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Didn't investors, especially SoftBank, enable this behavior? They deserve as much blame for this mess as he does, if not more.

by tempsy 7y ago

raverbashing 7y ago
Probably. It would be funny if this blew up in SoftBank's face. I think it will make even Theranos sound more sensible. Sure, the product exists and it's good but the "business plan" and its assumptions and business structure don't make much sense. Though I don't know how long they will survive without any more cash injections in the short term due to all their rental liabilities.
- tempsy 7y ago
  Nah, this isn't like Theranos. In reality, it is a very good product with slim margins. The reason it is losing so much money is because it is expanding quickly to show that it is a "high growth" Unicorn company. It isn't that it's a scam, it just puts it is a non-tech/non-SaaS category. Every founder/CEO wants to tell a huge growth story. If private investors are buying that then it's just that they miscalculated, but not defrauded.
  - bhouston 7y ago
    Slim margins means it isn't a great product, at least by standard business definitions. A product with slim margins is one that you divest from so you can focus on the products with good margins.
    - tempsy 7y ago
      I was referring to the quality of the product from the customer POV.
      - purple_ducks 7y ago
        They rent office space.
        michaelt 7y ago
        If you think office space doesn't vary in quality, you haven't worked in a very wide range of companies :)
        icelancer 7y ago
        Or rented from Regus, which is a company that people are just now finding out about. Their offices are absolutely embarrassing.
      - AlexandrB 7y ago
        MoviePass was an amazing product from the customer POV. Not a viable business though.
      - smacktoward 7y ago
        From the customer's POV, selling dollar bills for fifty cents each is also a high-quality product.
        tempsy 7y ago
        No not really. Again, they lose billions right now because it costs a lot to build out new buildings. Then as a building matures they recoup these costs through the memberships. The more mature offices are profitable. It just isn’t necessarily tech/VC level profits.
        throwaway2048 7y ago
        They aren't building out anything, they lease existing office space.
    - the_watcher 7y ago
      There are lots of good businesses that operate on thin margins. They're good businesses, which is why you can divest them to investors who want to run a good business. What they're not are businesses that should trade at anything close to software revenue multiples.
  - tyingq 7y ago
    It's also losing money because the CEO is converting it to personal wealth.
tptacek 7y ago
Help me understand how this is a coherent argument. I could see making the argument that investors share some of the blame for what the CEO did. How could they have more of the blame?
- tempsy 7y ago
  Because they decided to invest and never demanded oversight or questioned his voting power with each new term sheet they handed to him? The point of the board is in part to keep the CEO in check. They had many opportunities to do so well before weeks before the now shelved IPO roadshow.
  - jakelazaroff 7y ago
    Yeah, but all that would have been fine if he’d acted responsibly. Obviously giving him that much power is a dangerous game to play, but it doesn’t absolve him of responsibility for his behavior. Ultimately he — not the investors — is the one who built this sandcastle on partying, self-dealing and a cult of personality. One of the things about blame is that it’s never zero sum, and in this case there’s more than enough to go around.
    - mpalmer 7y ago
      > Yeah, but all that would have been fine if he’d acted responsibly. > if he’d acted responsibly > if The "if" is the point. SoftBank had the ability to eliminate the risk of this "if", and didn't.
      - jakelazaroff 7y ago
        So what you’re saying is: if someone doesn’t prevent you from doing something, they should shoulder more of the blame than you do for actually doing the thing?
        tempsy 7y ago
        Take an extreme example. If a VC decided to invest $1b in a lemonade stand run by a 7 year old and the whole thing falls apart, then yes I would blame the VC for not conducting proper due diligence and enabling someone who neither had the right business for $1b or was the right leader to execute on that business in the first place.

Didn't investors, especially SoftBank, enable this behavior? They deserve as much blame for this mess as he does, if not more.

by tempsy 7y ago

Didn't investors, especially SoftBank, enable this behavior? They deserve as much blame for this mess as he does, if not more.

raverbashing 7y ago

Probably. It would be funny if this blew up in SoftBank's face. I think it will make even Theranos sound more sensible. Sure, the product exists and it's good but the "business plan" and its assumptions and business structure don't make much sense. Though I don't know how long they will survive without any more cash injections in the short term due to all their rental liabilities.

tempsy 7y ago
Nah, this isn't like Theranos. In reality, it is a very good product with slim margins. The reason it is losing so much money is because it is expanding quickly to show that it is a "high growth" Unicorn company. It isn't that it's a scam, it just puts it is a non-tech/non-SaaS category. Every founder/CEO wants to tell a huge growth story. If private investors are buying that then it's just that they miscalculated, but not defrauded.
- bhouston 7y ago
  Slim margins means it isn't a great product, at least by standard business definitions. A product with slim margins is one that you divest from so you can focus on the products with good margins.
  - tempsy 7y ago
    I was referring to the quality of the product from the customer POV.
    - purple_ducks 7y ago
      They rent office space.
      - michaelt 7y ago
        If you think office space doesn't vary in quality, you haven't worked in a very wide range of companies :)
        icelancer 7y ago
        Or rented from Regus, which is a company that people are just now finding out about. Their offices are absolutely embarrassing.
    - AlexandrB 7y ago
      MoviePass was an amazing product from the customer POV. Not a viable business though.
    - smacktoward 7y ago
      From the customer's POV, selling dollar bills for fifty cents each is also a high-quality product.
      - tempsy 7y ago
        No not really. Again, they lose billions right now because it costs a lot to build out new buildings. Then as a building matures they recoup these costs through the memberships. The more mature offices are profitable. It just isn’t necessarily tech/VC level profits.
        throwaway2048 7y ago
        They aren't building out anything, they lease existing office space.
  - the_watcher 7y ago
    There are lots of good businesses that operate on thin margins. They're good businesses, which is why you can divest them to investors who want to run a good business. What they're not are businesses that should trade at anything close to software revenue multiples.
- tyingq 7y ago
  It's also losing money because the CEO is converting it to personal wealth.

tptacek 7y ago

Help me understand how this is a coherent argument. I could see making the argument that investors share some of the blame for what the CEO did. How could they have more of the blame?

tempsy 7y ago
Because they decided to invest and never demanded oversight or questioned his voting power with each new term sheet they handed to him? The point of the board is in part to keep the CEO in check. They had many opportunities to do so well before weeks before the now shelved IPO roadshow.
- jakelazaroff 7y ago
  Yeah, but all that would have been fine if he’d acted responsibly. Obviously giving him that much power is a dangerous game to play, but it doesn’t absolve him of responsibility for his behavior. Ultimately he — not the investors — is the one who built this sandcastle on partying, self-dealing and a cult of personality. One of the things about blame is that it’s never zero sum, and in this case there’s more than enough to go around.
  - mpalmer 7y ago
    > Yeah, but all that would have been fine if he’d acted responsibly. > if he’d acted responsibly > if The "if" is the point. SoftBank had the ability to eliminate the risk of this "if", and didn't.
    - jakelazaroff 7y ago
      So what you’re saying is: if someone doesn’t prevent you from doing something, they should shoulder more of the blame than you do for actually doing the thing?
      - tempsy 7y ago
        Take an extreme example. If a VC decided to invest $1b in a lemonade stand run by a 7 year old and the whole thing falls apart, then yes I would blame the VC for not conducting proper due diligence and enabling someone who neither had the right business for $1b or was the right leader to execute on that business in the first place.