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Adam Neumann, co-founder of WeWork, CEO of We, leader of WeWorld, has cashed out more than $700 million from the company ahead of a potential initial public offering, the Wall Street Journal reported:
Mr. Neumann, 40 years old, has sold shares during most of the investment rounds since 2014, although he didn’t take money out in the round this past January, according to people familiar with the matter. He has also taken out loans of several hundred million dollars backed by his WeWork shares, people familiar with his finances said.
He has used some of the proceeds to purchase more WeWork shares by exercising his stock options early, some of the people said. By doing so, Mr. Neumann is betting that the value of WeWork’s shares will rise while also minimizing his taxes, the people added. The majority of his wealth remains connected to WeWork, the people said.
Neumann has reportedly used the proceeds from these sales, plus debt borrowed against his holdings, to invest heavily in real estate, including “several properties in downtown San Jose, Calif., where WeWork has been planning an urban campus.” He has also spent more than $80 million for at least five homes and invested in startups aligned with his personal interests. One of those homes is a 13,000 square-foot property Neumann bought last year in the Bay Area for $21 million that includes a “guitar-shaped room,” which honestly sounds like a nightmare to try to decorate.
Startup founders don’t often cash out large chunks of their stakes ahead of a liquidity event like a sale or IPO, because to do so suggests a lack of faith in the company. In WeWork’s case, there is a more complex financial engineering at play in which Neumann is using his WeWork shares to get more money to invest in property that he could theoretically rent back to WeWork and also to purchase more We shares, which according to the Journal has something to do with tax implications. Complex financial engineering is very much WeWork’s M.O., with the company recently devising an investment fund that will help WeWork buy stakes in buildings it currently leases and which will also hold Neumann’s real estate holdings that he leases to WeWork. It’s all very complicated and unclear, you can see why WeWork usually gets by talking about its community vibe and beer on tap.
One of the cool things about running an online food delivery operation is that you get a lot of data. You see what people are ordering and when, and what people are searching but failing to order, maybe because the delivery times are too long or the options for that cuisine in that area just aren’t very good. Sure, your core business is delivering food, but now you have all this data. If you wanted to go a step further, you could also start thinking about filling holes you notice on the food delivery network so that more people complete their orders rather than abandoning them.
The obvious problem is that maybe you don’t want to get into the restaurant business. You have a good thing going with food delivery, which is complicated enough without trying to run your own restaurant on top of that. How can you, the platform provider, convince new restaurants to pop up or come online in places you think they would be successful, without having to do it yourself?
The answer so far is dark kitchens. Delivery platforms like Deliveroo and Uber Eats have experimented with leasing space in commercial kitchens out to restaurants looking to expand their delivery range without opening a new location. Now Uber is going a step further and launching a restaurant “accelerator” in London. The program is a partnership between Uber and Karma Kitchen, a kitchen-space rental company based in East London. Uber will pick five to seven restaurateurs to join the accelerator based on holes it spots on Eats in a 2-mile radius, which it calls “selection gaps.” For instance, if Uber noticed more people ordering pizza near Karma Kitchen than restaurants supplying it, it might tap a pizzeria for the accelerator.
The three-week program will work intensively with restaurateurs on operations, branding, and marketing. Restaurants will receive help with hiring, passing a food hygiene inspection, streamlining workflows to keep delivery times low, and even using accounting software. After restaurants “graduate” from the program, Uber said it will ensure restaurants receive enough demand and orders to meet basic costs like rent, but won’t directly subsidize businesses.
Food delivery companies compete first and foremost on price and speed, but they are increasingly investing in what you might call “custom content” to win over customers, much as Amazon and Netflix bet on custom video programming to keep subscribers coming back. San Francisco-based Caviar, another food delivery company, periodically emails customers letting them know that a certain trendy restaurant is “now only on Caviar.” Uber in addition to its accelerator is experimenting with breaking out popular menu items from restaurants and marketing them online as standalone offerings, a process it calls “decoupling menus to create virtual concepts.” Food is the new content. At the end of the day, delivery is commoditized, but your favorite burger isn’t.
There are gig economy companies, and then there is Thumbtack, a local services marketplace. Thumbtack is sort of an online yellow pages where people, who the company calls pros, list their services for customers to search by zip code and book. Thumbtack pros build their profiles and set prices for their services. Pros pay Thumbtack when customers contact them, i.e., for lead generation, and can also choose to promote their services. All in all, it’s a much more traditional independent contractor set up than most gig economy companies, which tend to manage their workers more closely—where they should be, how much their jobs will cost—albeit at arm’s distance through an algorithm.
This laissez-faire model made Thumbtack popular with workers, but it also could make the process more cumbersome for customers, as Thumbtack pros picked who they wanted to engage with. Then, in 2017, Thumbtack CEO Marco Zappacosta decided to take a different tack by letting customers get instant quotes for services. The transition was tougher than expected, Zappacosta told the Wall Street Journal, with the company losing service providers who were angry that Thumbtack had changed its model and company staff who didn’t believe in the new direction. In 2018, revenue dipped below its 2017 level, Zappacosta told the Journal.
Things have apparently turned a corner now, with Thumbtack announcing $150 million in new funding, mostly from Sequoia, at a $1.7 billion valuation. The financing is likely the company’s last before it goes public, Zappacosta told the Journal. Sequoia partner Bryan Schreier is bullish on the company, saying its market “is multiple times the size of Uber’s market.” Zappacosta wants Thumbtack to become a verb, like Uber did, so that people looking for a service provider say they will “Thumbtack it.”
It’s interesting to think of Thumbtack as the rare gig company that could benefit from California passing legislation that would make it harder to classify workers as independent contractors. I am not a lawyer, but Thumbtack pros seem far more likely to pass the ABC test than, say, an Uber driver or Postmates courier. Perhaps because its workers are more clearly contractors, Thumbtack has also been more proactive in figuring out benefits solutions for contractors, partnering earlier this year with portable-benefits app Alia to help pros access benefits like paid time off. Other gig companies have done little or nothing for fear that offering any sort of benefits could, perversely, better the case that their workers are actually employees.
Direct-to-consumer contact lens company Hubble is still up to its old tricks, according to the New York Times, aka taking advantage of the “passive verification” standard in the US to sell contact lenses online. I reported a couple years ago that Hubble had sold me and several of my friends and coworkers contacts after we submitted fake prescriptions from made-up doctors. The company was able to do this because rules in the US only require a contact-lens seller to attempt to verify a prescription, for instance by placing a call or sending a fax. After that, it’s up to the prescriber to get back to the seller to correct any errors in the prescription.
Hubble used garbled robocalls to contact prescribers—you can listen to audio of one in my story. If a doctor didn’t appear automatically in its system, as was the case with my order from the fabricated Dave Murphy at Quartz Optics, the company would try to find the closest match in the area and call that person instead. By 2017, Hubble’s tactics had angered the American Optometric Association, which lodged a complaint with the Federal Trade Commission (FTC). Optometrists also complained that Hubble sold contact lenses made from material they considered a dated technology.
Hubble has been held up as a marketing success story, but what the Times’s reporting makes clear is that the key to the business was always passive verification. Sally Dillehay, the former chief medical officer of a small lens company, told the Times that Hubble co-founder Ben Cogan contacted her in December 2015 about a plan to shift consumers from their prescribed contact lens brand to a new one not prescribed by their doctor using passive verification. “I told them I did not want to be involved with such a company,” Dillehay told the Times.
Despite this, Hubble has developed a reputation for marketing genius. Its use of microtargeting on Facebook was detailed in a long, effusive story in the Times in November 2017. In 2018, Hubble was portrayed flatteringly in a Harvard Business School case study on direct-to-consumer marketing. The case, which was reviewed and approved by Hubble, reveals how easily startup founders can write their own mythology. It opens with a scene of Hubble’s co-founders dashing about as they negotiate a funding round. It waives away concerns over Hubble’s prescription verification tactics, concluding that the co-founders “did not take these allegations lightly” and “worked to improve their already robust prescription verification processes.” The case isn’t a study in marketing brilliance, it IS a brilliant piece of marketing that legitimizes Hubble through its entry into the HBS canon.
At any rate. Government moves slowly, and in May the FTC proposed changes to its Contact Lens Rule that included modifications “to address concerns about incomplete or incomprehensible automated telephone verification messages.” The FTC, which never named Hubble directly, proposed sellers be required to verify information with prescribers “in a slow and deliberate manner and at a reasonably understandable volume.” The FTC also proposed sellers should have to provide the prescriber with the lens brand or manufacturer if it differs from the one on the prescription, in an effort to address how “some sellers appear to use passive verification to switch consumers from their prescribed lens to another lens brand.”
How you feel about Hubble probably depend on what you think of the rules governing the sale of contact lenses in the US. A lot of people resent that their contact lens prescriptions are only valid for one or two years, which means ordering new ones can require paying an optometrist to reissue the same prescription they already had. Other people, particularly those in the medical community, argue that contact lenses are a medical device that can affect the health of your eyes and shouldn’t be handed out like candy. The Times interviewed eight people who complained of eye problems after wearing Hubble lenses, including one who ended up in the emergency room, which doesn’t seem like that many for a company that’s been selling contact lenses for three years. “Hubble believes that patients should not have to choose between their eye health and their wallet,” the company says. As with most things, hindsight is 20/20.
This time last year.
Turo raises $250 million from IAC, becomes a unicorn. DoorDash partners with McDonald’s, in blow to Uber Eats. Peloton ready to roll out automated semi truck. Didi invites competitors to join its app. Uber makes safety case for self-driving cars. Uber tests monthly subscription for rides, Eats, bikes, scooters. Uber expands partnership with Fair.com. Uber pushes congestion pricing in Seattle. Airbnb says most listings are on Instant Book. Transport app FlixMobility raises €500 million, considers carpool service. Albertsons tests grocery delivery subscription. Postmates wants better deal for gig workers. Softbank raises 317 billion won ($270 million) for Seoul-based fund. Citi Bike expands into the Bronx. Uber says ride-hail rules hurt poor New Yorkers. Ride-hail drivers protest for better working conditions. Scooter rider hit, killed by bus in Atlanta. YouTube star killed in scooter crash in London. San Francisco delays IPO tax measure. Man earns $360,000 on Airbnb. The Racist History of Tipping.
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