answer is a much more difficult number to come by. Easier to get late money in a successful company and claim "qualitative success".
  - MegaButts 7y ago
    There's better data on this than there is for startups. Between 85 and 90 percent of VC funds (which is distinct from VC firms) lose money.
JumpCrisscross 7y ago
> how did they ever get valued so highly? Bird isn’t WeWork. Yes, they’re unviable on a unit basis now. But that’s a hardware problem. They’ve grabbed market share; now they must build margins through R&D. The traditional model is R&D first market capture second, but there isn’t a fundamental reason not to go the other way when the R&D is reasonably feasible.
- alpha_squared 7y ago
  Is that the Theranos model?
- docker_up 7y ago
  Their primary business is unavailable to them for half the year in most of the world because of weather, and half of the day. How is this multi-billion dollar business, if they already have 700M in funding and they want another 300M?
  - lkbm 7y ago
    I saw them used in the winter. I still see them used all the time in the dead of summer, in Austin. They mostly replace walking, which people do year-round, throughout the day, and well into the late night. At least this is true in my neighborhood.
- sambroner 7y ago
  This is my thinking as well... however, my assumption is that the majority of R&D will need to go into operations innovation and brand new last mile mobility strategies. Strong operations will allow bird to continue to cut costs. (I'm hoping) There's still room to innovate on winterized, electric, single person products.
- organsnyder 7y ago
  How is their market share at all secured? It's not hard for anyone else to dump a bunch of scooters in a locale already swamped by Bird. Yes, users would have to install a different app, but my hunch is most users will use whatever scooter is closest and/or in the best repair (even if it means installing another app).
bongobongo 7y ago
Just because people have money to burn does not mean they earned it or acquired it through hard work and good thinking. Most people with money are absolute idiots just like everybody else. In fact, in many cases, and especially with wealth inequality as it is, they can afford to be stupid. I am not joking-- I'm willing to bet that there is a direct correlation between inequality and stupid products/business models making it to market. When you can just keep trying new things until something sticks, you're not going to try very hard or act with much caution.
temp-dude-87844 7y ago
Fear of missing out. These risky bets fit into the long-shot side of part of a balanced portfolio, and if they do make it, those who have backed them are positioned to make good money. When the appetite of VCs cools, these get dumped on the public stock markets, where the cycle repeats once more.
DoreenMichele 7y ago
Business is complicated, so some people earnestly believe that if they have a bit more time they can work out the bugs. In some cases, this is true. In others, it's not. When it's not, it may seem like they are deluded or scammers. Maybe they are, but a more charitable interpretation is that business -- especially new businesses -- are like six blind men and an elephant, which means people can strongly disagree about the nature of the beast while both parties are simultaneously right about the pieces they know and understand and both are equally wrong in the aggregate. You make a paper airplane. You toss it into the wind and see if it flies. No amount of debate (concerning what should fly) changes whether it did or did not actually fly.

deleted 7y ago

[deleted]

docker_up 7y ago

VCs are generally greedy and stupid at the same time. They follow the herd more than any other industry. The fact they invest in something means little as to how savvy they are or how successful the product will be. 90% of all startups fail, and there have been plenty of spectacular implosions in the past and there will be plenty of spectacular implosions in the future. Bird will be the WebVan of this business cycle.

MegaButts 7y ago
> 90% of all startups fail There's no way it's that low. Maybe 90% of VC-backed startups, and even then I think it depends on how you massage the definition of 'fail'
- jeron 7y ago
  https://www.failory.com/blog/startup-failure-rate https://www.failory.com/blog/startup-failure-rate 90% failure rate comes from research by Small Biz Trends
  - MegaButts 7y ago
    A cursory glance at that data tells me it makes no sense. They cite several industries with failure rates substantially below 90%, don't give a single instance of a failure rate greater than 90%, but tell us it averages out that way. Also real estate businesses only have a 42% failure? So I have a greater than 50% chance of becoming a real estate mogul? I just don't buy it, and I don't believe those other numbers either. And the only source they cite on the website, http://www.moyak.com/papers/business-startups-entrepreneurs.html http://www.moyak.com/papers/business-startups-entrepreneurs...., doesn't really lend any explanation to their numbers. I think their data is wildly skewed by sampling bias, as they claim to get their data from interviewing failed founders. Welp, they never interviewed me - how many other people have they never interviewed because they simply never knew the company existed? How many founders, after failing, go out of their way to talk about their failure? VCs have a strong incentive to create a story that starting a company has a greater chance of success than it does, because it's low-risk for them and they want a churn of potential investment prospects. I think 1% is a much more realistic number than 10%, unless we're limiting ourselves to Sequoia-backed post-Series A companies.
- tedmiston 7y ago
  It also depends on how you define "startup". The informal definition we think of day-to-day is fairly fuzzy. There's nuance in differentiating a small business operated by a few people from a startup. Being venture-backed is a simple differentiator but there are still legitimate startups this would exclude, e.g., serial founders who don't need to raise or products that make money early. With respect to "fail"... is an acquihire or an even-money, 1-3x exit etc a "failure". Probably, yes for the VC, but not necessarily for the founder. Accelerators are incentivized to count "successes" liberally as well. With a more broad definition of startup, it's easy to see the failure rate at 99%+.
mushufasa 7y ago
(edited to consolidate my comments) Here are the reasons I can think of 1) compelling if it all works out. Invest clear-eyed and hope the founding team figures out the roadblocks. Greedy but not stupid; most successful startups start by 'doing things that don't scale.' 2) Pattern-matching / top-down portfolios. Mobile apps. Sharing economy. Subscription businesses. Electric Vehicles. Internet of Things. A lot of investors decide on themes for portfolio before they look at investments. Scooter sharing ticks a lot of boxes. 3) Adverse selection. It's a simple idea - anyone can grasp scooters as subscription. So the simplest-minded investors chose this rather than more subtle ideas. 4) as another comment suggested, investors are playing a game of musical chairs between funding rounds. Chamath Palihapitiya claims this as the reason his firm is stepping back from VC -- so he's walking the talk here https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-scheme-says-chamath-palihapitiya.html https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-...
- hef19898 7y ago
  So, point two would mean that, in an environment that regards VC finding as success, any good idea, in the sense of getting VC funds, would optimize to tick the right boxes, wouldn't it?
  - mushufasa 7y ago
    If you think of VCs / founders as a marketplace, which it kindof is, then yes. You have a larger 'market' for selling your startup idea, and optimize the 'product' for 'fit'. If you think of VCs as totally independent, open-minded, critically thinking professionals, dutifully providing a financial service, then no. You pick the VC for the idea rather than the idea for the VC. The second case is the ideal, but assumes highly-competent VCs and founders with equalish leverage. I think the perverse incentives for VC partners (read Palihapitiya) and the lack-of-prestige factors for first-time founders break the model. But this seems to be more true for second-time founders with moderate success under their belt.
- tenpsafdl 7y ago
  I agree with Chamath Palihapitiya. VC money is like taking steriods. You get the muscles, but it will disappear once you stop taking them. I have come to the realization that VCs are really bad at distributing resource. For all these pedigrees to show for, they all seems to be playing musical chairs. Part of the problem I see is that most VCs don't have a founder background and most of them you meet are pretty arrogant.
tedmiston 7y ago
Given the high percentage of startups that fail, I wonder what percentage of VC funds fail, where perhaps we can define fail as "return less than the S&P 500 over the same timeframe". I imagine the true answer is a much more difficult number to come by. Easier to get late money in a successful company and claim "qualitative success".
- MegaButts 7y ago
  There's better data on this than there is for startups. Between 85 and 90 percent of VC funds (which is distinct from VC firms) lose money.

JumpCrisscross 7y ago

> how did they ever get valued so highly? Bird isn’t WeWork. Yes, they’re unviable on a unit basis now. But that’s a hardware problem. They’ve grabbed market share; now they must build margins through R&D. The traditional model is R&D first market capture second, but there isn’t a fundamental reason not to go the other way when the R&D is reasonably feasible.

alpha_squared 7y ago
Is that the Theranos model?
docker_up 7y ago
Their primary business is unavailable to them for half the year in most of the world because of weather, and half of the day. How is this multi-billion dollar business, if they already have 700M in funding and they want another 300M?
- lkbm 7y ago
  I saw them used in the winter. I still see them used all the time in the dead of summer, in Austin. They mostly replace walking, which people do year-round, throughout the day, and well into the late night. At least this is true in my neighborhood.
sambroner 7y ago
This is my thinking as well... however, my assumption is that the majority of R&D will need to go into operations innovation and brand new last mile mobility strategies. Strong operations will allow bird to continue to cut costs. (I'm hoping) There's still room to innovate on winterized, electric, single person products.
organsnyder 7y ago
How is their market share at all secured? It's not hard for anyone else to dump a bunch of scooters in a locale already swamped by Bird. Yes, users would have to install a different app, but my hunch is most users will use whatever scooter is closest and/or in the best repair (even if it means installing another app).

bongobongo 7y ago

Just because people have money to burn does not mean they earned it or acquired it through hard work and good thinking. Most people with money are absolute idiots just like everybody else. In fact, in many cases, and especially with wealth inequality as it is, they can afford to be stupid. I am not joking-- I'm willing to bet that there is a direct correlation between inequality and stupid products/business models making it to market. When you can just keep trying new things until something sticks, you're not going to try very hard or act with much caution.

temp-dude-87844 7y ago

Fear of missing out. These risky bets fit into the long-shot side of part of a balanced portfolio, and if they do make it, those who have backed them are positioned to make good money. When the appetite of VCs cools, these get dumped on the public stock markets, where the cycle repeats once more.

DoreenMichele 7y ago

Business is complicated, so some people earnestly believe that if they have a bit more time they can work out the bugs. In some cases, this is true. In others, it's not. When it's not, it may seem like they are deluded or scammers. Maybe they are, but a more charitable interpretation is that business -- especially new businesses -- are like six blind men and an elephant, which means people can strongly disagree about the nature of the beast while both parties are simultaneously right about the pieces they know and understand and both are equally wrong in the aggregate. You make a paper airplane. You toss it into the wind and see if it flies. No amount of debate (concerning what should fly) changes whether it did or did not actually fly.