25 ms·

Fair, the SoftBank-backed car startup, lays off 40% of staff, sacks CFO

163 points by dcu 7y ago

jsemrau 7y ago
The demise of Softbank seems largely exaggerated [1]. While surely some investments are struggling, overall the company seems still to be in good shape. [1] https://www.japantimes.co.jp/news/2019/08/07/business/corporate-business/softbank-groups-quarterly-profit-jumps-%C2%A51-12-trillion-highest-recorded-japanese-firm/ https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
- JumpCrisscross 7y ago
  > overall the company seems still to be in good shape One, that article [1] precedes the WeWork debacle. Two, it refers to SoftBank Corp., a conglomerate that also holds a large stake in Alibaba. Nobody doubts SoftBank Corp’s solvency. Its Vision Fund is the dubious foray, to which the Corp is insufficiently exposed to be tanked by. [1] https://www.japantimes.co.jp/news/2019/08/07/business/corporate-business/softbank-groups-quarterly-profit-jumps-¥1-12-trillion-highest-recorded-japanese-firm/ https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
  - onlyrealcuzzo 7y ago
    I'm under the impression that Kyle Bass and a lot of other investors think Alibaba and Ten Cent could be cooking their books. Is this not true?
    - lonelappde 7y ago
      It's China so they must be cooking their books to keep their Chinese Communist Party partners happy.
    - ptenk 7y ago
      It’s possible, but it’s important to note Kyle Bass has been short China for a very long time and has been spreading FUD (true or not) since 2008.
- deleted 7y ago
  [deleted]
- rgbrenner 7y ago
  You're way overstating that. The important part of that article is in the first paragraph: boosted by a special profit from selling part of its stake in Chinese e-commerce giant Alibaba Group Holding Ltd. After they sold 11.1B of Alibaba shares[0] (virtually all booked as profit because of when they bought them), they ended the quarter with $10.6B in profits. So excluding that, they actually had a loss of 500m in one quarter. Softbank owned over $100B in alibaba shares... all derived from a single purchase of $20m of alibaba shares in 1999. Softbank's market cap is currently $77B. They're worth less than their Alibaba stake. 0. https://www.bloomberg.com/news/articles/2019-06-04/softbank-nets-11-billion-selling-part-of-its-stake-in-alibaba https://www.bloomberg.com/news/articles/2019-06-04/softbank-...
helpPeople 7y ago
So the bubble is bursting from tech? Or is there an international crisis causing this?
- gbear605 7y ago
  A single startup doing poorly is no sign of a bubble popping, just that this one company isn’t doing well.
  - TeMPOraL 7y ago
    It's the n-th startup backed by SoftBank.
- ebog 7y ago
  The bubble is bursting from Softbank* Tech as a sector is still doing very well, even though there are some high publicity mega failures like WeWork
  - actuator 7y ago
    Well, WeWork is not even tech. So, there's that.
    - jnwatson 7y ago
      Fair isn’t either.
    - Thlom 7y ago
      Glorified landlord?
      - actuator 7y ago
        Yeah, pretty much. Since tech startups rent their spaces out, it somehow gets discussed with them.
- sek 7y ago
high_derivative 7y ago
The reckoning may be still to come for various other Softbank-backed companies. Will just take a while for them to run out of cash. For example, Improbable also got 500M from Softbank a few years ago, and makes 500k (!) revenue at a loss of 50M [0] and cost of revenue of 10M. It's insane. [0] https://uk.finance.yahoo.com/news/softbank-backed-gaming-startup-improbable-burns-50m-huge-cash-injection-131849943.html https://uk.finance.yahoo.com/news/softbank-backed-gaming-sta...? edit: for anyone interested in the details, look at the most recent group accounts file here: https://beta.companieshouse.gov.uk/company/08070525/filing-history https://beta.companieshouse.gov.uk/company/08070525/filing-h...
- cdolan 7y ago
  I thought you were kidding with the name of the startup, given its situation. There has to be a word for that kind of irony?
  - high_derivative 7y ago
    Hah. I have wondered about this particular one a fair bit. First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue. Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
    - leesalminen 7y ago
      > Imagine giving 100 teams 5M each instead. In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product. At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.
lefstathiou 7y ago
I think companies that over raised too soon are facing a reckoning.
rax0m 7y ago
A result of the zombification of the japanese economy. The BOJ is buying stocks on all of these zombie companies to keep them alive and this is what you get.
- zaroth 7y ago
  There are clearly fundamental issues with SoftBank's VC operations; everything from investment thesis, evaluation criteria, valuation model, to post-raise governance. It smacks of exactly the result you expect when the money they are investing isn't "real". When what you're spending is actually funny money, why not ring up a $1B+ valuation just for the sake of being able to call the company a unicorn? Maybe they are hoping for self-fulfilling prophecy. But underneath you have money chasing problems which are completely uninteresting, non-technical, or niche markets which will never support the valuation. The money then proceeds to corrupt the teams which have raised it, because if someone just handed you half a billion dollars you better "put it to work" one way for another, even if the opportunities you are chasing don't measure up. The CEO convinces themselves their time is worth $50,000 an hour and suddenly it's irresponsible not to fly private, etc.
  - duxup 7y ago
    I wonder if the general problem of having a huge volume of money and trying to make returns from it is more about what you are talking about. The money stops being real, becomes funny money, and the investment behavior changes.
  - onlyrealcuzzo 7y ago
    To be fair, low interest rates all over the world are leaving zombie companies alive everywhere. In Japan, the problem is particularly absurd -- with the BoJ owning like 77.5% of their ETF market, and days passing where not a single Japanese bond sells (of which there are USD $10 Trillion outstanding, and the BoJ owns 43%!)
MaupitiBlue 7y ago
Whatever happened to f’edcompany.com?
- gwbas1c 7y ago
  I know! I opened it a few hours ago to see if any of the old stories were still there. Now it's just the logo and an email list sign-up.
ausjke 7y ago
Softbank's boss is a world famous investor. Looking back, the only bet he won big is Alibaba, the rest are either lukewarm, or disaster. Statistically, he is probably worse than ordinary people like us as far as investing goes, the difference only lies in that he has guts, he can call the shots no matter what. Other than that, he is probably no better than anyone else here? he is a good business man for sure, that's why he collected his first bucket of gold, but a good investing guy? to me not so at all.
- eigenvalue 7y ago
  That's really not accurate if you read more about him and his story. He made a ton of money early on by designing some electronic game system. He also made a lot on Yahoo Japan. And he saw the opportunity of the iPhone when no other big business in Japan did, and immediately moved to capture and leverage that opportunity in a massive way. But I am the first to admit that his recent picks in the Vision Fund are highly questionable. I doubt he would have been as reckless if it were his own (or Softbank's) money that he was investing and not Saudi royal money.
  - mikemotherwell 7y ago
    > not Saudi royal money That's the missing piece of all this. The Saudis may legitimately be in the market for turning $15B into $10B, and being happy. Oil is under a LOT of pressure, and while it won't go away anytime soon, the Saudis need to put their money somewhere. They likely already have a diversified portfolio of other stocks, they have after all made billions for almost a half century, and risking a smallish percentage of their wealth (there's a terrifying thought) is likely a smart move, even if they lose big, by anyone else's standards. As a political strategy it is also probably sane. Vision Fund is likely good for the Saudi's reputation, as investment in innovation over, say, real estate in London or SF is less politically charged. The Saudi's likely get a lot of this investment.
0xADADA 7y ago
SoftBank is that saddad that keeps lending his dirtbag son money, the son blows it all on lotto cards and shit food at Mohegan Sun, and then begs for more money. It'll blow up soon.
- wiglaf1979 7y ago
  That's a suspiciously precise description...
  - gimmeThaBeet 7y ago
    especially given Mohegan Sun is a singular place?
- desdiv 7y ago
  Softbank made the vast majority of its profits off a lucky bet on Alibaba back in 2000 (not unlike Yahoo). So using your analogy, saddad got rich off lotto cards and the son is just copying Dad.
- goobynight 7y ago
  Hasn't blown up for my uncle and he's nearly 50
malandrew 7y ago
Kind of a shame that all the comments are focused on Softbank here and no one is discussing Fair. I know what HN generally thinks of Softbank. What I want to know is what HN thinks of Fair and this layoff.
- cellular 7y ago
  Usually people work for startups for low pay/high hours for a big payoff of stock options. Will those laid off get nothing? That doesn't seem fair.
  - onlyrealcuzzo 7y ago
    You almost always get nothing unless your startup IPOs, which historically is about ~0.01% of all seed-funded startups. Even if the company sells privately, which does happen quite often, there's a liquidation preference so that investors usually get all of the money, leaving nothing for founders or employees. Someone posted an excellent example of it today: https://news.ycombinator.com/item?id=21358531 https://news.ycombinator.com/item?id=21358531
maxaf 7y ago
Setting aside SoftBank, let's talk about Fair. I'm a Fair customer, and I like the service, but I don't think it's a steal. It's a fair deal (no pun intended), but by no means would I call it a ridiculous, out-of-this-world deal. Surely some fellow New Yorkers will remember the good old days of the Uber-Lyft price war, when it was possible to travel from the low 90-s & York to the low 80-s & Columbus for $2 on an Uber Pool. Or how during the morning rush an Uber Pool would take one from the UWS to FiDi for about $5. Those were unimaginably good deals because they were heavily subsidized by the VC cash that was flowing so easily into rideshare companies and out the other end into riders' wallets. Those were the days! Fair is nothing like that. I pay $266/month for a 2018 CPO Honda Accord that I received with 2k miles and most of its original warranty. I reckon this costs me about 15-20% more than a dealership lease of a brand new car. I consider this a fair (...) premium for the flexibility that a Fair lease affords me: I can end it at any time without undue shenanigans, whereas a traditional lease would require me to either transfer it or pay an early termination fee. Why is this important? With Fair I don't feel as if some hapless VC is subsidizing my use of the vehicle. The whole thing feels like an actual business with assets and employees and some kind of plan, not a reckless gamble for market share that in itself is worth nothing to begin with. It all makes a certain kind of cold sense: when you browse Fair's app for a vehicle, the cars you see aren't actually on Fair's balance sheet until the lease has started. Since their prices aren't too good to be true, my gut tells me that, at the very least, they have a spreadsheet somewhere that spits out the price they should charge a customer after having quantified the risk of this customer ending the lease before its break-even date, thus saddling Fair with the car for which it now has to pay out of its own coffers. SoftBank being SoftBank, it's possible that Fair is one of its better bets.
- robert707 7y ago
  On the back end, that flexiblity to let you end at any time costs more than the 10 to 15 percent premium you pay. Equity dollars are used to recondition and transport your car and also to pay the debt on it until a new customer can get in it. Since the majority of their customer base churns through the platform with low tenure and is not retained (short term Uber drivers), it is a major problem and has destroyed every other player who tried to do short term leasing. You need a longer tenure to cover the cost of turning the car around. Your gut is very wrong on this one, sorry.
deleted 7y ago
[deleted]
robert707 7y ago
Fair is probably done al la WeWork. Out of money, living a 25 million dollar loan from Softbank, and abandoning everything but their Uber rental product. The Uber product is the Xchange Leasing one they took over from Uber because Uber was constantly losing money on it. In exchange for taking over that Softbank had given Fair a pile of money that lasted just over a year. Now that is gone and Softbank is just trying to figure out how to keep a pale shadow of Fair alive because Uber needs those cars on the road. This 40% came very hastily and was focused on product and eng. 4 weeks severance and no clarity on if you have benefit coverage during this. This was cutting for the sake of cutting, no clear consolidation of teams. Folks on the lots are expected to go in the next wave. Word is there is another 25 million out there Softbank will give Fair once Fair cuts enough overhead. Also some suppliers haven't been paid for months, some going back to July. At one point an irate supplier blocked the entries to the Irvine lot with his tow trucks until Fair paid at least some of the 700k they owed.
flog 7y ago
Well that explains why their money-down price jumped from $500 to $5000 within the last couple of weeks.
- driverdan 7y ago
  They require $5000 down for a month-to-month lease? That seems significantly higher than it should be.
piterdevries 7y ago
Isn't car subscription called leasing?
- tschwimmer 7y ago
  Fair does much shorter terms. Month to month.
- MichaelApproved 7y ago
  Traditional leases have multi-year contracts. These cars don't.
scurvy 7y ago
Given the recent issues they've had with other portfolio companies, I wonder if the C suite moves were based on family ties that Softbank didn't like. Seems like a lot of upper management at Fair were related to each other.
kolanos 7y ago
Softbank Vision Fund looks like a Saudi money laundering scheme to me.
servercobra 7y ago
I interviewed with them a few months ago. The guy who interviewed me was super nice and really smart, but the company's business model seemed really odd. It was some sort of arbitrage on cars with dealerships owning most of the stock and trying to guess when the best time to sell the car as used was. Plus they had this belief there was some customers who wanted something between ZipCar/rental cars and a traditional lease, which I found dubious. I can see wanting one year leases, but below that seems like a pretty tiny market. I'm not surprised they've mostly switched to focusing on Uber.
- lonelappde 7y ago
  There's a market for people who need a car to match their short term housing. (<1yr, or even a 3-yr lease on a used car). This is Rent-a-Wreck's market. Not a huge market, though.
  - pkaye 7y ago
    > <1yr, or even a 3-yr lease on a used car Why not just buy an used car and sell it after it is no longer needed?
    - vkou 7y ago
      Because you have to pay sales taxes on the full value of the car, not on the fraction of the value that you got use out of. Sales taxes are the #1 reason for why people who constantly lease do not just buy and resell cars.
      - perl4ever 7y ago
        This doesn't make a lot of sense to me, don't competitive pressures mean you implicitly pay for the sales tax you're not explicitly paying when you lease? In my state (although not all) you get credit against sales tax for a trade-in. But it seems to me that's a primary reason why a dealer offers less on a trade-in than a private party would. Just because you're not paying sales tax doesn't mean you get the whole benefit.
gentle 7y ago
Good riddance.
tempsy 7y ago
Really curious how OpenDoor is doing. They've raised a ton from SoftBank as well.
- mrnobody_67 7y ago
  Recent Recode interview, mentioned 3500 house sales per month.
- jdross 7y ago
  Latest round wasn't led by Softbank. Softbank just led the D. "The round was co-led by General Atlantic, Access Technology Ventures, and Lennar Corporation (the leading homebuilder in the U.S.), with additional participation from new investors Andreessen Horowitz, Coatue Management, 10100 Fund, and Invitation Homes (a leading property owner of homes for lease in the U.S.). Existing investors Norwest Venture Partners, Lakestar, GGV Capital, NEA, and Khosla Ventures also participated in the round." https://www.businesswire.com/news/home/20180613005382/en/Opendoor-Announces-325-Million-Series-Financing https://www.businesswire.com/news/home/20180613005382/en/Ope...
tus88 7y ago
> another startup is taking a proactive step to get ahead of the story, by cutting costs and restructuring before public opinion forces the issue on them. I thought the proactive approach was to get bought out by Facebook? And that was the entire goal all along...not to make an actually viable business.
tomnipotent 7y ago
There was a post here a little awhile ago from Fair Eng. team that mentioned how they _saved_ hundreds of thousands annually on their AWS ES bill through some change or another. Hundreds. of. thousands. I couldn't fathom a situation where they needed that much hardware to return some car listings. Even if you had every car in the world in their database (~1 billion) at ~10k/doc, that's only 10GB of data. And how many people could possibly be looking to rent/lease a car at any single time? So between two pretty guessable ceilings (data size + traffic) it was red flags everywhere.
xenihn 7y ago
There's some juicy stuff in the recent Glassdoor reviews.

163 points by dcu 7y ago

The demise of Softbank seems largely exaggerated [1]. While surely some investments are struggling, overall the company seems still to be in good shape. [1] https://www.japantimes.co.jp/news/2019/08/07/business/corporate-business/softbank-groups-quarterly-profit-jumps-%C2%A51-12-trillion-highest-recorded-japanese-firm/ https://www.japantimes.co.jp/news/2019/08/07/business/corpor...

JumpCrisscross 7y ago
> overall the company seems still to be in good shape One, that article [1] precedes the WeWork debacle. Two, it refers to SoftBank Corp., a conglomerate that also holds a large stake in Alibaba. Nobody doubts SoftBank Corp’s solvency. Its Vision Fund is the dubious foray, to which the Corp is insufficiently exposed to be tanked by. [1] https://www.japantimes.co.jp/news/2019/08/07/business/corporate-business/softbank-groups-quarterly-profit-jumps-¥1-12-trillion-highest-recorded-japanese-firm/ https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
- onlyrealcuzzo 7y ago
  I'm under the impression that Kyle Bass and a lot of other investors think Alibaba and Ten Cent could be cooking their books. Is this not true?
  - lonelappde 7y ago
    It's China so they must be cooking their books to keep their Chinese Communist Party partners happy.
  - ptenk 7y ago
    It’s possible, but it’s important to note Kyle Bass has been short China for a very long time and has been spreading FUD (true or not) since 2008.
deleted 7y ago
[deleted]
rgbrenner 7y ago
You're way overstating that. The important part of that article is in the first paragraph: boosted by a special profit from selling part of its stake in Chinese e-commerce giant Alibaba Group Holding Ltd. After they sold 11.1B of Alibaba shares[0] (virtually all booked as profit because of when they bought them), they ended the quarter with $10.6B in profits. So excluding that, they actually had a loss of 500m in one quarter. Softbank owned over $100B in alibaba shares... all derived from a single purchase of $20m of alibaba shares in 1999. Softbank's market cap is currently $77B. They're worth less than their Alibaba stake. 0. https://www.bloomberg.com/news/articles/2019-06-04/softbank-nets-11-billion-selling-part-of-its-stake-in-alibaba https://www.bloomberg.com/news/articles/2019-06-04/softbank-...

helpPeople 7y ago

So the bubble is bursting from tech? Or is there an international crisis causing this?

gbear605 7y ago
A single startup doing poorly is no sign of a bubble popping, just that this one company isn’t doing well.
- TeMPOraL 7y ago
  It's the n-th startup backed by SoftBank.
ebog 7y ago
The bubble is bursting from Softbank* Tech as a sector is still doing very well, even though there are some high publicity mega failures like WeWork
- actuator 7y ago
  Well, WeWork is not even tech. So, there's that.
  - jnwatson 7y ago
    Fair isn’t either.
  - Thlom 7y ago
    Glorified landlord?
    - actuator 7y ago
      Yeah, pretty much. Since tech startups rent their spaces out, it somehow gets discussed with them.
sek 7y ago

high_derivative 7y ago

The reckoning may be still to come for various other Softbank-backed companies. Will just take a while for them to run out of cash. For example, Improbable also got 500M from Softbank a few years ago, and makes 500k (!) revenue at a loss of 50M [0] and cost of revenue of 10M. It's insane. [0] https://uk.finance.yahoo.com/news/softbank-backed-gaming-startup-improbable-burns-50m-huge-cash-injection-131849943.html https://uk.finance.yahoo.com/news/softbank-backed-gaming-sta...? edit: for anyone interested in the details, look at the most recent group accounts file here: https://beta.companieshouse.gov.uk/company/08070525/filing-history https://beta.companieshouse.gov.uk/company/08070525/filing-h...

cdolan 7y ago
I thought you were kidding with the name of the startup, given its situation. There has to be a word for that kind of irony?
- high_derivative 7y ago
  Hah. I have wondered about this particular one a fair bit. First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue. Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
  - leesalminen 7y ago
    > Imagine giving 100 teams 5M each instead. In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product. At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.

lefstathiou 7y ago

I think companies that over raised too soon are facing a reckoning.

rax0m 7y ago

A result of the zombification of the japanese economy. The BOJ is buying stocks on all of these zombie companies to keep them alive and this is what you get.

zaroth 7y ago
There are clearly fundamental issues with SoftBank's VC operations; everything from investment thesis, evaluation criteria, valuation model, to post-raise governance. It smacks of exactly the result you expect when the money they are investing isn't "real". When what you're spending is actually funny money, why not ring up a $1B+ valuation just for the sake of being able to call the company a unicorn? Maybe they are hoping for self-fulfilling prophecy. But underneath you have money chasing problems which are completely uninteresting, non-technical, or niche markets which will never support the valuation. The money then proceeds to corrupt the teams which have raised it, because if someone just handed you half a billion dollars you better "put it to work" one way for another, even if the opportunities you are chasing don't measure up. The CEO convinces themselves their time is worth $50,000 an hour and suddenly it's irresponsible not to fly private, etc.
- duxup 7y ago
  I wonder if the general problem of having a huge volume of money and trying to make returns from it is more about what you are talking about. The money stops being real, becomes funny money, and the investment behavior changes.
- onlyrealcuzzo 7y ago
  To be fair, low interest rates all over the world are leaving zombie companies alive everywhere. In Japan, the problem is particularly absurd -- with the BoJ owning like 77.5% of their ETF market, and days passing where not a single Japanese bond sells (of which there are USD $10 Trillion outstanding, and the BoJ owns 43%!)

MaupitiBlue 7y ago

Whatever happened to f’edcompany.com?

gwbas1c 7y ago
I know! I opened it a few hours ago to see if any of the old stories were still there. Now it's just the logo and an email list sign-up.

ausjke 7y ago

Softbank's boss is a world famous investor. Looking back, the only bet he won big is Alibaba, the rest are either lukewarm, or disaster. Statistically, he is probably worse than ordinary people like us as far as investing goes, the difference only lies in that he has guts, he can call the shots no matter what. Other than that, he is probably no better than anyone else here? he is a good business man for sure, that's why he collected his first bucket of gold, but a good investing guy? to me not so at all.

eigenvalue 7y ago
That's really not accurate if you read more about him and his story. He made a ton of money early on by designing some electronic game system. He also made a lot on Yahoo Japan. And he saw the opportunity of the iPhone when no other big business in Japan did, and immediately moved to capture and leverage that opportunity in a massive way. But I am the first to admit that his recent picks in the Vision Fund are highly questionable. I doubt he would have been as reckless if it were his own (or Softbank's) money that he was investing and not Saudi royal money.
- mikemotherwell 7y ago
  > not Saudi royal money That's the missing piece of all this. The Saudis may legitimately be in the market for turning $15B into $10B, and being happy. Oil is under a LOT of pressure, and while it won't go away anytime soon, the Saudis need to put their money somewhere. They likely already have a diversified portfolio of other stocks, they have after all made billions for almost a half century, and risking a smallish percentage of their wealth (there's a terrifying thought) is likely a smart move, even if they lose big, by anyone else's standards. As a political strategy it is also probably sane. Vision Fund is likely good for the Saudi's reputation, as investment in innovation over, say, real estate in London or SF is less politically charged. The Saudi's likely get a lot of this investment.

0xADADA 7y ago

SoftBank is that saddad that keeps lending his dirtbag son money, the son blows it all on lotto cards and shit food at Mohegan Sun, and then begs for more money. It'll blow up soon.

wiglaf1979 7y ago
That's a suspiciously precise description...
- gimmeThaBeet 7y ago
  especially given Mohegan Sun is a singular place?
desdiv 7y ago
Softbank made the vast majority of its profits off a lucky bet on Alibaba back in 2000 (not unlike Yahoo). So using your analogy, saddad got rich off lotto cards and the son is just copying Dad.
goobynight 7y ago
Hasn't blown up for my uncle and he's nearly 50

malandrew 7y ago

Kind of a shame that all the comments are focused on Softbank here and no one is discussing Fair. I know what HN generally thinks of Softbank. What I want to know is what HN thinks of Fair and this layoff.

cellular 7y ago
Usually people work for startups for low pay/high hours for a big payoff of stock options. Will those laid off get nothing? That doesn't seem fair.
- onlyrealcuzzo 7y ago
  You almost always get nothing unless your startup IPOs, which historically is about ~0.01% of all seed-funded startups. Even if the company sells privately, which does happen quite often, there's a liquidation preference so that investors usually get all of the money, leaving nothing for founders or employees. Someone posted an excellent example of it today: https://news.ycombinator.com/item?id=21358531 https://news.ycombinator.com/item?id=21358531

maxaf 7y ago

Setting aside SoftBank, let's talk about Fair. I'm a Fair customer, and I like the service, but I don't think it's a steal. It's a fair deal (no pun intended), but by no means would I call it a ridiculous, out-of-this-world deal. Surely some fellow New Yorkers will remember the good old days of the Uber-Lyft price war, when it was possible to travel from the low 90-s & York to the low 80-s & Columbus for $2 on an Uber Pool. Or how during the morning rush an Uber Pool would take one from the UWS to FiDi for about $5. Those were unimaginably good deals because they were heavily subsidized by the VC cash that was flowing so easily into rideshare companies and out the other end into riders' wallets. Those were the days! Fair is nothing like that. I pay $266/month for a 2018 CPO Honda Accord that I received with 2k miles and most of its original warranty. I reckon this costs me about 15-20% more than a dealership lease of a brand new car. I consider this a fair (...) premium for the flexibility that a Fair lease affords me: I can end it at any time without undue shenanigans, whereas a traditional lease would require me to either transfer it or pay an early termination fee. Why is this important? With Fair I don't feel as if some hapless VC is subsidizing my use of the vehicle. The whole thing feels like an actual business with assets and employees and some kind of plan, not a reckless gamble for market share that in itself is worth nothing to begin with. It all makes a certain kind of cold sense: when you browse Fair's app for a vehicle, the cars you see aren't actually on Fair's balance sheet until the lease has started. Since their prices aren't too good to be true, my gut tells me that, at the very least, they have a spreadsheet somewhere that spits out the price they should charge a customer after having quantified the risk of this customer ending the lease before its break-even date, thus saddling Fair with the car for which it now has to pay out of its own coffers. SoftBank being SoftBank, it's possible that Fair is one of its better bets.

robert707 7y ago
On the back end, that flexiblity to let you end at any time costs more than the 10 to 15 percent premium you pay. Equity dollars are used to recondition and transport your car and also to pay the debt on it until a new customer can get in it. Since the majority of their customer base churns through the platform with low tenure and is not retained (short term Uber drivers), it is a major problem and has destroyed every other player who tried to do short term leasing. You need a longer tenure to cover the cost of turning the car around. Your gut is very wrong on this one, sorry.

deleted 7y ago

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robert707 7y ago

Fair is probably done al la WeWork. Out of money, living a 25 million dollar loan from Softbank, and abandoning everything but their Uber rental product. The Uber product is the Xchange Leasing one they took over from Uber because Uber was constantly losing money on it. In exchange for taking over that Softbank had given Fair a pile of money that lasted just over a year. Now that is gone and Softbank is just trying to figure out how to keep a pale shadow of Fair alive because Uber needs those cars on the road. This 40% came very hastily and was focused on product and eng. 4 weeks severance and no clarity on if you have benefit coverage during this. This was cutting for the sake of cutting, no clear consolidation of teams. Folks on the lots are expected to go in the next wave. Word is there is another 25 million out there Softbank will give Fair once Fair cuts enough overhead. Also some suppliers haven't been paid for months, some going back to July. At one point an irate supplier blocked the entries to the Irvine lot with his tow trucks until Fair paid at least some of the 700k they owed.

flog 7y ago

Well that explains why their money-down price jumped from $500 to $5000 within the last couple of weeks.

driverdan 7y ago
They require $5000 down for a month-to-month lease? That seems significantly higher than it should be.

piterdevries 7y ago

Isn't car subscription called leasing?

tschwimmer 7y ago
Fair does much shorter terms. Month to month.
MichaelApproved 7y ago
Traditional leases have multi-year contracts. These cars don't.

scurvy 7y ago

Given the recent issues they've had with other portfolio companies, I wonder if the C suite moves were based on family ties that Softbank didn't like. Seems like a lot of upper management at Fair were related to each other.

kolanos 7y ago

Softbank Vision Fund looks like a Saudi money laundering scheme to me.

servercobra 7y ago

I interviewed with them a few months ago. The guy who interviewed me was super nice and really smart, but the company's business model seemed really odd. It was some sort of arbitrage on cars with dealerships owning most of the stock and trying to guess when the best time to sell the car as used was. Plus they had this belief there was some customers who wanted something between ZipCar/rental cars and a traditional lease, which I found dubious. I can see wanting one year leases, but below that seems like a pretty tiny market. I'm not surprised they've mostly switched to focusing on Uber.

lonelappde 7y ago
There's a market for people who need a car to match their short term housing. (<1yr, or even a 3-yr lease on a used car). This is Rent-a-Wreck's market. Not a huge market, though.
- pkaye 7y ago
  > <1yr, or even a 3-yr lease on a used car Why not just buy an used car and sell it after it is no longer needed?
  - vkou 7y ago
    Because you have to pay sales taxes on the full value of the car, not on the fraction of the value that you got use out of. Sales taxes are the #1 reason for why people who constantly lease do not just buy and resell cars.
    - perl4ever 7y ago
      This doesn't make a lot of sense to me, don't competitive pressures mean you implicitly pay for the sales tax you're not explicitly paying when you lease? In my state (although not all) you get credit against sales tax for a trade-in. But it seems to me that's a primary reason why a dealer offers less on a trade-in than a private party would. Just because you're not paying sales tax doesn't mean you get the whole benefit.

gentle 7y ago

Good riddance.

tempsy 7y ago

Really curious how OpenDoor is doing. They've raised a ton from SoftBank as well.

mrnobody_67 7y ago
Recent Recode interview, mentioned 3500 house sales per month.
jdross 7y ago
Latest round wasn't led by Softbank. Softbank just led the D. "The round was co-led by General Atlantic, Access Technology Ventures, and Lennar Corporation (the leading homebuilder in the U.S.), with additional participation from new investors Andreessen Horowitz, Coatue Management, 10100 Fund, and Invitation Homes (a leading property owner of homes for lease in the U.S.). Existing investors Norwest Venture Partners, Lakestar, GGV Capital, NEA, and Khosla Ventures also participated in the round." https://www.businesswire.com/news/home/20180613005382/en/Opendoor-Announces-325-Million-Series-Financing https://www.businesswire.com/news/home/20180613005382/en/Ope...

tus88 7y ago

> another startup is taking a proactive step to get ahead of the story, by cutting costs and restructuring before public opinion forces the issue on them. I thought the proactive approach was to get bought out by Facebook? And that was the entire goal all along...not to make an actually viable business.

tomnipotent 7y ago

There was a post here a little awhile ago from Fair Eng. team that mentioned how they _saved_ hundreds of thousands annually on their AWS ES bill through some change or another. Hundreds. of. thousands. I couldn't fathom a situation where they needed that much hardware to return some car listings. Even if you had every car in the world in their database (~1 billion) at ~10k/doc, that's only 10GB of data. And how many people could possibly be looking to rent/lease a car at any single time? So between two pretty guessable ceilings (data size + traffic) it was red flags everywhere.

xenihn 7y ago

There's some juicy stuff in the recent Glassdoor reviews.