|Feb 20 2018||Public post|
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. This is issue ninety-five, published February 20, 2018.
Uber has Waymo problems.
The Uber-Waymo trial is over but the competition has just begun. Waymo is readying the world's first ride-hailing business with driverless cars in Arizona. Alphabet's self-driving carmaker got approval to operate as a transportation network company (TNC) in Arizona on Jan. 24, less than two weeks after it applied for the permit. I first reported Waymo's TNC license on Friday, about 15 minutes before Mueller's Russia indictment came out. I have the best timing.
The permit realizes a long-held fear of Uber's: that Waymo intends not just to build driverless cars, but to operate its own ride-hailing business. Waymo has been testing a self-driving car service in the Phoenix area since last April that lets passengers hail its self-driving Chrysler Pacifica minivans through an app, similar to Uber. TNC status would allow it to charge for these rides, which are currently free. Uber co-founder and former CEO Travis Kalanick has long believed that to compete, Uber must develop self-driving cars, too.
Anyway, it is all very awkward what with Uber and Waymo recently settling their trade secrets lawsuit, and Uber CEO Dara Khosrowshahi apologizing to "our friends at Alphabet." Friends, lol. Uber and Waymo might be less of enemies than before, but they are certainly not friends. Alphabet CEO Larry Page was "super not happy, unpumped," when Uber got into autonomous vehicles, to quote the ever eloquent Kalanick, and I daresay Uber is similarly unpumped about Waymo's recent advances into commercial ride-hailing.
Elsewhere in Uber, the company is reportedly preparing to sell its Southeast Asia unit to Grab, a local ride-hailing, motorbike, and payments competitor. Here's CNBC, which broke the news:
The move would mimic Uber's strategy in China, where the company sold its ride-hailing operation to Didi for 20 percent ownership, and Russia, where the company merged its local business with Yandex's ride-hailing business for a 37 percent stake. The objective would be to help Uber reel in its costs in preparation for an IPO as soon as next year, said the sources, who asked not to be named because the discussions are confidential.
We talked before about how SoftBank's stake in Uber plus four other ride-hailing companies positions it to be a global dealmaker, brokering truces among startups that might otherwise fight indefinitely. SoftBank is a longtime backer of Grab, participating in four of its funding rounds since 2014, the latest of which totaled $2.5 billion. The Japanese tech giant has, in other words, a significant interest in seeing Grab succeed. SoftBank's Rajeev Misra, who holds a seat on Uber's board, has also said Uber should focus on its core markets of the US, Europe, Latin America, and Australia.
With that in mind, it's worth wondering whether a similar deal could soon follow in India, where regional competitor Ola has started to pull away from Uber.
SoftBank is also a repeat investor in Ola, most recently participating in an October 2017 round that gave the company $1.1 billion. Uber might not want to give up in India, or Southeast Asia, for that matter, but for SoftBank it would work out quite well. Meanwhile, Khosrowshahi is on his first trip to Asia as Uber CEO, because Uber isn't ready to cede the world yet.
Ever in your Favor.
The boom-to-bust cycle is well established in the on-demand economy. A startup raises money and pours it into promotions and discounts that fuel rapid customer growth. It tells investors about that growth and they give it more money to do the same thing, in even more places. It keeps doing this until, one day, the money runs out. Suddenly, the startup finds itself overextended, with disgruntled workers and customers who were never really loyal, but only after the promotions and discounts. It scrambles to raise more money but, with slowing growth, investors aren't interested. It retreats, sells its few remaining assets, and quietly disappears.
That's how the story usually goes. With Favor it was a little different. Favor is an on-demand delivery service headquartered in Austin, Texas. The company was founded in 2013, two years after Postmates and around the same time as DoorDash. It raised a couple million dollars in seed funding, then landed $13 million from venture capitalists in March 2015. By late 2016, Favor had expanded to 23 cities in several states and opened an office in Toronto, Canada. Then, in December 2016, Favor abruptly shuttered its Canadian operations. A month later, it ended service everywhere but Texas.
In Favor's case, the interesting bit is what happened next. Instead of selling off its customer list and quietly disappearing, Favor raised $22 million from an existing investor in September 2017 and announced plans to hire 25,000 new delivery workers, which it calls "runners." It also claimed to have achieved overall profitability (not just at the unit economics level). "We don't try to buy customers or runners, but instead try to provide the best possible service," Favor CEO Jag Bath said at the time, a thing no other on-demand startup CEO has said ever. "It's difficult to compete with free food all the time." (Favor may also have achieved profitability by laying off a good 100+ employees from mid-2016 to late 2017, at least according to headcount estimates from PitchBook, the blue line, which gets its data from an unclear source.)
The end to the story is that instead of vanishing and selling for scraps, Favor on Feb. 15 announced it had sold for an undisclosed amount to H-E-B, a privately held supermarket chain based in San Antonio, Texas. Favor will provide delivery for H-E-B's more than 400 stores in Texas and Mexico, operating as a wholly owned subsidiary. "We see a unique opportunity with this partnership to support and accelerate each other's growth," H-E-B chief operating officer Martin Otto said in a press release.
They say a rising tide lifts all boats. Well, in this case, the tide was Amazon, and after it bought Whole Foods in June 2017, grocers flocked to delivery startups like they were Noah's Ark before the flood. The Amazon-Whole Foods deal likely spurred Target's $550 million acquisition of Shipt, and sent grocery chains across the US running to Instacart. They have reason to fear: The owners of Winn-Dixie and Tops Friendly Markets are reportedly readying bankruptcy filings as Amazon prepares to squeeze the last ounce of profitability from the grocery industry. It makes sense that H-E-B, a Texas-based chain, would be interested in Favor, a Texas-based delivery startup. When H-E-B's Otto says the two companies will "support and accelerate each other's growth," I read, "fend off Amazon."
Airbnb's cafeteria workers found a union to join:
The United Auto Workers won a union contract covering nearly 150 cafeteria workers at four Airbnb facilities. It’s the latest development in a unionization trend among tech companies’ sub-contracted staff.
The workers, who are employed through food service contractor Bon Appétit, unionized in November, around the same time that Airbnb's San Francisco offices ended their contract with another food service company, Flagship Food Group. During the transition, 94 contractors were reportedly told they were being let go. The decision drew backlash from Airbnb's starry-eyed workforce, forcing CEO Brian Chesky to acknowledge in a company-wide email that "there has been sadness, anger, and confusion." After the backlash, the terminated contractors were guaranteed jobs, with hourly wages, with Bon Appétit.
The union contract gives Airbnb's cafeteria staff raises of at least 5% in their first year plus "major improvements to their benefits." Contract workers in tech keep many of the biggest, most lavish corporate campuses running for the richest, most powerful companies while earning the lowest, least livable wages themselves. Many have unionized in recent years, in an effort to better their lot:
Airbnb cafeteria workers join thousands of sub-contracted service workers who have unionized within the past few years on the campuses of tech giants like Facebook Inc. and Yahoo! Those include shuttle bus drivers who have joined the Teamsters, security guards who are in SEIU and cafeteria workers who have joined Unite Here. Organizers credit those victories in part to the willingness of major tech giants to intervene with their contractors in order to make it easier for workers to unionize without fear that they will get fired or the contractor will get dumped.
Workers in the gig economy, of course, have been largely unable to pursue a similar path because independent contractors aren't permitted to unionize. The only exception is Uber drivers in Seattle, whom the city council voted to let organize in December 2015. A Washington state judge upheld that ruling in March 2017 after Uber fought to block it, and a federal judge lifted an injunction against the legislation in August.
Taking away the punch bowl.
You know what they say, hell hath no fury like a millennial whose beer taps were suddenly shut off:
“When I heard they got rid of the beer, I was like ‘What?’” said Anna Roubos, founder of Table Public Relations, which leases space in a downtown San Francisco WeWork. The beer “was part of the decision” to rent there, she added.
WeWork, it seems, realized its free beer taps were potentially running afoul of California law, where it's a landlord without a liquor license. Under state law, "it's not clear whether it can go without one if it wants to serve alcohol to building occupants," the San Francisco Chronicle reports. The particular issue is that WeWork's contract includes "kitchens and beverages" in its membership fee, which could be a problem with regulators.
The company told the Chronicle it's "working with state officials to determine next steps." In the meantime, it's gone ahead and replaced the beer with kombucha, a fermented tea popular among hipsters. Roubos told the Chronicle that her team has gotten used to the change and drinks "more kombucha than we ever drank beer," which I guess is good news for her company's productivity.
Harry's gets $112 million to move beyond shaving. Zoomcar raises $40 million for on-demand car rentals. Boston residents call for short-term rental regulations. Uber CEO plays it safe. Uber CEO says "cars are to us what books are to Amazon." Delivery Hero feels pressure from Uber, Amazon. Facebook partners with Lyft on crisis response. Lyft sponsoring five Baltimore bike-share stations for $270,000. Lyft agrees to let San Francisco review its data. Uber launches low-cost "Chap Chap" service in Nigeria. AftaRobot aims to make minibuses safer in South Africa. Uber suspends service in Morocco. London proposes new rules for Uber drivers. Uber's Andrew Chen jumps to Andreessen Horowitz. Police seeking missing Uber driver. Parkland shooting suspect took Uber to the school. Handy considers leaving New York. The WeWork manifesto.
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