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The BS line is just one part of it The VC and to some extent the Private Equity industry can subsidize money hemmoraging business models and fuel massive growt
by EGreg 6y ago
The BS line is just one part of it
The VC and to some extent the Private Equity industry can subsidize money hemmoraging business models and fuel massive growth of bad unit economics until they dump them on the public. Uber and WeWork are just two high profile examples.
In fact, then openly admit they stay away from sustainable and profitable businesses in favor of massive subsidized “traction”.
That’s the loophole - same as colleges can jack up prices on liberal arts degrees and then student loans get bought by Freddie and Fannie.
- xyzzyz 6y ago> Uber and WeWork are just two high profile examples. Uber does not have bad unit economics in its core rides business. It makes profit on rides, and it loses it on trying to expand into food delivery. You can easily see it if you just look at their financial reports.
- teachrdan 6y agoObligatory "Not an accountant but": My understanding is that Uber assigns significant costs related to ride share to R&D, etc., to make it look like their rides business is profitable. Certainly some segment of their core business is profitable. But at the end of the day, if all they have is a glorified cab company that is profitable in a few big cities and loses money everywhere else, that's not a story that sounds good to investors.
- xyzzyz 6y agoI doubt that: I think that would be serious securities fraud.