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Benefit to whom? There are at least 3 parties involved in every VC funded startup, the company, the investors and the customers. Growing as fast a possbile an
by mox1 7y ago
Benefit to whom?
There are at least 3 parties involved in every VC funded startup, the company, the investors and the customers.
Growing as fast a possbile and becoming a market leader benefits 1 perhaps 2 of those. I would argue usually benefits 1.
- SpicyLemonZest 7y agoI think it’s hard to argue growing fast doesn’t benefit customers. Becoming a market leader means almost by definition that a lot of customers are convinced you’re selling the best thing on the market.
- gbear605 7y agoFrom another perspective, becoming the market leader might mean that a lot of consumers are convinced you’re selling the best thing on the market because you’re the only thing on the market because you bankrupted all the other choices. The venture capital growth-at-all-costs model results in monopoly or near-monopoly conditions, which is horrible for consumers. If your business doesn’t have competition, you’re probably hurting your customers.
- SpicyLemonZest 7y agoI suppose I can imagine the scenario, but have any VC-backed companies actually grown big in that way? Doordash is the closest example I can think of, but unless you're considering restaurants rather than end users as their customers, it seems pretty uncontroversial to say that it's been good for customers. Alternatives exist, and both Doordash and the alternatives have significantly expanded the range of foods most people can get delivered.
- throwaway2048 7y agouber's model is/was essentially putting their competition (taxis) out of business with VC subsidized rides.
- SpicyLemonZest 7y agoTaxis are still in business in every city I’m personally familiar with. Are there other cities where they’re gone?
- ssalazar 7y agoMedium comes to mind, who quickly gained popularity but then introduced user-hostile features when they realized they needed to tighten their business model. Evernote is a similar example. Even Facebook/Instagram/Google before they had advertising. Having a finite VC-funded runway means eventually having to convert market share to profitability, such as by raising prices, and that’s not always a great result for customers.
- AlexandrB 7y agoOr it means that you're selling $2 of goods and services for $1 of cost to the customer. In traditional markets, this kind of predatory pricing was considered a form of anti-competitive behaviour, but usually only large near-monopolies with deep pockets had the money to pull it off. VC allows a startup - that can't possibly be considered a monopoly - to price a product/service at below-cost for years to grow its user base regardless of ultimate sustainability. See also: Groupon, Movie Pass, WeWork, and maybe Uber. In the end it's often the VCs that choose the market leader, not the customers. Competitors that enter the market without VC backing are forced to be profitable from the start and have no way to compete on quality or price. This is especially apparent with "gig economy" startups where offering subsidies/incentives to the service providers increases the quality (timeliness, availability, coverage) of the service for the customer. In many ways it resembles a command economy, with a small number of VCs deciding what "the next big thing" is ("oh, looks like everybody wants scooters, let's pour all our capital into scooter companies").