Uber alums are calling the shots in Silicon Valley
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Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you're returning from last week, thanks! If you're new, nice to have you! (Over)share the love and tell your friends to sign up here.
I enjoyed shared rides company Via’s April Fool’s joke, ViaTandem, a shared bike rental that “produces zero carbon emissions, will cost you half as much as renting your own bike, and is way more energy efficient - only 50% of the pedaling power required!”
Lyft… off?
Lyft had reason to celebrate this weekend. After pricing at the top end of its IPO range, at $72 a share, the stock jumped 8.7% during its first day of trading (March 29). Co-founders Logan Green and John Zimmer were rich men! Then came Monday.
On its second day of trading, Lyft’s stock slid to $69.01, erasing gains to close below its IPO price. Lyft tumbled even as the broader market edged up a percentage point, and is down again in mid-day trading today. Green and Zimmer are still rich, but less rich than they were. As Joe Weisenthal said so eloquently on Twitter yesterday, “$LYFT is getting crushed.”
It would be silly to read much into the stock performance of a company that has only existed on the public markets for 2.5 business days. But that doesn’t change the fact that on Monday the unicorn fantasy ended for Lyft, and the real talk started.
“We see four paths to profitability: cut driver pay, turn off incentives, reduce insurance costs or shift to self-driving cars,” Guggenheim Partners analyst Jake Fuller wrote in a research note on Monday, initiating Lyft coverage with a “neutral” rating. “The first two would be tough in a highly competitive category, the third might not be enough by itself and the fourth is likely 10 years out.”
Sell-side analysts are a famously optimistic bunch, but even they are not so optimistic as venture capitalists. It took someone like Jake Fuller of Guggenheim to state plainly why Lyft is an iffy bet: After years of losses, Lyft still has no clear viable path to profitability. It can’t cut driver pay or rider incentives because it would bleed market share to Uber. Tweaks to insurance probably aren’t enough, and the driverless future the company has pinned its hope on remains far off. Sure, you can lose money to make money, but at some point you have to start making money.
Lyft historically has preferred to gloss over the fundamentals and focus on its story. You know, the road ahead. The end of traffic. Humanity, hospitality and a dose of magic. Such topics are more to Lyft’s liking than things like net loss, insurance-related costs, and other financial metrics on which a business is judged.
Lyft is being watched as an indicator of how other money-losing consumer tech companies could fare, should they follow through on plans to go public in 2019. These include Uber, WeWork, Postmates, Instacart—basically, a lot of the companies we talk about in this newsletter. Many of their biggest investors and employee shareholders are likely hoping the companies can hang on long enough for the customary 180-day IPO lock-up period on insiders to expire so that they, at least, can cash out.
More on Lyft’s debut:
Why some green investors are passing on Uber and Lyft (Reuters)
Lyft IPO brings scrutiny to bikes and scooters (The Information)
Wait until short-sellers enter the Lyft fray (Bloomberg)
Better chance of a person landing on Mars than Lyft turning a profit, analyst says (Bloomberg TV)
Congestion pricing.
The big news in New York City is that the state passed congestion pricing in the fiscal year 2020 budget over the weekend. The plan doesn’t take effect until Dec. 31, 2020, at the soonest, and key details still have to be figured out, but it’s looking like cars could face fees of $11 to $12 to drive in Manhattan below 61st Street, and trucks of $25.
The governor’s office said congestion pricing would be enforced using electronic tolling devices, with passenger vehicles paying just once per day. People who reside in the congestion zone won’t be exempt, though state budget director Robert Mujica joked that they wouldn’t get charged to move their cars for alternate side parking.
The new tolls are designed to reduce traffic and increase vehicle speeds in the busiest parts of Manhattan, and to raise more than $1 billion a year for the city’s decrepit public transit systems. The New York Post reported March 29 that 80% of congestion revenue could go to the city’s subway and buses, and 10% each to the Metro-North and LIRR commuter rails.
Congestion pricing has long been popular with transit and policy wonks, but politically unviable in the US. We live in a car-dependent society, and vehicle owners understandably chafe at the idea of having to pay more money to get where they need to go, especially if those fees affect a regular commute. A 2008 push for congestion pricing by former New York City mayor Michael Bloomberg famously died in Albany.
This time last year, a Quinnipiac University poll found that 44% of New York City voters were opposed to using congestion pricing to fund mass transit. But in a January 14 poll (pdf) by Siena Research Institute, opposition to congestion pricing was down to 39% of New York state registered voters and support up to 52%. In fact, support for congestion pricing outweighed opposition across almost every demographic—liberals, moderates, New York City, suburban households, upstate, white, black, Latino, every age group, every religion, and every income level.
Newfound support for a transit tax that disproportionately affects privately owned vehicles is perhaps the clearest sign that the US is ready to change its relationship with cars. New York’s decision to try it increases the odds that other major US cities will follow. “New York’s use of congestion pricing could be a game-changer,” Travis Brouwer, an assistant transportation director in Oregon, told the New York Times. “If New York City can prove that congestion pricing can work and gain public acceptance, it could give cities like Portland a boost as we look to introduce pricing.”
The shift has been made easier by the rise of ride-hail services like Uber and Lyft that provide alternative transport options to people in areas without great public transportation. It has also been hastened by growing concern over the environmental harm caused by our reliance on cars, with transportation edging out electricity as the greatest source of carbon emissions in the US.
For the city’s taxis, ride-hailing services, and other for-hire vehicles, a separate congestion plan already took effect. Beginning Feb. 2, 2019, a “congestion surcharge” enacted in April 2018 kicked in for trips in for-hire vehicles that at any point touched Manhattan south of 96th Street.
The surcharge favors Uber and other companies that offer shared rides, like Lyft and Via, because it charges $0.75 per shared trip compared to $2.50 per applicable yellow cab ride and $2.75 for any non-yellow cab private ride (for example, a regular Uber or black car). Uber threw its lobbying weight behind congestion pricing, spending $100,000 to lobby state lawmakers in the first go-round, and allocating another $1 million toward the effort last summer. Uber and Lyft are now pushing for a similar toll in Seattle as an alternative to a specific tax on ride hailing.
The Mafia.
A couple weeks ago, the New York Times ran an important story about the startup alumni funding “tech’s next wave.” These people made their fortunes, so to speak, working at Uber, Airbnb, and some of the other most prominent companies of the past decade. Then they ventured into the world and invested some of their winnings back into people who came from the same places they did:
It’s part of Silicon Valley’s often-incestuous circle of life. The start-up world projects a meritocratic image, but in reality, it is a small, tightknit club where success typically hinges on whom you know.
In this model, employees of tech start-ups frequently leave the companies once they have been enriched by their firms’ initial public offerings. Then networks of alumni from these companies — called mafias — support their peers’ new businesses with hiring, advice and money.
These gangs of wealthy tech employees are known in industry parlance as “mafia,” after the network of early PayPal employees that was nicknamed the “PayPal Mafia.” Andrew Chen, Uber’s former head of rider growth and now a general partner at Andreessen Horowitz, hosts quarterly dinners for “Uber alumni turned founders.” He estimates Uber alumni have produced more than two-dozen venture-backed startups so far. Josh Mohrer and William Barnes, two early Uber employees, formed a group of several hundred Uber employees to invest in startups together, and are planning a fund called “Moving Capital” dedicated to companies from Uber alumni. Riley Newman, a former head of data science at Airbnb, raised a $55 million VC fund to invest specifically in former Airbnb employees turned entrepreneurs.
In other words, the resources available to founders who come from Uber and a small handful of other startups are tremendous. The bar for raising money doesn’t seem to be that high either. Andrew Chapin, the architect of Uber’s failed subprime auto leasing program, told the Times he “didn’t have to do a lot of pitching” to raise a cool $3.75 for his new mental health startup, Basis. Dan Hill and Michelle Rittenhouse, a pair of former Airbnb employees, raised $2 million from the Airbnb-focused fund with hardly any details hammered out. “They know us, they trust us,” Newman told the Times. “We know them, we trust them.”
Conversations around diversity in Silicon Valley, or the appalling lack of it, tend to focus on hiring. But an equally important and perhaps more insidious contributor is the small and elite circles through which money flows. Venture capitalists like to say they pick winners. The subtext is they tend to pick people who look like them, who go on to hire employees who also look and think like them. A small fraction of these founders succeed at building big, successful companies that make their employees rich, allowing them to leave and form alumni networks to invest in more people like them.
The cycle is hard to break, and despite what Softbank would have you believe, there is a limited amount of money in the world that can be awarded to a limited number of companies. Every dollar casually handed to an Uber alum, no questions asked, is a dollar less for a founder who didn’t come from there, or who at some point realized they didn’t cut it in the tech bros’ club.
Scooters!
They look like toys, but never forget that they are dangerous:
Shortly into the launch of the first scooter pilot program in the state of Massachusetts, one woman reportedly met the street in an accident that resulted in an ambulance ride and multiple stitches.
According to WBUR, the incident occurred roughly 15 minutes into an event kicking off Brookline’s pilot program, which is bringing 200 Bird and Lime e-scooters to the town’s streets this week. 62-year-old Kim Smith reportedly lost her balance before tumbling to the ground, but was thankfully wearing a helmet at the time of her crash, as is required by state law.
Asked for comment on the accident, Lime director of Northeast expansion Scott Mullen told WBUR he needed more details. “Was she hit by something? Was there a banana peel? We’ll figure it out,” he said. “Let me get the facts, and we’ll figure it out.” Nothing like a good-old banana peel reference to reassure the public your company is taking these incidents seriously.
As stand-up electric scooters proliferate at speeds made possible by generous venture-capital financing, injuries are keeping pace. ER doctors in Nashville, Tennessee, say they treat up to 15 patients for scooter injuries a week. In San Diego, California, police are investigating crashes that sent two scooter riders to the hospital this past weekend. San Diego experienced its first scooter death, a 53-year-old tourist who crashed into a tree, earlier in March. In Auckland, New Zealand, a man wound up in the hospital last week after the Lime scooter he was riding snapped in two.
Lawmakers seem at a loss for what to do. Drawing on Uber’s scorched-earth playbook, scooter companies are pulling out of cities that impose rules or fees they dislike. Lime and Bird last week both said they would vacate Raleigh, North Carolina, over “burdensome regulations on e-scooter providers,” such as restrictions on where users can ride and park and a $300-per-scooter fee. In February, Lime also pulled out of Tempe, Arizona, citing local operating fees of $1.06 per scooter, daily, plus a $386.90 annual vehicle fee. (Tempe didn’t budge.)
Scooter companies are havens for Uber and Lyft alums—Bird founder Travis VanderZanden worked for both—so it’s not surprising that these companies are reviving the ride-hailing playbook. Whether it will work is another matter. Uber drew its power over local regulators from both riders and drivers, who could be urged into action when lawmakers tried to pass rules the company didn’t like. Scooters don’t have this two-sided marketplace—at the end of the day, it’s the company and its riders. That to me suggests their bargaining power is less before you even begin to ask questions like “do people care about scooters as much as they do Uber or Lyft.” My guess is they don’t. And joking about crashes that end with an ambulance ride and stitches will probably only make everybody less keen.
This time last year.
Good luck leaving your Uber driver less than five stars
Other stuff.
Airbnb Has a Hidden Camera Problem. Airbnb’s OYO investment could be its ticket to the East. Airbnb hits 500 million guests. WeWork invests in office data startup Proxy. Rider complaints common for Waymo. College student murdered after mistaking another car for her Uber. Pennsylvania agency wants Uber to improve background checks. Travis Kalanick wins dismissal of Uber investor lawsuit. Poland will require Uber to use licensed taxi drivers. Uber should give drivers their data. Ride-hailing near Vancouver led by apps in Chinese. Woman films Lyft driver dozing at the wheel. Revvo raises $4 million for sensors that track tire health. ChargeWheel raises $1 million to build charging hubs for e-bikes and e-scooters. Cities know where you’re riding that scooter. Homeport rolls out 500 e-bikes in Prague. No Lyft for Softbank. European bankers grow wary of WeWork. Casper hopes for small profit in 2019. DoorDash launches “kitchens without borders.” Uber driver accused of assaulting passenger flagged by ICE. Why the World’s First Robot Hotel Was a Disaster. What Lobsters and Jellyfish Can Teach Us About Immortality. “I am an Uber employee and I support the drivers’ strikes.”
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Send tips, comments, and scooter injury reports to @alisongriswold on Twitter, or oversharingstuff@gmail.com.