GM puts a price on Lyft, Airbnb is bad news for mortgages, and “overly earnest” startup plans

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$6 billion.

Here is a conclusion to that series of headlines on Lyft’s rumored acquisition offers we discussed last week: GM Expressed Interest in Lyft at $6 Billion. It is unclear whether GM ever made much of a formal bid for Lyft—the Information has one source saying GM “verbally indicated” its interest—but regardless, Lyft wasn’t having it. Six billion dollars represents a steep discount from the $9 billion price Lyft hoped to achieve and the $12 billion its co-founders reportedly said the company will be worth by next year.

Whether you believe those rosy projections seems to hinge largely on if you think Uber plans to quash Lyft in the US market now that it’s no longer waging a $1 billion-a-year war on Didi Chuxing in China. Personally, I think it probably does. See also this bit from Eric Newcomer’s report on Uber’s losses in the first half of 2016:

Uber told investors on Friday's call that it's willing to spend to maintain its market share in the U.S. The company told investors that it believes Uber has between 84 percent and 87 percent of the market in the U.S., according to a person familiar with the matter.

Lyft, per the Information’s story on its approach from GM, has continued to cap losses at $50 million a month and plans to “lower that to $30 million by the end of this year and even further by early next year, according to a person with knowledge of the plan.” Lyft is also reportedly targeting 2016 net revenue of “at least $400 million” with this important caveat: 

More than half of Lyft’s net revenue is expected to come from a $1.65 “trust and safety” fee that Lyft charges for every ride.

On its website, Lyft describes this fee as an afterthought. It is an “additional, fixed fee added on a per ride basis.” It “helps finance a broad spectrum of operating costs including safety measures like insurance and background checks.” And yet the trust and service fee is projected to make up half of the year’s net revenue! If anything tells you about the thin margins in ride-hailing, it should be that.

B2P.

Profitability is the new “it” metric for startups and last-minute booking site HotelTonight says it got there in April. The company did this with a plan called “Build to Profitability,” or B2P, which Ellen Huet at Bloomberg has dubbed “an overly earnest name.” HotelTonight went after the usual suspects in its cost-cutting: slashing marketing, trimming waste on discount sites and coupons, reducing annual infrastructure fees by 40%. They also turned it into a challenge-slash-game:

Every week, [HotelTonight CEO Sam] Shank updated the company on its burn rate, and every morning, employees got an e-mail with such key metrics as gross bookings value, year-over-year growth and gross margin. Shank put a bottle of Johnnie Walker Blue Label on the office bar and stuck a Post-It ultimatum on it: "Don't drink until after B2P."

I mean, I guess that’s one way to motivate your employees. It seems to have worked?

When HotelTonight hit its profitability target in April, the Blue Label "lasted about 10 minutes," Shank says. "There were a lot of high fives." At an all-hands meeting the following month, he revealed the plans to go public.

Brad Severtson.

Here is an interesting story from the Wall Street Journal on homeowners who are having trouble refinancing their mortgages because they rented the property out on Airbnb. One is Brad Severtson, a 61-year-old Seattle resident and former Rhodes scholar, who made $30,000 last year “renting out a cottage in his Victorian home’s backyard.” Severtson applied early this year to refinance a home-equity line of credit and was turned down by Bank of America because it “didn’t allow home-equity lines of credit on properties in which the homeowner is operating a business.” A spokesman for Airbnb tells the Journal that such scenarios “are incredibly rare.” The Journal concludes that “in the case of mortgage refinancing … banks will likely have to gain more experience with Airbnb hosts.” This of course is what happens with sharing economy services like Airbnb that move faster than the pace of regulation. No one really knows the rules and a lot of them are being figured out as we go. That’s not necessarily a bad thing, but it can lead to some unpleasant surprises for the Brad Severtsons of the world. 

The bad new economy.

Sometimes I wonder why people keep driving for Uber and doing deliveries for Postmates and so on when the jobs really don’t sound that great. Yes, you get to set your own schedule, but the pay can be pretty shabby, there aren’t any benefits, and many of these independent-contractor companies have also found ways to prod their workers into pseudo-shifts. But then you read a story like this in Bloomberg and remember that a lot of jobs in the US economy are really bad right now, and so maybe by comparison the 1099 gigs are at least palatable. 

Many people who lost well-paying jobs have found work, but for less money, doing hourly retail and food services jobs … These new hourly workers not only make less money, but they have much less predictable schedules than hourly workers had before the recession, according to a new study from the University of California, Davis. "The jobs replacing the ones that were lost after the recession ended were a lot of low-wage hourly jobs with really variable schedules," said Ryan Finnigan, an assistant professor at U.C. Davis and one of the researchers who worked on the study.

Companies like Uber feel big but are still tiny employers—if you can even call them that—on the macro scale. Nonetheless, they have managed to sell many US workers on the vision of platform-based work as a modern American dream. Can’t get a traditional job? Drive for Uber! Deliver on DoorDash! Set your own schedule! Be your own boss! Sooner or later, the reality tends not to align with the vision. Even so, the state of low-wage jobs elsewhere in the labor market remains a lot worse.

Other stuff.

Uber plans service in Karachi. Uber halts operations in Abu Dhabi. Tyler County, Texas, “has chosen to embrace Uber.” Uber regs in St. Petersburg? Pittsburgh mayor talks self-driving cars. Why Uber is testing its autonomous fleet there. Self-Driving Cars Reach a Fork in the Road. UberEats expands into Marin County. Instacart expands to Fort Lauderdale. Interview with Airbnb’s China rival. UberChopper to Mysterland. Lyft interns make $9,000 a month. Solange blasts Postmates. Meet the Candidate Campaigning for Congress via Uber. Man Keeps $121,000 in Amazon Goods He Was to Deliver. Hottest delivery-only restaurant in the galaxy launches new desktop app. “Neglected” entrepreneurs. The startup reckoning has yet to happen. Cue the sad violin.