5 ms·
Cash Burns Fast for Uber-Like Startups That Grow City by City
- cylinder 12y agoMost of these businesses are unprofitable and unsustainable at their core. Once the funding washes away they will be exposed.
- fsk 12y agoA bunch of delivery services crashed and burned during the first .com bubble, for precisely that reason. But there's a new generation of gullible investors!
- jseip 12y agoThis was certainly true for us at Livingsocial and, to an extent, it was true for Groupon as well. The cash burn sucks, but you have to love the unit-level economics that this model provides. Want to turn on new revenue? - just open up another city!
- anon808 12y agoyes, but how do you turn on the new profit?
- brianbreslin 12y agoin many cases thats not a short term concern. They see it as "let me spend $1M to buy $1M in revenue." Thinking is they can buy revenue, and then downline achieve efficiencies of scale to earn profits.
- pbreit 12y agoI would think startups would be a little smarter than just doing the same thing in each geo. Surely fixed costs can be minimized. The warehousing infrastructure won't be that valuable if the company goes under.
- saosebastiao 12y agoInstacart needs less cash to expand (compared with Amazon, which also delivers groceries in some urban areas) since it doesn't have to build warehouses or large stores. If your gross margin is negative, then the "extra cash" from not investing in warehouses just goes straight to the customer's pocket instead, instead of towards a capital asset that actually lowers your variable costs. And lets not kid, anybody who knows instacart's revenue model and the margins of the grocery industry knows with about 99% certainty that instacart is losing money with every sale. Buy it all up while the VCs are feeling charitable, cause its going to dry up very quickly.