Lyft financials leak, another food delivery startup implodes, and the tiny driverless shuttle in Las Vegas
|Jan 17 2017||Public post|
Lyft lost $600 million on $700 million in revenue last year, according to financials reported last week by The Information. Those losses, while hefty, showed improvement from 2015, when Lyft lost $412 million on just $200.6 million in revenue. Fresh off 52.6 million US rides in the fourth quarter, the company is forecasting profitability by 2018, has an eye on international expansion, and has “never been more optimistic about our future.” Uber, by comparison, was on track to burn nearly $3 billion in 2016 on $6 billion in revenue and said it did 78 million rides in the US in December alone. A chart:
2017 is shaping up to be an interesting year for ride-hailing companies as they continue to battle for market share, but also look to pare losses. Lyft, to its credit, seems to have kept its promise to investors to lose no more than $50 million a month in 2016. The quarterly trends from last year also appear promising. After shedding $174 million on $141 million in revenue during a brutal second quarter, Lyft’s losses declined and its revenues increased for the remaining two quarters of the year. The company has also made some key tweaks to slow its spending, such as waiting a few days to offer new users a free-ride coupon (the change, per The Information, is expected to save tens of millions of dollars a year).
Of course, the unicorn-sized question is whether Lyft will be able to continue cutting costs while fending off Uber at home and launching new markets overseas. If we agree that ride-hailing is a commodity business, i.e., one that competes on price rather than highly differentiated service, then the answer depends on what everybody else does. If Uber backs off on rider discounts and driver subsidies, Lyft should also get some breathing room. On the other hand, because people tend to use these services mainly in the cities where they live, making the network effects stronger locally than at scale, it only takes one decently funded competitor cutting prices in any given market to force other companies to do the same. (See: Juno in New York.) One reason Uber sold its China operations to Didi Chuxing over the summer was that both startups agreed they could either cut a deal or bleed each other’s resources indefinitely. “It was like an arms race,” Didi founder Cheng Wei told Bloomberg. For any ride-hailing company to be on a true path to profitability, it probably needs to exit that arms race for good.
“Meals for much less.”
Late entry for 2016 food startup casualty of the year: Bento, a San Francisco-based meal delivery service, closed its kitchen Dec. 9. The startup broke the news to users in a letter dated Jan. 4 on its website (addressed to “Bento’ers,” of course). Bento was founded in 2015 by Jason Demant and Vincent Cardillo with $1.5 million in seed funding to “deliver delicious Asian food in minutes.” The company saw “incredible growth,” from serving 100 meals per day in May 2016 to 700 meals per day in December, its co-founders write. They also claim to have hit “full net profitability” in October and November. And yet!
Despite these successes, there were a few major issues with the business:
Low gross margin dollars—We were now wholesaling our meals which meant that we were selling meals for much less. Despite the lower sales price we were still making a healthy margin on each meal, however, the total margin dollars were low. In order to finance research & development and a more robust management team, we needed to sell a LOT more meals, which was becoming increasingly difficult.
Growing further was going to be challenging—We were starting to run into major issues around our kitchen size, the timing of meals, and other logistical challenges.
Personal financial challenges—While the business was profitable, I was unable to pay myself a sustainable salary.
This last section of the letter, the real-talk, if you will, is signed just by Demant, so maybe he drew the short straw. He alludes to “several promising discussions to sell Bento to a new owner” but says that none panned out. Hardly surprising, when you consider the dozen-plus food delivery startups that shut down completely last year, the many that took valuation haircuts, and the handful that tried and failed to sell. In the ultimate Silicon Valley pivot, Bento’s co-founders are now plugging three other meal-delivery startups, with promotional code BENTO. (“In the spirit of our full transparency: Each company has offered Bento a small bonus if you choose to sign up for these services.”)
Airbnb is no stranger to lawsuits but this latest one promises plenty of headaches. Eviction Defense Network, a Los Angeles-based nonprofit, has sued the home-sharing company for getting six tenants kicked out of their homes. The suit, filed in Los Angeles County Superior Court earlier this month, alleges that six tenants were illegally removed from their apartments in July so that the units could instead be listed at higher rates on Airbnb. The lawsuit resembles another one filed by tenants in December 2015, and brought by the city last June, against a property owner who allegedly forced occupants out of rent-controlled properties to market them on Airbnb. This new claim comes as the Los Angeles City Council is weighing regulations for short-term rentals, and it must be the last thing Airbnb wants the council members reading. The company told the L.A. Times it has “long opposed landlords who remove housing from the market.” Meanwhile, Wiseman Properties, a residential management company named in the lawsuit, helpfully tells the Times, “Those buildings will be dirt in February.”
On the road.
Here is a fun story about the first driverless bus on public roads in the US, a tiny shuttle that carries 15 people just 0.2 miles in downtown Las Vegas.
The fully electric vehicle, called Arma, was developed by Paris-based startup Navya. It currently retails for €250,000 (about $266,000) and must be purchased with a five-year service contract that runs another €200,000 (about $213,000). Rides are free and open to the public through Jan. 20, from 10am to 7pm local time on weekdays. While the three-block route along Fremont Street won’t take you very far, it’s sure to be a novelty. The shuttle has a safety driver but no visible controls like brakes or a steering wheel. Instead, there’s a touch-screen tablet to display information about the journey and an emergency stop button—that anyone can press.
(Note: If you made it this far last week, and read carefully, you may have noticed a link about planned Uber fare cuts. That story was from January 2016 and I included it by mistake. Fake news!)
Obama’s wage enforcer boycotts Uber. Women’s March boosts bus-sharing startup Skeddadle. The Uber-ization of Canada. Snapchat founders to retain control in IPO. Google chips away at ride-hailing. Delivery startup Favor retreats to Texas. Uber for logistics Lalamove raises $30 million. Airbnb for retail spaces Storefront sets up in Hong Kong. Failed Uber competitor bought by automaker. Uber plans autonomous vehicle research center in Detroit area. 16 Questions About Self-Driving Cars. Uber makes progress on Capitol Hill. Uber syncs up with your calendar, integrates with Google Maps. Uber tests cash payments in Colorado Springs. Putin taxes Uber drivers. Airbnb’s Chip Conley steps down. Peter Thiel explains himself. Layoffs at Munchery. Pay cuts for Instacart shoppers. “Oisin Hanrahan has big plans and a big problem.”