SoftBank's kids aren't playing nice
CXCI
Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last time, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.
If you like this newsletter, please consider hitting the like button! It’s the small gray heart at the top and bottom of the email. Oversharing runs on the generous spirit of readers like you, at least until it stumbles into $1 billion of SoftBank money.
WEO.
We hired a new CEO, and would you believe, he’s a real estate guy:
The decision to choose [Sandeep] Mathrani—who at Brookfield ran one of the nation’s largest mall owners—is a clear signal that WeWork is a real-estate-focused company. Under Mr. Neumann, it positioned itself more like a technology startup, with a sprawling array of businesses that included office space, an entrepreneurship-focused elementary school and event-planning website Meetup.com.
Mathrani succeeds Artie Minson and Sebastian Gunningham, the WeWork execs who took over as co-CEOs after Adam Neumann drifted away on his golden parachute in September, in search of better energy. Mathrani previously guided General Growth Properties, the second largest retail landlord in the US, back from bankruptcy. He helped sell GGP to Brookfield for $15 billion (roughly two WeWorks, at current valuations) in 2018 and became Brookfield’s head of global retail. “All of us were laughing about the fact that WeWork has accepted the fact it’s a real estate company,” a former WeWorker told The Real Deal.
Another way to look at this is that Neumann was the right CEO for WeWork in the beginning, when WeWork was primarily in the business of raising money, something Neumann was undoubtedly very good at. Neumann raised money by telling all the right people that WeWork was a tech company while building something that looked an awful lot like a real estate company. After a failed IPO and a $9.5 billion bailout from SoftBank, We more or less exhausted its ability to raise money and Neumann burned up his reputation, making him a lot less useful and someone who knows how to run a real estate company a much better choice for CEO.
Elsewhere in the WeWorld, WeWork has vacated its West Coast headquarters in Salesforce Tower, San Francisco’s tallest building, and listed all three floors for other tenants. WeWork laid off 169 people in San Francisco last year as part of a global cut of 2,400. The Salesforce office was supposed to be “a hub for the company’s tech team, which was working on cutting-edge systems for buildings’ infrastructure,” per the San Francisco Chronicle, but maybe We doesn’t need that anymore now that it’s embracing the whole real estate thing.
Frenemies.
Uber and DoorDash discussed a merger last year at the urging of SoftBank, a major shareholder in both companies, the Financial Times reported:
DoorDash was reluctant to entertain merger talks with Uber but ultimately agreed to sit across the table from its rival at SoftBank’s urging, these people said.
The talks came in the wake of Uber’s $8.1bn initial public offering in May and around the time WeWork, another SoftBank investment, was planning a public listing it ultimately withdrew. SoftBank’s Vision Fund was Uber’s largest investor at the time of its listing, owning 15 per cent of the company.
“We have great confidence in Uber Eats’ business,” a Softbank Vision Fund spokesperson told the Financial Times.
DoorDash overtook Uber Eats in US online food delivery almost exactly a year ago. That made Uber the no. 3 player in the US, behind DoorDash and Grubhub. Several months later, DoorDash unseated Grubhub as well, per sales data from research firm Second Measure. DoorDash, which as a private company isn’t accountable to investors in the same way publicly traded Grubhub and now Uber are, knocked off these competitors with the help of $2 billion in funding from investors including SoftBank.
Uber reported a $316 million adjusted EBITDA loss for its Eats segment in the quarter ended Sept. 30. (Fourth quarter and full year results are due tomorrow.) As far as we know, DoorDash isn’t making a profit. You can see why SoftBank might prefer the companies to reach a truce than to keep battling and bleeding out SoftBank money.
Uber Eats and DoorDash aren’t the first competing investments SoftBank has made. SoftBank enthusiastically funded many of the biggest ride-hail companies as far back as 2015. It had money in Ola, Grab, Didi Chuxing, and Brazil’s 99 before it ever backed Uber. And look what happened: Didi bought 99, Uber sold its Southeast Asia business to Grab. With each deal, SoftBank won.
Maybe that’s also what SoftBank thought would happen with food delivery, that it would spread its bets among a couple different players, and in the unlikely scenario that a couple of them got big and started fighting each other it would step in and be like, okay guys, let’s try to all get along here. Except so far it hasn’t worked out that way (also that would potentially be an antitrust problem). Uber Eats and DoorDash are still competing in the US, and per the Wall Street Journal the situation is even worse in Latin America:
Uber is under siege in Latin America amid a bruising price war where its ostensible rivals are Rappi and China’s Didi Chuxing Technology Co. But here’s the twist. All the combatants have as their biggest owner the same tech investor, Japan’s SoftBank Group Corp., which has injected a total of $20 billion into the three.
Startup investors typically don’t back competing companies. SoftBank, which runs the world’s largest venture-capital fund, has poured so much money into popular tech categories that it created a sort of circular firing squad in which SoftBank-backed companies use SoftBank cash to attack one another.
It is more than a bit awkward:
Uber executives were shocked at how quickly Didi gained market share, former employees said. Head of rides Andrew Macdonald and other executives moved to stem the market-share losses. Uber eventually agreed to increase incentives for drivers and lower some prices.
Uber executives were mystified by SoftBank’s decision to fund a rival, the former employees said, especially because that was hurting Uber’s attempts to reduce losses in preparation for its initial public offering.
You know what they say, all’s fair in love and VC-subsidized food-delivery wars.
6%.
We have talked a lot about Postmates and how it uses fees to pad its revenues and make pricey deliveries seem more affordable, at least to customers who aren’t looking too closely. So I had to laugh when I saw this story in the Philadelphia Inquirer:
As of Tuesday, the four biggest food-delivery apps were charging sales tax on food, but industry leader DoorDash (which also owns Caviar) and Postmates were not collecting the tax on service and delivery fees. Even on the food, Postmates was charging just a 6% sales tax in Philadelphia, not the required 8%.
Maybe there is a legitimate question around whether these companies should be required to collect sales tax on service and delivery fees and not just the food they sell, I’m not an expert here. But it is kind of hilarious that sales tax in Philadelphia is 8%—the state’s 6% tax plus an extra 2 percentage points in the city—and Postmates was just like nah, we’re doing 6%. This doesn’t increase Postmates’ revenue on an order but does make its prices slightly cheaper, since the tax calculated on the order is lower.
Postmates reportedly didn’t explain to the Philadelphia Inquirer why it only charges 6% sales in Philadelphia, but did send a statement saying it is “actively in touch with the Pennsylvania Department of Revenue about the distinct products available to merchants and customers on the platform and how tax laws apply to each vertical.” Postmates filed confidentially to go public in February 2019, planned to make the papers public in September, said it would delay the IPO in October, and has faded into the background of the food-delivery wars ever since.
Safety first.
How is coronavirus affecting the sharing economy, you ask? Well:
Uber Technologies Inc. has suspended 240 user accounts in Mexico to contain the potential spread of coronavirus.
The users suspended had ridden with two drivers who came into contact with a possible coronavirus case, according to a statement posted to the company’s Mexican Twitter account. To date, there have been no confirmed cases of the virus in the country.
And:
Airbnb Inc. asked hosts in parts of China affected by the coronavirus to help guests rearrange accommodation, while stopping short of warning customers about the disease.
The advice comes as hundreds of properties remain available via the room-booking platform in the city of Wuhan in central China’s Hubei province, where the deadly virus that’s killed more than 200 is believed to have originated.
I suppose this all makes sense. Airbnb hosts can decide whether they are going to accept guests and Airbnb guests can decide whether they’d still like to book a reservation in Wuhan; the risks are fairly obvious to everyone. Uber users in Mexico don’t have any particular reason to worry about being exposed to the virus from a cab ride, so I guess it’s prudent to temporarily suspend riders and drivers who might have been affected. The sharing economy certainly doesn’t want to be known for sharing novel new viruses.
This time last year.
Lyft sues to avoid paying drivers a living wage
Other stuff.
Waymo partners with UPS to deliver packages. Alto Pharmacy valued at over $1 billion in SoftBank-led funding round. Oyo lays off one-third of US staff, tweaks business model. SoftBank loses top Vision Fund manager. UPS orders 20,000 vans from electric-vehicle maker Arrival. Ola launching in London in February. Bond raises $15 million for last-mile deliveries. Instacart shoppers in Illinois vote to unionize. Independent contractors find workarounds for AB5. Uber could take Colombia dispute to international arbitration. Lyft lays off 90 people. Airbnb backs creation of EU digital regulator. Amsterdam court rules Airbnb hosts must be licensed. Fed proposes loosening limits on banks and venture capital. UK competition regulator wants more power after Brexit. Citymapper puts itself up for sale. Chicago restaurateurs want tighter rules on food delivery. Amazon doubled grocery deliveries in Q4. E-scooter sales jumped over Christmas. Chattanooga extends ban on dockless e-bikes and scooters. Short-term rentals are keeping hotel rates down in peak seasons. Cards Against Humanity Buys Clickhole. The Iowa Writers’ Workshop Takes on the Iowa Caucus.
Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.
Send tips, comments, and WEOs to @alisongriswold, or oversharingstuff@gmail.com.