There are no grounds for believing that Uber will ever be profitable, let alone justify its lofty valuation, absent perhaps the widespread implementation of driverless cars.
.. is least likely to be implemented in cities, which present far more daunting design demands that long-distance transport on highways.
.. The taxi ride company provided 290 pages of verbiage, but would not provide its net income or even annual revenues.
.. Uber is currently the most highly valued private company in the world. Its primarily Silicon Valley-based investors have a achieved a venture capital valuation of $69 billion based on direct investment of over $13 billion.
.. Uber has been aggressively pursuing global industry dominance, in the belief that the industry has been radically transformed into a “winner-take-all” market.
.. Unlike most startups, Uber did not enter the industry in pursuit of a significant market share, but was explicitly working to drive incumbents out of business and achieve global industry dominance. Uber’s huge valuation was always predicated on the dramatic growth towards global dominance.
.. Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares.
.. in 2000, Amazon had a negative 50% margin, losing $1.4 billion on $2.8 billion in revenue, and the company responded by firing more than 15 percent of its workforce.[4] 2015 was Uber’s fifth year of operations; at that point in its history Facebook was achieving 25% profit margins.
Startup Cargo Cults: What They Are and How to Avoid Them
Cargo Cult Causes
Everyone in the startup ecosystem, from investors to founders to employees, is prone to Cargo Cult thinking. People try to extract lessons from the successes of others, but fall prey to numerous biases and fallacies:
- Survival bias — attributing causality to common attributes of successes without determining if those attributes were different among failures. Example: “The most successful CEOs are incredibly hardworking.” (It turns out that many unsuccessful CEOs are incredibly hardworking, too, so working 100-hour weeks may not be a good predictor of success.)
How to De-Risk a Startup
Principle #1: showing is better than telling.
- [1] You think you can do XYZ.
- [3] You’ve done XYZ in the past.
- [5] You’re currently doing XYZ, and doing it well.
Principle #2: external validation is stronger than your personal opinion.
- [1] You claim XYZ.
- [3] Numerous people who are affiliated with you (friends/accelerator batchmates/etc.) claim XYZ.
- [5] Numerous people who are completely unaffiliated with you claim XYZ.
Principle #3: more data is better.
- [1] Your product has 0 sales.
- [3] Your product has 5 sales.
- [5] Your product has 50 sales.
MailChimp and the Un-Silicon Valley Way to Make It as a Start-Up
No venture capital, no Bay Area presence, no crazy burn
rate: MailChimp’s founders built the company slowly by
anticipating customers’ needs and following their instincts.As a private company, MailChimp has long kept its business metrics secret, but Mr. Chestnut wants to publicize its numbers now to show the road less traveled: If you want to run a successful tech company, you don’t have to follow the path of “Silicon Valley.” You can simply start a business, run it to serve your customers, and forget about outside investors and growth at any cost.
.. “One of the problems with raising money is it teaches you bad habits from the start,” said Jason Fried, the co-founder of the software company Basecamp, who has written frequently on the perversions of the venture capital industry. “If you’re an entrepreneur and you have a bunch of money in the bank, you get good at spending money.”
.. At the time, MailChimp faced a host of larger and better-capitalized rivals, including Constant Contact, which went public late in 2007. But Mr. Chestnut said MailChimp had a proximity to its customers that its competitors lacked. Because MailChimp was itself a small business, it understood what those businesses wanted out of their marketing tools. Its offerings were cheaper, it added features more quickly, and it allowed greater customizations to fit customers’ needs.
.. The next phase of MailChimp, he said, is to become a one-stop shop for the entirety of a small business’s marketing needs.
.. “Every time we sat down with potential investors, they never seemed to understand small business,” Mr. Chestnut said. Venture capitalists always wanted MailChimp to serve “enterprise companies,” large businesses with thousands of employees and, potentially, thousands to spend.
“Everybody we talked to said, ‘You’re sitting on a gold mine, and if you pivot to enterprise, you could be huge,’” Mr. Chestnut said. “But something in our gut always said that didn’t feel right.”