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Because the SV VC business model isn't to build a traditional profitable business that beats the competition by providing a superior product/service for a compe
by terminous 3y ago
Because the SV VC business model isn't to build a traditional profitable business that beats the competition by providing a superior product/service for a competitive price. It is to dominate the competition by subsidizing the real cost to consumers, until you have taken over the market and can raise the price and lower the quality of the product/service.
Edit: Or the business model is to be acquired by a FAANG who fears they need to get into your area and care more about optics to their bosses/shareholders than how financially sustainable your startup is.
- marcus_holmes 3y agoDoes that even work as an investment model? The poster child for this has got to be Uber, and they've shown that this is a lot harder to achieve than it appears. The huge wins have all been IPOs where the business is still growing/trying to dominate the market, and not where they're in that monetisation phase. At least that's what I've seen. I don't think there's a single case yet where the "dominate and then monopolise" plan has actually worked?
- StreetChief 3y agoIt works for management and executives, that's who it works for.
- ip26 3y agoUber seems to have created a lot of opex (30k employees, high comp) setting a pretty high bar to reach profitability, and there are many substitute goods (planes, trains, your own car, bicycles, busses, walking). So they may not be positioned to truly corner consumers with prices high enough to reach profitability, even if they monopolize cabs.
- constantly 3y agoUber is profitable as of the fourth quarter of 2023. You will also note that around the time of their financial announcement[1] their stock price gained about 50% in share price, jumping from $40/share at the beginning of November to $60/share today, about six weeks later. [1] https://investor.uber.com/news-events/news/press-release-details/2023/Uber-Announces-Results-for-Third-Quarter-2023/default.aspx https://investor.uber.com/news-events/news/press-release-det...
- lokar 3y agoWork for whom? All of the early employees and investors in Uber have done very well.
- stockboss 3y agoAmazon?
- 0xDEAFBEAD 3y agoFacebook and Youtube might qualify here
- disgruntledphd2 3y agoIt worked for Facebook, but they were a lot more intentional about growth vs revenue.
- deleted 3y ago[deleted]
- benjaminwootton 3y agoA less cynical take is that it allows you to run at a loss for a very long time as you build revenue and market share. This can be right up to the time that you exit.
- oblio 3y ago> A less cynical take is that it allows you to run at a loss for a very long time as you build revenue and market share You're saying the same thing as the grandparent comment and in various places in the world this would be considered dumping/subsidizing and illegal. Yet here we are and the enshittification continues.
- j16sdiz 3y agoI think dumping/subsidizing is illegal only in the context of international trade.
- wslh 3y agoLegal doesn't mean that is ethical. Just saying that this is an interesting topic that was discussed for years in HN: at the end is it similar to dumping?
- Qwertious 3y agoDumping is absolutely illegal in domestic contexts. The famous one being supermarkets who undercut local fruit shops until they go out of business, then jack up the prices once they have a monopoly in the local area.