# Pando Daily | Incisive, hard hitting articles on Uber



## chi1cabby (May 28, 2014)

*"See you in the trenches."*

I'll never forget that moment. We were at the 2012 Crunchies just after Paul and I'd left to start our respective companies and Michael Arrington was watching it at home in Seattle on a live stream. Uber was doing well but it wasn't nearly the company it is today. I still considered Travis Kalanick a friend.

Bastian Lehmann -- an old friend of Paul's, and by extension, mine, from the UK- had started Postmates. It had bombed in its Disrupt demo the year before, but had found its sea legs in a market that suddenly wanted an Uber or an Airbnb for everything.

Lehman was a fan of Kalanick's and went up to express his admiration. The Uber founder's smirky face turned cold, he sneered at Lehmann and said: "See you in the trenches." Then he turned on his heel and walked off.

When Lehmann first told me about it, I assumed he must have misunderstood the exchange. That surely Kalanick was kidding and had turned around with finger guns and a smile. But no, he was dead serious. How well I knew my "friend."

When a regular startup bro says that, it's a little like him saying he's going to "change the world." When a "come at me bro!" pugnacious egomaniac-- who would go on to lead one of largest privately traded companies in Valley history says it-- it's a bona fide threat.

Yesterday, Kalanick more fully delivered on his threat against Postmates- but also against Grubhub and the rest of the overcrowded food delivery market- when Uber dramaticallyredesigned its app to highlight UberEATS on an equal footing to getting a ride. It used to be buried at the bottom along a lot of other pilot Uber product extensions. Now it's at the top: You want a ride somewhere or you want food? The message is clear: Uber does two core things for you, not one. The change is being rolled out to users gradually.

Right now, Uber's food delivery service offers just a handful of restaurants in just a handful of cities. But it's a direct volley and another huge step towards Uber's oft-stated goal to move not just people but _everything_ around cities. This is how Travis Kalanick goes through life-- and did even in Uber's earlier days, before the billion dollar valuation, the warchest of some $6.9 billion in funding, and the self-described war room in its headquarters. _"I'll take that market, and that market, and__that legislature__, and __that political operative__&#8230;"_

I remember when he expanded to Europe in 2011, just 18 months into Uber's existence and well before he'd even entered most major US cities, or we even knew if the company would be able to operate legally in them. I asked Kalanick why he'd go international already when there's still so much to do here. "It's a big world, Sarah, open your mind!" I remember him saying in that smirky, bro'd out way.

But it's possible for anyone- even a company that is valued well north of $40 billion - to try to do too much.

Uber has dominated- absolutely dominated- US ridesharing. The only reason there's even a strong number two in Lyft is because the market is just so huge and Uber keeps shooting itself in the foot PR-wise. Because that's the thing-- Uber's product is so great, people will still use it even when there are weekly reports of assault and abuse and convicted rapists skirting background checks on the service. That's created a culture within the company of birthright and invincibility.

_Even doing the worst things we could possibly do to drivers, riders, the press and anyone who gets in our way doesn't hurt us! We're golden!_

Now, far be it from me to offer advice to Uber...

This is-- after all-- a company that I've expressed serious concerns about, whether it's their "eh, maybe" attitude towards comprehensive background checks, their utter disdain for their own inconvenient and expensive drivers whom can't wait to replace with self driving cars, or -- yunno--threatening my family.

And I get that this company- with its $7 billion (and counting!) cash reserves, insane "we'll pay no matter what you do to us or how you surge us!" customer retention, and pugnacious "we can't lose" attitude -doesn't listen to anyone's advice ever, whether that person be a board member or much despised me.

But still&#8230;

Many a Silicon Valley giant that has come before it has been humbled at three things:

-- Capricious expansion into a new business that isn't its core

-- Believing that because it absolutely dominated one category it can dominate any category

-- Believing it can do something better than competitors because,_Well duh! We are Amazon/Google/Microsoft/Facebook/Fill-in-the-blank._

Here's where Uber is now: It is reportedly valued at near $50 billion. That's more than two and a half Twitters or two LinkedIns. And that's not because of the business it does now-- which is impressive but not $50 billion impressive. It's because of the growth potential. Specifically the growth potential it must capture_before _Uber should try to go public. The public markets-- after all-- aren't seeing near the premium prices the late stage private markets are.

There are two ways Uber shows growth commensurate with that price; two promises they've essentially made the newest investors. The first is about rapid international growth. But in some of the biggest markets Uber is being challenged by strong local incumbents backed by even bigger pockets including some of the largest Asian super unicorns and large US hedge funds.

In China in particular, Uber is showing growth in rides and market share against the massive market share leader Didi Kuaidi. But Uber doesn't have the homefield advantage or first-mover advantage, so that growth is coming via massive, insane subsidies. The exact strategy everyone in startup world decries&#8230; except when Uber does it. People familiar with Uber's plans say that if the rate of subsidies continues, Uber could lose as much as to _$1 billion a year_ in China. Even if that number is inflated, it's surely hundreds of millions of dollars in Chinese subsidies alone, chasing growth in a market it will never win.

fundamentally a different business. Food delivery can have bikes and couriers who don't want to speak to people and have totally different insurance issues. It's not impossible, but learning a new business and out-slaying others in it certainly isn't a lay-up anymore than it was a given that Facebook could shrug and add a new features to destroy Twitter, Foursquare, Quora, and Snapchat. (None of those happened, and Facebook seemed genuinely shocked.)

Sometimes platform isn't everything. And sometimes a company-- even one valued in the hundreds of billions with much bigger resources -- simply can't win every battle. The problem is Uber doesn't know or believe that yet. And it's getting paid in bucket-loads of cheap capital to keep buying new markets, new growth, and new future options to grow into that heady price.

But Uber is on a price prespice._One false move&#8230;_

And this is a famously libertarian company that has already attracted the attention of lawmakers-- whether it's Al Franken questioning its use of customer data or Hillary Clinton raising concerns about contractors. Just because it's kept growing in spite of all its safety and PR missteps doesn't mean there isn't a lingering stigma.

Let's not forget-- this is at its core a company that prides itself on security and safety which can't go a week without a scandal. After one of the largest ones in Delhi, it came out that the company had a scant four people working in its local Delhi operations. A proudly "lean" operation&#8230; that's raised some $7 billion in capital.

There's a problem when a company raises billions of dollars on a growth proposition that it only puts subsidies-- not actual people or solid processes-- behind.

On one level, I'm heartened that the latest expansion only involves ferrying quesadillas from place to place, not people. Still, for Uber to think it can dominate every international market the way it has in the US by way of tiny skeleton staffs, and now move a few pixels and dominate food delivery, seems like a crazy distraction, considering its still growing core business that doesn't exactly grow itself.

What's interesting is Lyft and Postmates aren't getting dragged into the same battle the way LivingSocial did following Groupon around the world. Despite raising $1 billion Lyft hassteadfastly determined it will focus on the US market, and Postmates has long held to a policy of protecting margins and growing at a deliberate sustainable pace. Both are smart strategies. Uber wins if Uber can drag everyone else into its unsustainable cash burn race. If a dozen other companies who are good at specific logistics or specifics locales hold to their own playbook, the combination of them all may be far more devastating.

Will Uber go under? Hard to imagine. But an up round on this price is hardly a given.


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## Casuale Haberdasher (Dec 7, 2014)

chi1cabby said:


> View attachment 11981
> 
> 
> *"See you in the trenches."*
> ...


POST # 1/chi1cabby: Thanks for the
Latest from Agrieved
Pandostress Sarah Lacey. If ANYONE is
More Deserving of a Killshot at #Travi$
than Sarah, Bison knoweth not.

Curiously, her "Spellchecker" is a Poor
Substitute for P R O O F R E A D I N G !

TEXT:......................... " Prespice"
TEXT CORRECTED: " Precipice "

Keep up The Good Fight, Sarah!
Thanks again, St. Comity.[/QUOTE][/QUOTE]


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## Casuale Haberdasher (Dec 7, 2014)

chi1cabby said:


> View attachment 11981
> 
> 
> *"See you in the trenches."*
> ...


POST # 1/chi1cabby: ALMOST FORGOT!
Who is to be
Credited for the Very Funny "U-toon" ?

Bison Decade-Long On-Demand DBA.


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## chi1cabby (May 28, 2014)

*Oh no you Didi...*
By Sarah Lacy, written on September 17, 2015










_"The assets under management and market cap of our key shareholders exceeds $2 trillion in aggregate, and they are all here to witness our partnership with Lyft."_

Oh, it's on. It's so on.

For months, Pando has been predicting a tighter, more formal working relationship between Uber's rivals around the world, not least because of the huge overlap in investors, common goals, and more or less agreements to focus on home markets. Yesterday, we saw the first big announcement of exactly that: A joint press conference between Lyft and dominant Chinese ridesharing company Didi Kuaidi.

The press conference was ostensibly about a joint technology project that would allow a fictional American business man named "Peter" traveling to China to fire up Lyft and get around via Didi's service when he arrives. Likewise Chinese visitors to the US. Didi's president Jean Liu even suggested that one day Didi would be able to find American visitors a driver who speaks English.

For anyone who has ever traveled in China and can't afford a private driver, that's pretty cool. Eight million people travel between US and China every year. And it could easily be a template for other countries to work with either Lyft, Didi or both. Didi has alreadyinvested in GrabTaxi in Singapore and if Didi isn't in the new round of Ola in India, I'd be stunned.

But none of that is what yesterday's announcement was_really_ about.

Really, it was a masterstroke of choreographed marketing. It was the first time much of the US business press has encountered Didi (The New York Times was out of the loop enough its reporter referred to the new partners -- with such incredibly aligned interests that one had already _invested in_ the other -- as "strange bedfellows"). It was also the first time Lyft has thrown a punch at its rival, or come close to chest thumping about its own service, or in any way tried to capitalize on Uber's many missteps and challenges.

For months, investors have been telling me that Lyft has an upgraded management team and new intensity with board additions like Rakuten and Carl Icahn. But this is the first time I've seen evidence of any of that. It's certainly a contrast to Lyft'sgutless "Hey! We have an app too!" billboard campaign.

An hour before the press conference at DreamForce, Uber CEO Travis Kalanick-- for your consideration: The least self-aware person on Earth -- tried to brush off his spotty reputation by saying "actions speak louder than words." (The recent Fast Company profile was&#8230; what? his third? fourth? wordy attempt at an image reboot&#8230

Luckily for Kalanick, in Silicon Valley valuations speak louder than actions. Every time Uber does something disturbing--overpromising on the thoroughness of background checks, victim shaming riders who claim to be assaulted, encouraging passengers to treat female drivers like prostitutes, tracking user data in such creepy ways it prompts aSenate inquiry, or threatening journalists -- an Uber investor gets wheeled out to shrug and say the equivalent of "Yes, Travis Kalanick is aggressive, but he's had to be to build such a great company!" And then Uber's PR machine leaks "internal numbers" to Business Insider -- or gets magazine writers at Vanity Fair and Fast Company to write thousands of flattering words-- to smooth it all over.

In truth neither words nor actions have elevated Kalanick where he is today: It's that astounding $50 billion valuation and an addictive service that users can't go without, momentarily disgusted as they might find themselves with the company's ethos and tactics.

But here's the thing: Valuations have to keep growing. And Uber raised that last round on a promise of global domination. Already with just 11% of the Chinese market, Kalanick has said China is poised to be its largest market by year end. It's spending $2.5 billion out of a total $7 billion ever raised to date trying to buy marketshare in India and China alone. And in China, it's inconceivable that Uber wins for a variety of financial, geopolitical, and market reasons we've detailed at length. The company has never refuted any of our reporting on this.

Uber doesn't really mind when you criticize its actions or refute its words. But it gets really, really concerned when something might hurt that all-important valuation. And that's why Didi-- not Lyft-- has been the only company to scare the shit out of Uber.

After a two-month struggle to raise a $1 billion round for Uber China, that finally culminated in Uber Global having to put in as much as $500 million as a show of faith in the business, it's starting to dawn on Uber just how foolhardy this whole plan is. Famously libertarian Kalanick did a recent appearance at Baidu-- the sole local Chinese institution in that round-- where he spoke in traditional Communist party talking points about "harmony" and "stability." And in that Fast Company profile, he dropped the silly swagger that Uber is "crushing it" in China to acknowledge that Uber was a severe underdog in the market.

So the timing of Didi coming onto Uber's home turf-- where it's mostly still ably controlled the international business press message around ridesharing-- was not coincidental. After all, other than to send a message -- to Uber, investors, and the press-- there was no real reason this announcement had to happen _now_. Didi invested in Lyft back in its May round, and the joint product announcement the event was ostensibly about won't come out until the end of the year.

An hour after Kalanick-- who has been svengali at manipulating the press and telling his story since the earliest days-- somehow unironically said: "Getting out there, getting in front of it and telling our story is something we are still trying to learn to do." Didi finally did exactly that for the first time in the US.

Here were the important things John Zimmer and Jean Liu said that were lost on a lot of the press who haven't been closely watching this battle-royale. Note they never once uttered the word "Uber" but the entire event was all about Uber nonetheless.

Zimmer went first and opened his talks by saying he was going to give some background on Lyft for the Chinese media in the room. That was an effective move for two reasons: It telegraphed respect for the Chinese market, which Silicon Valley companies can't do enough, and it gave Zimmer a chance to recast itself as a growing leader, not a sad second fiddle.

Zimmer noted that Lyft was first to offer peer-to-peer ridesharing, the first to pass cooperative legislation in the US, and the first to do share ride technology with LyftLine. He said eight out of ten drivers prefer Lyft to "our competitors" (that is, Uber). He talked about the "mutual respect" between drivers and riders and said "drivers are happy and so they feel great about taking care of customers." (Translation: We don't have anywhere near the accusations of assault, rapes and violence of Ubers, nor do taxi drivers heckle us on national TV.)

Zimmer said that Lyft was actually taking market share in America-- not simply growing along with the market. He cited research that customers use Lyft more frequently than riders use "competitor's" services. And talked up the growth in New York specifically.

But that was just all for the benefit of the Chinese reporters in the room&#8230;

After demoing the app that doesn't exist yet between the two companies, Zimmer disclosed that secret investment in Lyft's series E was $100 million and said this was "just the start of a broad partnership between our companies" including more financial and product components.

Translation: This event really isn't about this app that will be awesome for eight million people if it works whenever it actually gets built. It's a gauntlet thrown, and an attempt to reframe the narrative in Uber's home turf.

*Continued next post*


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## chi1cabby (May 28, 2014)

Then Didi president Jean Liu took the stage. (Of course the #2 exec at Uber's only real rival is a woman. Hollywood couldn't have scripted this better&#8230

She started by gushing about all the investors and top business press from China and America in the room. She name checked Tencent, Alibaba, and Beijing Automotive Group. The latter is the Didi investor who I noted before is a Chinese government agency. Zimmer had given his own shout out to the Coatue brothers -- Thomas and Philippe Laffont -- and Carl Icahn, who was sitting in the front row.

How often do you see all the largest investors go to a press conference about an unlaunched app for eight million people? This along with the quote above that Didi's investors assets under management and market cap totals $2 trillion is a direct hit at Uber's core strength: Raising seemingly infinite amounts of money at escalating valuations. Didi is the first ridesharing competitor anywhere in the world that can out fundraise Uber.

And that's important because Uber has only gained its 11% in China because it is spending north of $1 billion on subsidies. Didi is sending a clear message that-- unlike Lyft-- it can play that game way longer than Uber.

She described the move as "a new trend for country champions to work together"-- kinda like when Yahoo invested in Alibaba, rather than trying to compete in China itself. A move that would wind up being one of the smartest of that era of the Valley: It allowed a major US Internet company to profit handsomely off the growth of the Chinese market while not getting mired into trying to own that market itself. (Reminder: Alibaba is one of Didi's main backers, and also an investor in Lyft.)

Then she described ridesharing as "a very unique business" where not just "top notch" technology was required but "local expertise" and an ability to fit "into the local ecosystem including the regulatory regime."

The two of them must have casually mentioned China's "regulatory regime" a dozen times during the event, as if navigating it is the same as Uber and Lyft's battles in, say, Las Vegas. In reality, everyone who has watched Google, Twitter, and Facebook's experiences in China knows the "regulatory regime" is code for "China will just shut you down, Uber." Particularly because, unlike those other companies, Uber is trying to map and control cities' transportation grids, has a history of inciting its drivers into political activism&#8230; and its China expansion is being coordinated by a former special assistant to the US Secretary of Defense.

The two of them also took turns amplifying one another's message. Liu acknowledged how "ambitious but at the same time&#8230; humble, kind and genuine" Lyft's founders were and how in the six months she'd known them she'd seen them gain marketshare in the US. She even threw in an anecdote about taking a Lyft driven by a woman who noted that her girlfriends "only drive for Lyft." (The lone nod at Uber and Travis "the boober guy" Kalanick's long history of sexist actions _and_ words.)

Zimmer meantime acknowledged he'd been to China and indeed there are "an incredible amount of people" there. More helpfully he said the following when asked if he'd considered going into the market alone:

"When you have a market leader with 99% share of taxis and 80% share of private cars, and basically that's the only company that understands the local culture and regulatory environment, this is the winning strategy. It was an easy choice for us."

Translation: Why would a US company even think it could win in China?

During her remarks, Liu also took a turn "educating" folks in the room about Didi, which was smart, because most of the business press who have written about Didi (including me) have mostly focused on the competitive dynamic with Uber, not the company itself.

She described how the market is different with the usual jaw dropping demographic stats: Chinese cities add some 20 million people per year-- the equivalent of two and a half New Yorks-- and the average speed a car travels at is less than four miles a hour. In all there are more than 800 million urban Chinese and less than 20% of them own cars.

That isn't likely to change because there's simply no more room on the road for cars: Major cities have strict caps on issuing license plates as a result. Out of one hundred applications per year, only four are getting a license plate in Beijing and Shanghai, she said.

While Zimmer said he wants to make car ownership "optional" in the US, Liu described a country where car ownership simply isn't an option. The message: These are two similar, but different problems a single approach (oh, hey again, Uber!) can't solve.

She described how Didi's app is designed uniquely to solve that problem: It has a bus service, a taxi service, a corporate transportation service, private drivers, a peer to peer service and a new service called "Hitch" aimed at professionals who want to share their car with other professionals during a commute. They charge between $1 and $30 per ride depending on the option you pick.

There were also some jaw dropping stats on the scale of Didi's business: In just three months since launching Hitch, it is doing 700,000 trips a day. She says their servers processed 12 million requests on a recent day, arranging seven million Didi rides-- three million taxi rides, three million private rides and the rest Hitch and buses. Compare that to Uber'sboast of doing 1 million rides a day-- _total_-- in China.

The growth has outstripped even Didi's projections. Liu said in October of last year, they were doing 30,000 private car trips per day. While fundraising, they projected that could be as high as 300,000 a day in a year's time, and some investors pushed back, finding that unbelievable growth in just a year. Today it's 3 million a day. "It's ten times our projection," she said.

And then there was the kicker:

"We do believe that transportation should be transformed with technology however we think that transportation should be done in a more collaborative, peaceful, and constructive way in regards to millions of people's livelihoods. Our mission is to increase the average pay of taxi drivers, and achieve collaborative reform from within and avoid abrupt termination."

She continue to say that approach is why Didi is confident it can find "common ground with regulators and stakeholders."

Lyft's comments about respecting drivers is just some nice brand positioning. But for Didi it is a clear message that it isn't about disrupting, ripping and replacing, or in anyway firing or dislodging taxi drivers or moving to an era of self driving cars because "drivers are expensive!" That message is key to not getting shut down in China. Because if the fear that a US company with deep ties to the state department controlling urban infrastructure isn't enough to get Uber shut down (and it almost certainly is), there's that message: Uber will kill jobs in China; Didi will not. And there's no way Uber can climb back from its position on "disruption," destroying the "asshole called taxi" and a full-throated celebration of the impending robot-car revolution.

Check. Mate.


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## chi1cabby (May 28, 2014)

*Cuban-backed Breeze uses fake ridesharing job ads to trick users into applying for car loans*


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## chi1cabby (May 28, 2014)

*Lyft now does 7 million rides a month. Wasn't a huge spike in alleged attacks supposed to inevitably come with growth?*
https://pando.com/2015/11/20/lyft-n...wth/c6abd85d7792113ad17ad65882f990237a3bfe72/
*By Sarah Lacy*
written on November 20, 2015

It was a mixed week for Lyft. And that's pretty much life as Lyft, isn't it?

The only surviving number two ride sharing company in the US, but a David that mostly refuses to pick up the rock and put it in his slingshot and score a point against Goliath. Lyft: A company of which we constantly wonder: Do they actually want to win?

On Tuesday, Reuters reported that Lyft was on track to hit $1 billion in gross revenues this year, boasting more than 40% market share in its home market of San Francisco.

Then, the next day, Bloomberg obtained some leaked Lyft documents and spun a different story: One of missed revenue targets and escalating marketing costs, presumably, to gain all that market share.

From that piece:

In the first half of the year, Lyft generated less revenue, lost more money, and added fewer customers than projected in February. The numbers suggest Lyft has had to burn through cash as it chases growth in a competitive industry. The willingness to spend big on growth is a costly strategy that's becoming increasingly common in Silicon Valley. Public market investors have expressed concern about the high valuations of private technology companies recently. Fidelity Investments, BlackRock, and others wrote down their stakes in some startups this year.

Reuters painted a story of an ascendent company with the "vast majority" of its venture cash still in the bank. Bloomberg painted one of a company burning through tens of millions a month with unpredictable revenues in a market where late stage capital is rapidly constricting. Both are probably true.

Also this week, Lyft had another - far less remarkable or newsy - distinction on Pando. It was included for the first time in our monthly "ridesharing companies behaving badly" series.

We started this a few months ago, because the reports of assaults happening in cars have continued unabated. And yet, it's no longer a new or shocking story so reporters have stopped covering them. We don't want to run a story on this topic every day either - especially given other topics like the ride sharing story in China and other global markets. On the other hand, not covering these stories at all leads to a false perception that they're no longer happening.

Every month we've done it, there have been no reports we could find anywhere that included Lyft. Until this month. From the piece:

Courthouse News Servicereported on October 30 that a woman has sued both her driver and Lyft itself. The woman vomited in the driver's vehicle; he then followed her into her home and demanded sex in exchange for waiving a clean-up fee. The woman said she was able to push the driver off of her and convince him to leave her home...

And then, earlier this week, a second Lyft driver -- this time in Dallas -- was arrested forallegedly raping a female passenger:

She told police she ordered a ride from an app-based service, according to court records. A man in a black Chevrolet Tahoe rolled up and picked her up. She sat in the front passenger seat.

After a short distance, Laila allegedly began to inappropriately touch the woman. She resisted, and he pulled onto a "dark side street," where he raped her in the back of the Tahoe, police said in court records.

This is not to say that Lyft drivers have never had these sorts of allegations before. We detailed a cluster of them back in June.

But, comparatively, they've always been fewer and far between, even as both Uber and Lyft grow. Why?

There've been a lot of explanations, and with time at least one of them has been solidly debunked: That these assaults are just the cost of scale. Since its early days, Uber claimed there were more reports of attacks in Ubers because Uber was bigger. With more rides, more of this just becomes inevitable, it shrugged. Lyft will see.

A look at actual numbers refutes that.

When the scandals first started coming out about Uber, it was doing some 800,000 rides a week. Lyft is still not experiencing as many of these scandals as Uber was then and it's doing - according to numbers reported this week - some 1.7 million rides a week.

The idea that with more people on these sites the law of averages demands there will be more bad eggs slipping through the cracks simply hasn't proven true.

Another explanation is that Uber is the market leader and as such gets way more scrutiny, so the Lyft attacks are happening but comparatively _under reported_. I find that one hard to believe too. Uber has a pretty aggressive smear machine, and sees Lyft as enough of a threat it's tried to sabotage its fundraising and steal its drivers. If these reports were widespread they'd be leaked to receptive publications like Business Insider and TechCrunch_daily_.

Let's not forget this gem, whenLyft was -- hilariously-- accused of hacking Uber recently. There was no evidence of the claim at all, despite multiple press reports from "anonymous sources." If there was more mud to throw at Lyft, Uber insiders would find a way. We get a lot of these tips sent from the taxi industry - and they hate both Uber and Lyft.

One explanation might be subtle differences in how the two do background checks. For instance, Lyft requires in-person meetings before someone is vetted as a driver. Given the pressures to sign up drivers, Lyft likely errs on the side of approving them. But still.

Another meaningful difference - especially going forward - will be Uber's global ambitions compared to Lyft's US focus. Background checks are a lot more challenging in many parts of the emerging world, and Uber's lean operating model of putting just a handful of people on the ground leaves future assaults all but assured.

The world has seen, tragically, exactly how effective Uber's background checks in India are. And Pando previously reported that hundreds of Chinese Uber driver accounts are for sale on Taobao at any given time. Some sellers have completed thousands of these transactions. Even if Uber was carefully vetting Chinese drivers, there's no control over who keeps the account.

The last factor that can't be ignored is culture. Uber has become known as a company that turns a blind eye towards misogynyat the highest levels of its corporate structure, and a place that will victim-shame riders who claim they've been assaulted. In the past, Uber CEO Travis Kalanick has just claimed these incidents didn't occur, or Uber reps have told Pando and other outlets that victims - usually women - were provocatively dressed or drunk when they were attacked. The latter is particularly disgusting, given the social props Uber tries to get as an alternative to drunk driving.

We'll continue to keep a grisly score in the monthly column we most wish we never had to write again.


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## chi1cabby (May 28, 2014)

*Has Pando missed the heart of the Uber problem? A transportation industry expert writes...*
https://pando.com/2015/12/01/has-pa...tes/a5c239cf3fc961d10b17a4892d0f74e899b77fd9/










_Editor's note: In response to my_ _article on Convoy__, "the Uber of trucking," Pando received the following response from Hubert Horan, one of the early advisers/architects of trucking deregulation in the 1970s and a well-known transportation industry expert._

_The letter is fascinating, insightful, and critical. I don't agree with his characterizations of some of my arguments; but I do agree with his own arguments and explanations in this letter, and more than that, I appreciate the time and serious effort Horan put into this letter to educate all of us. Few people in America have his decades-long industry perspective and his unique political insights on the politics of transportation, antitrust, markets, and tech. Here's the letter in full._

_-Mark Ames_

...

Has Pando missed the heart of the Uber problem?

As an avid Pando subscriber/supporter, I wanted to raise some serious concerns with your November 4th Convoy post.

I agree that Convoy, which appears to be closely mimicking the Uber playbook, raises major issues that fully warrant the attention you've given it, and I am grateful for the effort and critical thinking that you and Pando have brought to these unicorn issues over the last several years. Apologies in advance if the tone of what follows seems excessively critical, but I have four major concerns based on my background in transport and regulatory economics: (A) I think the Convoy piece (as well as most previous Pando reporting on Uber) misses the critical point that neither company has an underlying business model linked to any rational evidence of sustainable competitive advantage, and you've misled readers by equating the Uber/Convoy models with companies like Amazon, and EBay, which did have plans based on solid economics; (B) You correctly noted that the investors behind Convoy (and Uber) are seeking quasi-monopolistic dominance (trying to build a rent-extractive "narrow in the stream") but you failed to lay out for your readers the critical difference between driving thousands of less-efficient existing suppliers out of business because you've built an overwhelmingly better mousetrap, versus driving more efficient suppliers out of business using artificial market power; (C) You correctly note the already lean conditions in trucking, and it is quite reasonable to discuss Uber-type companies in a broader historical/political context. But I think you've improperly equated the politics and economic thinking behind Ford/Carter transportation deregulation with much more radical finance-driven changes 20-30 years later, and I think the 1970s points you raise aren't critical to your readers' understanding of Uber/Convoy; (D) I imagine that Pando doesn't get many letters attacking its failure to fully appreciate the problem of Uber and Uber-type companies, but if one fails to focus on the complete lack of competitive economics, and the huge dependence on (eventually) exploiting artificial market power, then I think you end up seriously understating the damage these companies could impose on the rest of society.

As a brief introduction: I have spent my entire career in transportation, mostly airlines, but originally railroads, and my career encompassed the deregulation of these industries, and figuring out how to use greater pricing/planning freedom to compete more effectively. (1) I developed the first modern international airline alliance (Northwest-KLM), was involved with other significant competitive innovations (revenue management, frequent flyer) and many of the initial post-deregulation mergers and bankruptcies. I later became a major critic when the innovations and restructurings that had created massive improvements in both industry efficiency and consumer welfare became efficiency-destroying wealth-transfer mechanisms. I testified in Congress against both the Delta-Northwest and United-Continental mergers, and before DOT against the alliance antitrust immunity grants that actually drove the radical consolidation of the airline industry. To be clear I have never had any financial links with Uber or any urban car service competitor or regulator, or with any trucking industry interests.

*1)* _You've improperly equated the Uber/Convoy and Amazon/EBay business models-one is based on legitimate /competitive economics; the other isn't. Your post said that even if it's not Convoy, "it's safe to assume that sometime soon, tech will transform and restructure the $749 billion trucking sector" in a similar way to Uber and taxis, Amazon and booksellers, and EBay and newspaper classifieds. This totally misses a critical distinction-- Amazon/EBay type business models were based on powerful competitive advantages over the businesses they were seeking to supplant while the Uber (and apparently Convoy) models seek to "disrupt" an industry with economics that are actually worse than existing competitors. Despite other issues, Amazon could offer consumers much wider choices than they ever had before, eliminated all of the costs of retailing, achieved huge warehousing and distribution efficiencies and clearly had scale economies that no traditional competitor could match. On the other hand, the Uber business model (software/brand company plus its "independent" contractors) fails each of these efficiency/competitive/technological tests. Uber isn't transforming the consumer product-it offers the exact same service as traditional taxi/limo operators. Uber-even a future, more mature Uber-- will have much higher driver, insurance, training, ownership and maintenance costs. The massive subsidies that create the appearance that Uber offers better/cheaper service are not sustainable. Since the mature Uber won't be able to produce urban car service at significantly lower cost, there are no welfare gains from increased service or lower prices. There is no evidence that a reasonably well run taxi/limo company has bloated costs that cry out for new market entrants, and there's ample evidence (dirty cars, horribly paid drivers) that industry costs are already extremely lean. Even Uber's vaunted app is irrelevant to competitive economics. The ordering/pricing aspects of the app are a tiny piece of total costs, they don't drive any big network economies, and apps can easily be copied. The app actually illustrates a serious Uber structural disadvantage. The economic key to any transportation company is the ability to balance supply (i.e. assets) against volatile demand in the medium/longer term. Thus profits depend on managers with long experience dealing with complex markets, and with sophisticated tools for capital planning and shorter-term price/supply adjustments. Airlines, railroads and shipping companies use some of the most advanced management systems anywhere in the private sector. Yellow Cab isn't in the same league, but has managers with serious fleet management capabilities, and dispatchers who understand all the idiosyncrasies of local demand patterns (factory night shifts, conventions, bar/restaurant patterns). Uber has an app that ignores the both vehicle management, and market demand forecasting, has no local market knowledge and simply reacts to short-term car requests. Any urban transport operator faces much tougher economics than freight or intercity passenger operators, because there's no way to reduce costs by smoothing demand peaks. Airline revenue management can massively reduce capital costs by getting price sensitive people to not fly on Friday afternoon. The Long Island Railroad has had peak/off-peak pricing for a hundred years, but rush hour is still rush hour, and the LIRR suffers with the cost of hundreds of cars that only get used ten hours a week. Surge pricing will not get anyone to shift their Saturday night out to fill empty cabs midday Tuesday, and there's nothing else in the Uber model that addresses any of these fundamental problems with the economics of urban transport. Given the vastly greater complexity of trucking, the idea that a company with a software app could produce new efficiencies great enough to drive most existing trucking companies out of business seems too ludicrous to take seriously. As you clearly point out, there is lots of historical evidence that the last few decades of competition have already made existing operators pretty efficient. Unlike urban car services, trucking includes lots of companies (UPS, JB Hunt) with incredibly advanced industrial engineering capabilities. Anyone who thinks that there are tens of billions worth of trucking efficiencies out there-efficiencies that absolutely no one anywhere in the trucking industry could see-and that these billions can be generated by a scheduling app, but will be so huge that they'll totally disrupt a$749 billion industry---is either delusional or willfully dishonest._

*Continued post below:*


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## chi1cabby (May 28, 2014)

*Continued from post above:
*
Uber-type companies need to be understood as a radical departure from Amazon/EBay type models. Instead of displacing competitors through actual efficiencies, or by creating entirely new markets, its model is entirely based on getting the world to believe that it will inevitably dominate the entire industry. This requires aggressively suppressing any discussion of empirical economic evidence (which would undermine its case) and emphasizing the factors driving inevitability--the brilliance of its early stage investors, the ruthlessness of management, and the raw political power of the company's wealthy supporters. PR is a component of every start-up; at Amazon/EBay it played a supporting role and relied heavily on economic evidence of competitive strengths, but at Uber PR is the heart of the plan, and replaces the need to figure out how to provide much better service at much lower cost. As with 97% of Uber's media coverage, the Fortune and Bloomberg pieces you cited totally avoided any discussion of competitive economics and tried to pass off its faithful repetition of Convoy's "industry disruption is inevitable" PR theme as "news reporting". But by equating the Amazon and Uber approaches you've fallen into the same trap. You've failed to tell your readers that there are no competitive economics behind the "inevitability" claim, and you've helped spread their "our valuation is legitimate because we'll produce huge economic value just like Amazon and EBay" PR claim.

*2) *_All companies want to be big and powerful, but you've failed to explain why market dominance by Uber/Convoy is an especially serious threat to your readers. My concern here is that even among highly educated people with lots of business experience, there is frightfully little understanding of how extreme market dominance might or might not be a bad thing for the rest of society. In aviation I went through the entire transformation from deregulation (robust competition is the key driver of the innovations that are critical to consumer welfare and long-term industry efficiency) to radical consolidation into a global cartel. (2) Even though airlines get a thousand times more coverage in the business press than taxis or trucks, that coverage ignored the consumer/efficiency implications of consolidations as carefully as Bloomberg and Fortune ignored the competitive economics of trucking. Given the ubiquitous coverage (and glamorization) of companies that are (or aspire to become) huge and powerful, I don't think most readers understand your "narrow in the stream" (rent-extraction) concern, and the article doesn't clearly spell-out the importance of eliminating competition in Uber-type business plans. If the objective is to convince a general audience that a specific type of anti-competitive behavior is something that warrants extra attention, I would focus on whether the company's size and market power was economically legitimate or "artificial'? If there isn't obvious empirical evidence of huge efficiency/service advantages that competitors couldn't match (as with Uber) then it is "artificial" and alarm bells ought to go off and critical scrutiny is justified. If your readers think Uber and Convoy are just like Amazon and EBay, they'll never understand or care about your competition concerns. Companies whose industry dominance will bring better service and lower prices will have PR programs emphasizing those benefits; companies who are seeking artificial dominance will have PR programs emphasizing that dominance is inevitable, and that resistance would be futile._

I assume that Pando readers would assume that all big and powerful companies do some of nasty things (tax evasion, worker exploitation, buying politicians, etc.) that no reputable business school professor would explicitly endorse. It may be useful to ask your readers to consider whether that nasty behavior is critical to the company's success, and whether that behavior would be possible without quasi-monopolistic levels of industry dominance with huge barriers to future entry. Amazon evaded the sales taxes its competitors paid and has nasty warehouse working conditions, but no one would claim that its growth depended on them, or claims that thousands of independent bookstores would have survived if only those practices had been blocked. On the other hand, if Uber had to meet the same licensing, insurance, training and maintenance requirements as Yellow Cab, wouldn't outlets like Bloomberg and Fortune have to start every story by wondering how Uber could possibly offer lower fares and cleaner cars? Uber can't get "independent" drivers to cover the full cost and risk of commercial vehicles, nor exploit the full power of "surge pricing" until it becomes the only game in town for drivers and riders (or leads an oligopoly of companies with similar models). If things like this, that are critical to costs and revenues, depend on extreme levels of artificial market power, then it means that investor gains will likely come at the expense of general economic welfare, and more alarm bells ought to go off.

*3)* _You've incorrectly equated the thinking of 70s and 00s "deregulation" advocates. The history, politics and ideology of deregulation is something we both think is important. Although I imagine we'd agree on a broad range of historical points, your article suggests that the thinking behind transport deregulation was largely similar/compatible with modern day deregulation thinking, while I think the historical record strongly supports the opposite view (differences vastly outweighing similarities). My primary concern here is that this history isn't terribly relevant to your reader's understanding of the main issues (Convoy's intention to follow the Uber playbook, would Uber/Convoy's success benefit the rest of us), and may limit their understanding of your more important points._

Again, I have substantial first hand familiarity with the original deregulation movement. The academics behind it strongly believed there were critical "public interests" in every industry including economic efficiency and a range of social objectives (worker safety, consumer and environmental protection), that government intervention was required to protect these "public interests", that government interventions designed to enhance economic efficiency had to focus on overall consumer welfare, with transparent, even-handed administration without regard to the interests of individual companies, and that there was economic or political basis for believing that large industries had any natural ability to maximize consumer welfare in the absence of legal or regulatory constraints. Modern deregulation advocates believe none of these things. The "transport deregulation" movement of the 70s correctly recognized two major failings in ICC/CAB practices: regulatory micro-management had ossified these industries (should United be allowed to serve macadamia nuts on Hawaii flights?), and facilitated "regulatory capture" where the best organized industry interests could lock-in status quo inefficiencies (3) This administrative/political gridlock thwarted the theoretical advantages of market competition (increased innovation, ability to shift capital from less productive to more productive uses). "Deregulation" in the 70s was strictly limited to eliminating oversight of short-term marketing decisions (product features, pricing, capacity shifts). All of the regulatory rules (safety, financial reporting, consumer protection rules, antitrust, capital requirements, labor laws, bankruptcy, tax rules, etc.) that were important to maintaining a level competitive playing field and protecting other public interests were to remain intact. Fred Kahn, who drove airline deregulation under Carter, explicitly argued that giving airlines increased pricing freedom meant that Washington needed to beef up safety and antitrust oversight. Mergers and bankruptcies were explicitly allowed, since regulation had created huge "barriers to exit" that kept uncompetitive capital in place indefinitely. But any notion of oligopolistic concentration would have been totally rejected as pricing/scheduling freedoms were useless in the absence of strong competitive pressures.

If one were to write a political/intellectual history of how Americans have managed their economy over the last 50 years, the "transport deregulation" movement of the 70s would warrant a major chapter, but Pando readers trying to understand Uber/Convoy, or unicorns in general, wouldn't need to read it. Nor the chapter on how arguments from transport deregulation created the pro-consumer justification for banking liberalization (banks needed regulatory permission to give toasters away to people who opened new accounts). Nor the multiple chapters on the ideological war in finance against the "public interest" that allowed the freedom to give away toasters to quickly morph into the elimination of interest rate rules (that prevented extreme housing market volatility) to the gutting of Glass-Steagall to the "deregulation" of systemic financial risk. I think most Pando readers need to understand why the underlying economics of Uber/Convoy companies are fundamentally different from Amazon/EBay companies, and why they should be much more concerned by the actions of the investors behind Uber/Convoy than by the investors behind Amazon/EBay-type companies.


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## chi1cabby (May 28, 2014)

*Continued from above:*

*4)* _You've seriously understated the "Uber" political issue. I think the key here is the linkage between unicorn business models and empirical evidence of economic reality. If you totally replace the competitive product/efficiency advantages of an Amazon-type plan with a massive PR program emphasizing how the raw political power of the unicorn investor class will inevitably destroy all existing competitors, then demonstrations of political power (and ruthless marketplace behavior) becomes a key driver of capital markets. Extreme wealth accumulation and corporate power has been historically tolerated because of the perception that the Bezos and Omidyars of the world (like the Carnegies and Rockefellers of the past) created huge public welfare improvements en route to their wealth and power and the (more problematic) perception that the size and power of this class will be constrained by economic reality at the end of the day. Uber-type unicorns are purely exploitative-they create fabulous wealth for a handful, while destroying economic value in aggregate (assets have been shifted from more efficient firms to a less efficient firm, artificial market power is used to exploit drivers, suppliers and consumers, etc.). Wealth accumulators who'd built companies on legitimate economic strengths needed political power defensively-to protect their pot of gold, and to slow down the market forces that would inevitably erode those strengths. Uber-type investors need much more political power, and they need to use it as an offensive weapon immediately on start-up. If the unicorn investing class thinks Uber has proven that tens of billions of private value can be created purely with PR and political strength, then "Unicorn manufacturing" becomes an industry unto itself. Lots of investors will attempt to replicate the formula time and time again, and each new unicorn creates the need to increase raw political power used to enrich these investors, and to destroy any possible political opposition.
_
As with Uber, the Convoy PR effort started with a huge emphasis on the fame and wealth of its early stage investors, and the "inevitability" that they would utterly disrupt their entire industry. As with Uber, no one then asked for evidence of the powerful competitive advantages that would be needed to achieve such an audacious objective, or asked why no existing competitor had ever come up with similar ways to transform competitiveness, or asked for evidence of the massive existing inefficiencies that were being targeted, or asked for evidence of the economics that would eventually allow them to sustain a powerfully dominant position over an industry that had been incredibly fragmented through its entire history. When you equate Uber/Convoy with Amazon/EBay, most readers will assume powerful economics must exist, and that they are not pursuing "artificial" market power. When you cite the transport deregulation claims of the 70s, readers will not link the investors with today's much more radical political/ideological forces. If reporting has not focused on underlying economics, readers cannot figure out whether claims about low fares reflect real efficiencies or unsustainable subsidies, and cannot figure out whether the open flouting of insurance and safety rules is something that will eventually help or harm consumers. Uber's harassment of Sarah Lacy should have been a much more important story, but I without economic context, it could easily be spun unfortunate bro misbehavior that was irrelevant to the future of the taxi industry. But if Uber has no legitimate competitive advantage, then the harassment serves as a clear signal that Uber depends on political power, and readers can see how it fits into a clear pattern with other demonstrations of its power and ruthlessness. Many business plans involve some degree of exploitative, rent-seeking or otherwise nasty behavior. I see Uber-type businesses as a radical advance, where willful exploitation based on the political power of the unicorn investing class becomes the entire basis for the enterprise. I see this type of investor behavior as a direct threat to the notion that "marketplace competition" can serve the greater good by allocating resources to more productive uses.

(1) I am personally familiar with many of the major players in deregulation movement-Paul MacAvoy, one of the fathers of trucking deregulation and a member of Ford's Council of Economic Advisors was my advisor in graduate school. At Northwest I worked for Mike Levine, who was Breyer's chief staff person on airline deregulation. My summer job throughout college was with the economics and competitive planning group at US Railway Association which set up Conrail after the Penn Central bankruptcy. The story of how a bunch of very liberal, Ivy League oriented academics completely revitalized the moribund railroad industry has been told a number of places including Rush Loving, The Men Who Loved Trains, Indiana University Press 2006 and Robert Gallamore and John Meyer, American Railroads: Decline and Renaissance in the Twentieth Century, Harvard University Press, 2014

(2) It is not immediately relevant to the Uber/Convoy story, but since you follow the broader subject of how different industries have been radically transformed by powerful interests working to elimination meaningful competition, and how anti-competitive, corporatist ends were justified by forces nominated devoted to "market competition" you may be interested in an article I wrote describing the means (willful fraud, antitrust malfeasance, corrupt economic testimony, etc.) by which this occurred in aviation, Double Marginalization and the Counter-Revolution Against Liberal Airline Competition, 37 Transportation Law Journal 251-291 (2010)

(3) In railroads, it was agricultural shippers (starting with the Grangers) who had the power to suppress freight rates to the point where railroads could not replace capital, while shippers of manufactured goods (who subsidized agriculture under early ICC rules) shifted to truck as soon as they could. In international aviation, it was the major flag carriers (Pan Am, Air France) who made protection from competition a cornerstone of every country's policy, ensuring that international fares were set high enough so that even the most inefficient flag carriers (i.e. Alitalia) could make money. The best single book on how regulators ossified postwar transport was George Hilton, The Transportation Act of 1958, Indiana University Press 1969, which chronicled the utter inability of the first attempt at "regulatory reform" to overcome the institutional forces that locked-in status quo inefficiencies.


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## chi1cabby (May 28, 2014)

*Bill Gurley is either the most unselfaware man on the planet or he just wrote an open letter to Uber*
https://pando.com/2016/04/21/bill-g...ber/eec3e53546e8148e5a80754af78c54d73ba258a7/
By Sarah Lacy










This morning I woke up to a particularly strange piece of venture capital performance art in the form of a very long essay by Benchmark's Bill Gurley.

Before I read it, I saw VC after VC applauding it on Twitter, although not really mentioning specifics. So I buckled myself in for the long read.

One question kept coming up over and over again as I read the essay carefully, making notes for nearly an hour: Who exactly is Gurley writing this for?

There is almost nothing in the entire essay that has not already been written about here and elsewhere over the last year.



All numbers keep going up, except exits which have been at historically low levels.

VCs had a banner first quarter, raising more for their own funds than we've seen in 15 years, despite the most uncertainty over what their portfolios are worth that we've seen in recent times.

That even the strongest companies will be made weaker by wasting billions chasing market share.

That dumb money in the form of SPVs, family offices, sovereign wealth funds, and foreign cash is being "invited" into top unicorns because there is no other money left to fund them.

That many high profile unicorns raised money withdirty term sheets, which are essentially a ticking time bomb.

That employees should ask their founders hard questions about what terms they've already accepted.

Any regular Pando reader-- or reader of most publications covering the ecosystem in depth-- know all of this.

Certainly, every venture capitalist knows all of this. Many of them have also been saying it for much of the last year. They've likely been saying it to the portfolio companies, so the essay can't be news to them either.

So who exactly is this essay written for?

Finally I reached a graph that I suspect contained the answer. In a section on how investors should navigate the current mess, Gurley says early stage investors are essentially in the same boat as founders and employees:

This is because these companies have raised so much capital that the early investor is no longer a substantial portion of the voting rights or the liquidation preference stack. ​
Bingo. To those who have wondered for the better part of a year why someone like Gurley keeps complaining about inflated burn rates and unsustainable valuations, even as his biggest investments are the biggest offenders of that playbook, here is your answer: _He had no say in any of it._

What I was witnessing -- both in this long essay and the VCs nodding and retweeting it all morning-- was essentially the kind of performance I do when my children aren't playing nicely:

_"See???? Isn't it great how Daniel Tiger shared his toy with his sister????"_

You get the picture that Gurley has sat in every board meeting of every unicorn he's invested in saying each of these things written in the essay. And because board governance and VC board rights are at historic lows, and early stage investors are now such a tiny amount of capital raised, there is not much more investors like Gurley can do than talk. And now, they are sitting there, watching the best companies of this era put more inflated money on top of more inflated money.

Gurley could have called this memo: _How I've spent the last year watching great companies sabotage themselves._

And while I'm sure this wasn't intended, there's an irony that's impossible to miss: The biggest and most aggressive culprit of everything Gurley describes is Uber. And Uber is Gurley's biggest hit.

His chief complaint is burn rates. Uber is spending $2 billion a year just chasing market share in India and China, alone. Those aren't even the company's core markets. It's not even winning in them. No one comes close to Uber's burn rate even in an era of crazy burn rates.

Another example: IPOs. Uber's Travis Kalanick and Gurley have already publicly disagreed over whether Uber should go public. So consider this graph:

Go public. In the long run, the very best way for founders to look after their own ownership as well as that of their employees is to IPO. Until an IPO, common shares sit behind preferred shares. Most preferred shares have different types of control functions and most of them have a senior preference over common. If you really want to liberate your own common shares and those of your employees, then you want to convert the preferred to common and remove both the control and the liquidation preference over your shares. Many founders have been erroneously advised that IPOs are bad things and that the way to success is to "stay private longer." Not only is an IPO better for your company (seeMark Zuckerburg and Marc Benioff on this subject), but an IPO is the best way to ensure the long-term value of your (and your employees') shares. 
​And consider this description of what Gurley calls an almost Madoff-like scheme for getting new money like family offices, wealthy individuals, and sovereign wealth funds to invest. It is precisely the playbook Uber ran with its most recent funding in the US, and its "oversubscribed" round in China (That was only oversubscribed once Uber itself invested one-third of the money.)

From Gurley's piece:

If you ask any large family office, they will tell you they are being bombarded with calls and emails offering secondary positions in Unicorn companies. Often with teasers such as "20-40% discount to last round price."​
He derisively calls these "pre-IPO rounds," because such shady actors promise an IPO is coming.

Compare that description to the terms Uber China offered last year:

"Dangling estimated returns of as high as 109 percent, the "Project U" offer would put at least 80 percent of the money into shares of closely held Uber before an expected initial public offering in 1 1/2 to 2 years, while the remainder would go into stakes of the company's separate China arm, according to the document."​
Again, from Gurley:

The main message for investors who are just now being approached is the following: it's not the second inning or even the sixth, it's the fourteenth inning in a five hour baseball game. You are not being invited to a special dance, you are being approached because you are the lender of last resort. And because of how we meandered to this place in time, parting with your dollars now would be an extremely risky move. Caveat emptor.​
Lender of last resort: Like perhaps shady the Russian Oligarchs that funded Uber's last round?

And one of the most telling graphs of the entire piece:

Perhaps the biggest mistake untapped investors will make is assuming that because there are branded investors already in the company, that the new investment opportunity must be of high quality.​
Translation: Just because I'm in this company, don't assume I think an insanely priced late stage round makes a lick of sense. _Don't say I didn't warn you._

You get the feeling that Gurley is so sick of saying all these things and his companies not listening that he wants to just have it out there permalinked in the world so that he can point to it when, eventually, at some point all of this unravels. It's his way of not totally going down with that ship, as a guy invested in many of the worst offenders of what he describes.

*Continued on post below:*


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## chi1cabby (May 28, 2014)

*Continued from post above:*

Towards the end of the essay, he says that even the best entrepreneurs are made worse by too much capital, that even the best companies can be hurt by this playbook. Like, perhaps, Uber:

Loose capital allows the less qualified to participate in each market. This less qualified player brings more reckless execution which drags even the best entrepreneur onto an especially sloppy playing field. This threatens returns for all involved.​
He ends with this.

More money will not solve any of these problems - it will only contribute to them. The healthiest thing that could possibly happen is a dramatic increase in the real cost of capital and a return to an appreciation for sound business execution.​
Investors like Gurley who were smart enough to see the potential of the largest and highest valued unicorns years ago are at the end of their ropes. They've warned against a correction. They've tried to talk the Valley into a correction. They've mocked "tourist" late stage investors. They've tried to slow down funding cycles. But the market just isn't correcting in any meaningful way. Median valuations were up in the first quarter. Total funding dollars also ticked up.

It's almost impossible to spin venture funding in the first quarter into a crash, even as exits are getting even worse than they were in 2015. He says at the beginning of the essay that "the fantasy began to come apart" last year. More like Gurley and others have been actively taking a sledgehammer to the fantasy and burn rates are still unsustainable, companies like WeWork (also a Gurley company) continue to raise up rounds at crazier prices.

It's the tortured manifesto of a brilliant early stage investor, "lucky" enough to have gotten in early in the top companies of this era, who is just sitting by watching in futility as they continue to make capital decisions that he describes in this essay as nothing short of reckless. If his own words are to be believed, he is watching his own best performing companies erode their own potential.

As I read and read, I kept looking for the disclaimer. The "this only works for the best companies" or a caveat to why, say, this strategy makes sense for an elite few companies, but the rest are playing a dangerous game. It never came.

The only thing remotely close was at the beginning of the piece when he says the hope in this era is that there will be enough aggregate unicorn value, that the failings of many individual unicorns won't matter. He notes that while that might be true, unicorns aren't an "index," and not every VC has access to the Ubers or Airbnbs of the world.

It's a tacit admission that Gurley still believes his own companies-- like presumably Uber, Snapchat, WeWork and others-- will make him and his investors even richer. But until there's any real liquidity these are the internal screams of a man watching a trainwreck in slow motion, unable to act.


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## chi1cabby (May 28, 2014)

Also please read Bill Gurley's blog post on #UberPool:

*A Must Read For All Drivers | Uber's New Big Hairy Audacious Goal*


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## Ziggy (Feb 27, 2015)

Thanks chi1cabby ... best "behind the curtain" compilation of articles I've seen


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## Taxi Driver in Arizona (Mar 18, 2015)

My prediction: Mr Gurley and other VCs and Uber board members will be publicly calling for Travis' resignation by the end of the year.


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## Casuale Haberdasher (Dec 7, 2014)

chi1cabby said:


> Also please read Bill Gurley's blog post on #UberPool:
> 
> *A Must Read For All Drivers | Uber's New Big Hairy Audacious Goal*


POSTS # 4-11/chi1cabby: Another "Post-
a-RamaThon" courtesy
of St. Comity of Chicago and his Irrepres-
sible "Partner in Crime" @sarahcuda !

Anyone watching the FX Series "The
Americans" will know what I mean 
when I say that NO ONE DESERVES
the Zooanitic BioWeaponized Glanders 
more from Osculating Travvy's "Bag" than
Proud, "Above the Crowd", Pompous @$$
Bill Gurley !

Looks like your "Geniu$" Wii "Onanist"
Buddy, #Travis K. Whatapr♤♡k!, y'know,
the "Provincial Mook" that has an Ayn
Rand Shrine in the "WAR ROOM" was
not only a "Bad Bet" but just who YOU
DESERVE as the Most TONE DEAF of
his "Money Minion$".


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