Fair, the SoftBank-backed car startup, lays off 40% of staff, sacks CFO(techcrunch.com)
techcrunch.com
Fair, the SoftBank-backed car startup, lays off 40% of staff, sacks CFO
https://techcrunch.com/2019/10/24/fair-the-softbank-backed-car-subscription-startup-lays-off-40-of-staff-sacks-cfo/
123 comments
I interviewed with them a few months ago. The guy who interviewed me was super nice and really smart, but the company's business model seemed really odd. It was some sort of arbitrage on cars with dealerships owning most of the stock and trying to guess when the best time to sell the car as used was. Plus they had this belief there was some customers who wanted something between ZipCar/rental cars and a traditional lease, which I found dubious. I can see wanting one year leases, but below that seems like a pretty tiny market. I'm not surprised they've mostly switched to focusing on Uber.
There's a market for people who need a car to match their short term housing. (<1yr, or even a 3-yr lease on a used car). This is Rent-a-Wreck's market. Not a huge market, though.
> <1yr, or even a 3-yr lease on a used car
Why not just buy an used car and sell it after it is no longer needed?
Why not just buy an used car and sell it after it is no longer needed?
Because you have to pay sales taxes on the full value of the car, not on the fraction of the value that you got use out of.
Sales taxes are the #1 reason for why people who constantly lease do not just buy and resell cars.
Sales taxes are the #1 reason for why people who constantly lease do not just buy and resell cars.
This doesn't make a lot of sense to me, don't competitive pressures mean you implicitly pay for the sales tax you're not explicitly paying when you lease?
In my state (although not all) you get credit against sales tax for a trade-in. But it seems to me that's a primary reason why a dealer offers less on a trade-in than a private party would. Just because you're not paying sales tax doesn't mean you get the whole benefit.
In my state (although not all) you get credit against sales tax for a trade-in. But it seems to me that's a primary reason why a dealer offers less on a trade-in than a private party would. Just because you're not paying sales tax doesn't mean you get the whole benefit.
These businesses seem highly appealing to financiers, as this is largely what financiers do in their day to day - and it seems to work out well for them.
So the bubble is bursting from tech? Or is there an international crisis causing this?
The bubble is bursting from Softbank*
Tech as a sector is still doing very well, even though there are some high publicity mega failures like WeWork
Tech as a sector is still doing very well, even though there are some high publicity mega failures like WeWork
All those recent news have an eerie vibe to it, but in this case it's venture captial and the investors knew the risk.
But it could be a sign, all that money from Softbank got spent on something. It's all interconnected, with so much debt going around, somebody has to be wrong.
But it could be a sign, all that money from Softbank got spent on something. It's all interconnected, with so much debt going around, somebody has to be wrong.
You are appearing to confuse VC backed non-tech startups with tech.
To talk about tech in general, look to the major players: Google, Microsoft, Amazon, Apple, Facebook, and so on.
To talk about tech in general, look to the major players: Google, Microsoft, Amazon, Apple, Facebook, and so on.
The reckoning may be still to come for various other Softbank-backed companies. Will just take a while for them to run out of cash.
For example, Improbable also got 500M from Softbank a few years ago, and makes 500k (!) revenue at a loss of 50M [0] and cost of revenue of 10M. It's insane.
[0] https://uk.finance.yahoo.com/news/softbank-backed-gaming-sta...?
edit: for anyone interested in the details, look at the most recent group accounts file here: https://beta.companieshouse.gov.uk/company/08070525/filing-h...
For example, Improbable also got 500M from Softbank a few years ago, and makes 500k (!) revenue at a loss of 50M [0] and cost of revenue of 10M. It's insane.
[0] https://uk.finance.yahoo.com/news/softbank-backed-gaming-sta...?
edit: for anyone interested in the details, look at the most recent group accounts file here: https://beta.companieshouse.gov.uk/company/08070525/filing-h...
I thought you were kidding with the name of the startup, given its situation.
There has to be a word for that kind of irony?
There has to be a word for that kind of irony?
Hah. I have wondered about this particular one a fair bit.
First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue.
Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue.
Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
> Imagine giving 100 teams 5M each instead.
In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product.
At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.
In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product.
At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.
[deleted]
just because you succeeded doesn’t mean it wasn’t risky.
Respectfully it may have been above their risk tolerance, and of course you being successful with it doesn't make it a prudent investment. That's the "I won the lottery so everyone should have played the lottery" thing.
As the other person said, doesn’t mean it wasn’t risky.
But also, people in your industry may have been in a better place to assess that risk.
But also, people in your industry may have been in a better place to assess that risk.
Hmm, don’t they also have an enterprise/Defence sector? I imagine that would generate more stable revenue
It seems natural that they video games business is pretty spikey in terms of revenue, although it’s worrying there isn’t a AAA game that’s using their technology yet, seems still unproven.
It seems natural that they video games business is pretty spikey in terms of revenue, although it’s worrying there isn’t a AAA game that’s using their technology yet, seems still unproven.
Wrong, they never delivered anything to anyone. I got insider sources.
Reminds me of https://grift.network
It's an Infinite Improbability Investment Drive, topic of Douglas Adams's next novel.
That's what I thought with Soylant but here we are...
A better name for their company would have been Oh, The Irony.
There's nothing wrong in theory with a VC making a large investment into a company which has a long R&D road ahead of it with effectively zero revenue before they launch a revolutionary product.
It's amazing if moonshot companies with all-star teams can raise a lot of money on good terms so they can get to work on solving hard problems which have great long-term fundamentals.
A gaming engine just really doesn't seem to fit that mold.
And for most problems you really can split up the roadmap to be able to launch earlier, make more incremental progress toward your overarching goal, reduce the size of the initial raise, and ensure you are iterating and learning along the way through actual customer contact, not working away in a dark room disconnected from the market realities.
It's amazing if moonshot companies with all-star teams can raise a lot of money on good terms so they can get to work on solving hard problems which have great long-term fundamentals.
A gaming engine just really doesn't seem to fit that mold.
And for most problems you really can split up the roadmap to be able to launch earlier, make more incremental progress toward your overarching goal, reduce the size of the initial raise, and ensure you are iterating and learning along the way through actual customer contact, not working away in a dark room disconnected from the market realities.
> A gaming engine just really doesn't seem to fit that mold.
if it had been unity or unreal engine, would you have changed your opinion?
if it had been unity or unreal engine, would you have changed your opinion?
As far as I can tell, throwing 500m at either Unity nor the Unreal Engine wouldn’t be a good allocation of money either, although better than staying in Softbank’s hands.
Are those profitable to the tune of 500M?
Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
It never ceases to amaze me the depth of the world economy, and how seemingly small niches can add up to billion dollar markets.
But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively.
It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.
But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively.
It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.
It's that fact that led to FB and Google.
IBM didn't see MS coming, MS didn't see Google coming, Google didn't see FB coming, etc.
The beauty of this is that things look done and then someone see a new niche and it turns out it wasn't a niche, but something millions of people wanted.
IBM didn't see MS coming, MS didn't see Google coming, Google didn't see FB coming, etc.
The beauty of this is that things look done and then someone see a new niche and it turns out it wasn't a niche, but something millions of people wanted.
I wouldn't go as far as to say the Improbable deal made sense, but your analysis here is pretty shallow.
SpatialOS isn't really something that can be built as a series of libraries a la carte and individually proven. It's an opinionated and tightly integrated approach to solving a very difficult problem, and the entire point is the turnkey platform. Either it's ready to build notable games on, or it's not.
Further, Improbable wants developers to pull the trigger on spending millions or even tens of millions developing titles for the platform. Investing this much in a platform that fails is an existential crisis for a games company. There's no way your half built SpatialOS game can run anywhere else.
Therefore, confidence is key, and raising an eye watering amount of money is basically table stakes to be taken seriously.
Whether it's worth solving a problem that can't be broken down in viable independent chunks is another matter (I have no interest in that personally). I'm not saying I'd invest at that valuation either. But it's certainly not as straight forward as you seem to be claiming.
SpatialOS isn't really something that can be built as a series of libraries a la carte and individually proven. It's an opinionated and tightly integrated approach to solving a very difficult problem, and the entire point is the turnkey platform. Either it's ready to build notable games on, or it's not.
Further, Improbable wants developers to pull the trigger on spending millions or even tens of millions developing titles for the platform. Investing this much in a platform that fails is an existential crisis for a games company. There's no way your half built SpatialOS game can run anywhere else.
Therefore, confidence is key, and raising an eye watering amount of money is basically table stakes to be taken seriously.
Whether it's worth solving a problem that can't be broken down in viable independent chunks is another matter (I have no interest in that personally). I'm not saying I'd invest at that valuation either. But it's certainly not as straight forward as you seem to be claiming.
[deleted]
Actually I saw a presentation about pharmacy companies already aquiring startups at Phase 1 or even after pre-clinical trials, so VC money isn't needed post Phase 1 generally.
I don’t think so, because game engines shouldn’t need $500 million to prove themselves. If you could make the case that the software was irreducibly complex, then maybe.
More generally, just because Unity and Epic are worth more now, doesn’t mean it would have been a good idea to pour money in back then. Hindsight isn’t an actionable heuristic.
More generally, just because Unity and Epic are worth more now, doesn’t mean it would have been a good idea to pour money in back then. Hindsight isn’t an actionable heuristic.
SpatialOS isn't building a 'game engine' though, it's something that plugs into Unity/Epic, with a service whose revenue model extends beyond the initial game development to support services for the whole lifespan of the game.
I was responding directly to the parent question: "if it had been unity or unreal engine, would you have changed your opinion?"
Your point may be true. I don't think it's a $500 million point to prove, but I also haven't looked at SpatialOS enough to take that stand.
Your point may be true. I don't think it's a $500 million point to prove, but I also haven't looked at SpatialOS enough to take that stand.
That's such a crowded market though, with CryEngine, Godot, Lumberyard, and yet more competing for attention.
Those are bad examples because they didn't need huge unprofitable upfront investments. Unreal engine, for example, was a side benefit of creating a game that was itself profitable, and then they realized they could make additional money from licensing the engine, and did so. It simply doesn't take massive upfront independent investment to develop game engines, and the market is already crowded with all sorts of good options some of which are even developed on a volunteer basis (like Minecraft which originally used the open source LWJGL).
This comment doesn't really make sense to me. To me, (paraphrasing heavily), the comment two tiers above you is trying to say, "The upside is not high enough as typical moonshot companies to raise as much as they did. Plus, they could have probably broken the problem down further."
The guy above you responds: "But these game engines had very high upside."
And you respond: "But those game engines didn't need high upfront investment. And none really do, you can make them cheaply."
That wasn't the point of the guy above. His point is, "There may be enough upside to building a really good game engine." The hypothesis of this company is by spending a lot of money building a really good game engine, they can get upside like Unreal. Whether or not that hypothesis makes sense is entirely a different discussion than: "Is there enough upside to justify this hypothesis", the question at hand.
The guy above you responds: "But these game engines had very high upside."
And you respond: "But those game engines didn't need high upfront investment. And none really do, you can make them cheaply."
That wasn't the point of the guy above. His point is, "There may be enough upside to building a really good game engine." The hypothesis of this company is by spending a lot of money building a really good game engine, they can get upside like Unreal. Whether or not that hypothesis makes sense is entirely a different discussion than: "Is there enough upside to justify this hypothesis", the question at hand.
That's not what the poster you're responding to said.
Ruby on Rails was extracted from the creation of a website, basecamp. Once they were done creating it they realized they could extract a new framework out of it and did so.
This has multiple benefits.
1. profitable from the get go 2. design geared towards solving actual problems
What the person above you is saying is that the Unreal Engine was created in the same manner, whereas SpatialOS was not. And because of that, the risk was much lower.
Ruby on Rails was extracted from the creation of a website, basecamp. Once they were done creating it they realized they could extract a new framework out of it and did so.
This has multiple benefits.
1. profitable from the get go 2. design geared towards solving actual problems
What the person above you is saying is that the Unreal Engine was created in the same manner, whereas SpatialOS was not. And because of that, the risk was much lower.
I agree with you, but why was the person above me commenting on risk?
While it is true that those things happened with Unreal Engine, it was sideways from the discussion that was occurring, but presented as a refutation. Risk has nothing to do with the comment two tier above me. I'm just pointing that out.
While it is true that those things happened with Unreal Engine, it was sideways from the discussion that was occurring, but presented as a refutation. Risk has nothing to do with the comment two tier above me. I'm just pointing that out.
when people start quibbling over words I like to point them to this feynman video.
https://www.youtube.com/watch?v=lFIYKmos3-s
The idea that risk isn't a part of the discussion about why a company is laying off 40% of its work force doesn't seem like it has much merit.
The responses made sense, and they've been explained to you. You're just casting about trying to come up with some way to dismiss the other persons point while intellectualizing it for the HN audience. If we were on reddit your tone would be some passive aggressive wiffle waffle about experience or intelligence.
The tone might change based upon the site, but the inaneness of the person behind them doesn't.
https://www.youtube.com/watch?v=lFIYKmos3-s
The idea that risk isn't a part of the discussion about why a company is laying off 40% of its work force doesn't seem like it has much merit.
The responses made sense, and they've been explained to you. You're just casting about trying to come up with some way to dismiss the other persons point while intellectualizing it for the HN audience. If we were on reddit your tone would be some passive aggressive wiffle waffle about experience or intelligence.
The tone might change based upon the site, but the inaneness of the person behind them doesn't.
Hey man, I still don't think you are understanding my point. This comment is actually pretty interesting:
> if it had been unity or unreal engine, would you have changed your opinion?
To me (again, to me. You could have a different interpretation, that's fine), the conversation was no longer about Improbable. It's about VC. The guy above him is arguing that a game engine does not have long term payoffs to justify the investments Fair got. But if they had made Unreal Engine, maybe it would have been worth it. It's not a bad comparison at all- Unreal Engine was made in a non-risky way, but if they HAD made it in a risky way, it might have been worth it to do.
> The idea that risk isn't a part of the discussion about why a company is laying off 40% of its work force doesn't seem like it has much merit.
When I commented, we were three degrees of separation away from Fair. So while this happened on a post about Fair, I just didn't get why it was relevant. But I see how my tone could have came off as dismissive. In truth I would rather have seen people debate the quoted comment, which is interesting, but the discussion got sidetracked, and I was trying to bring it back to the main point- I see how it could have been seen as dismissive for sure.
Your comment kind of bugs me. It's one line of content and four of person attacks. You've said that the responses have been explained, but you spent way more time insulting me than explaining. You said my tone would have been condescending if we were on Reddit, but you directly insulted me multiple times, and we're not on Reddit. Read your comment back to yourself. How would you feel if you received that? Are you proud of saying that to someone? I seriously don't think I said anything pointless. Even if it was pointless, there are way more respectful ways to say it, I was feeling down today and you made me feel worse.
> if it had been unity or unreal engine, would you have changed your opinion?
To me (again, to me. You could have a different interpretation, that's fine), the conversation was no longer about Improbable. It's about VC. The guy above him is arguing that a game engine does not have long term payoffs to justify the investments Fair got. But if they had made Unreal Engine, maybe it would have been worth it. It's not a bad comparison at all- Unreal Engine was made in a non-risky way, but if they HAD made it in a risky way, it might have been worth it to do.
> The idea that risk isn't a part of the discussion about why a company is laying off 40% of its work force doesn't seem like it has much merit.
When I commented, we were three degrees of separation away from Fair. So while this happened on a post about Fair, I just didn't get why it was relevant. But I see how my tone could have came off as dismissive. In truth I would rather have seen people debate the quoted comment, which is interesting, but the discussion got sidetracked, and I was trying to bring it back to the main point- I see how it could have been seen as dismissive for sure.
Your comment kind of bugs me. It's one line of content and four of person attacks. You've said that the responses have been explained, but you spent way more time insulting me than explaining. You said my tone would have been condescending if we were on Reddit, but you directly insulted me multiple times, and we're not on Reddit. Read your comment back to yourself. How would you feel if you received that? Are you proud of saying that to someone? I seriously don't think I said anything pointless. Even if it was pointless, there are way more respectful ways to say it, I was feeling down today and you made me feel worse.
How does it make sense to take massive risks when doing so is simply not necessary? That's very rarely going to be the correct play. It does not take a massive risk (i.e. huge upfront financial investment) to make a game engine, so why in the world would you do so? And why would anyone give you the money to do so?
Contrast with something like self-driving cars, which do require unbelievably massive upfront investments and still aren't solved satisfactorily yet, despite the investment of untold tens of billions of dollars that no one has yet recouped a cent of.
Contrast with something like self-driving cars, which do require unbelievably massive upfront investments and still aren't solved satisfactorily yet, despite the investment of untold tens of billions of dollars that no one has yet recouped a cent of.
honestly, all you've done here is reinforced my belief that you're not worth interacting with.
> Are you proud of saying that to someone?
well my days of dismissing you are certainly coming to a middle.
Imagine if my spent my time caring about someone who chose to patronize me.
> I was feeling down today and you made me feel worse.
good! Perhaps you'll adjust your behavior.
> Are you proud of saying that to someone?
well my days of dismissing you are certainly coming to a middle.
Imagine if my spent my time caring about someone who chose to patronize me.
> I was feeling down today and you made me feel worse.
good! Perhaps you'll adjust your behavior.
The gaming engine is their current bread and butter but they're betting their future on lots of general simulation contracts, particularly in the defence sector.
In other words, it's a big money play to scam the government for Military-Industrial Complex pork, bankrolled by foreign investors because it's the 21st Century and nothing has to make sense anymore.
This is pretty absurd when framed this way.
As a long time critic of military spending, at least I would call it. A plus that most of that spending is receipts to some other US business no matter how regressive those transfers may be.
But once it can be arbitraged by international capital, and leeching of foreign governments who can't control their own spending becomes a business we have hit full insanity.
As a long time critic of military spending, at least I would call it. A plus that most of that spending is receipts to some other US business no matter how regressive those transfers may be.
But once it can be arbitraged by international capital, and leeching of foreign governments who can't control their own spending becomes a business we have hit full insanity.
Years ago, I saw an article in some legal industry magazine about how a new thing for UK venture capital to invest in was American lawsuits.
> A gaming engine just really doesn't seem to fit that mold
Even more to your point, Improbable doesn't make a full game engine...they make SpatialOS.
"SpatialOS is a cloud platform that provides hosting, online services, tools and a multiserver networking stack for developing and operating your multiplayer game, using any engine."
Also several projects using SpatialOS have folded recently
https://www.eurogamer.net/articles/2019-08-12-another-spatia...
Even more to your point, Improbable doesn't make a full game engine...they make SpatialOS.
"SpatialOS is a cloud platform that provides hosting, online services, tools and a multiserver networking stack for developing and operating your multiplayer game, using any engine."
Also several projects using SpatialOS have folded recently
https://www.eurogamer.net/articles/2019-08-12-another-spatia...
What makes this a softbank-crazy investment is:
- the founders were just out of undergrad
- zero background/credibility in either distributed systems or gaming or simulation
So I will guess there was no well-defined R&D roadmap ahead at all. Where should it have come from?
- the founders were just out of undergrad
- zero background/credibility in either distributed systems or gaming or simulation
So I will guess there was no well-defined R&D roadmap ahead at all. Where should it have come from?
> While investment rose, Improbable’s turnover dived from £7.8m in 2017 to just £579,859 the next year.
> “Our revenue will be driven by games built on SpatialOS entering the market,” the Improbable spokesperson said. “As such, our commercial progress is not reflected by our revenues. Spikes in revenue will occur along the way related to specific contracts, but our core business is connected to game releases.”
> Despite mounting losses and falling revenues, Improbable is in no danger of running into trouble, thanks to the huge cash injection from SoftBank. Improbable had £255.4m of cash in the bank at the end of the accounting period and £360m of assets, including a £97m portfolio of bonds and treasury notes.
This isn't totally unexpected is it? Their revenue is tied to future game development being done using their platform.
The drop could easily have been due to Unity changing the terms to exclude SpatialOS, which has now been resolved...
The only thing that would be concerning if there were signs no games were using it or didn't need it. Not that revenue isn't hundreds of millions during the R&D phase.
> “Our revenue will be driven by games built on SpatialOS entering the market,” the Improbable spokesperson said. “As such, our commercial progress is not reflected by our revenues. Spikes in revenue will occur along the way related to specific contracts, but our core business is connected to game releases.”
> Despite mounting losses and falling revenues, Improbable is in no danger of running into trouble, thanks to the huge cash injection from SoftBank. Improbable had £255.4m of cash in the bank at the end of the accounting period and £360m of assets, including a £97m portfolio of bonds and treasury notes.
This isn't totally unexpected is it? Their revenue is tied to future game development being done using their platform.
The drop could easily have been due to Unity changing the terms to exclude SpatialOS, which has now been resolved...
The only thing that would be concerning if there were signs no games were using it or didn't need it. Not that revenue isn't hundreds of millions during the R&D phase.
If Unity ToS and compatability is a like 90% revenue killer, how sustainable is this model? Are they that big a deal that new development will shift to their platform?
That's App Store ToS and most game companies.
Softbank seemed crazy to me. Wag etc. - this sounded to me like DotCom bubble investments.
Also the sheer amount of money that SB put into companies, amazed me.
Also the sheer amount of money that SB put into companies, amazed me.
Recently I've heard/read the Softbank guru described as addicted to risk. He was backed by $45bil in Saudi money after a 45 minute meeting, so maybe he is convincing or knows what he's about, but the risk factor is clear. Maybe one of the investments takes off long term but there are billions gone already.
Also listened to the Planet Money Episode[0]?
[0] https://www.npr.org/templates/transcript/transcript.php?stor...
[0] https://www.npr.org/templates/transcript/transcript.php?stor...
I think companies that over raised too soon are facing a reckoning.
A result of the zombification of the japanese economy. The BOJ is buying stocks on all of these zombie companies to keep them alive and this is what you get.
There are clearly fundamental issues with SoftBank's VC operations; everything from investment thesis, evaluation criteria, valuation model, to post-raise governance.
It smacks of exactly the result you expect when the money they are investing isn't "real". When what you're spending is actually funny money, why not ring up a $1B+ valuation just for the sake of being able to call the company a unicorn? Maybe they are hoping for self-fulfilling prophecy. But underneath you have money chasing problems which are completely uninteresting, non-technical, or niche markets which will never support the valuation.
The money then proceeds to corrupt the teams which have raised it, because if someone just handed you half a billion dollars you better "put it to work" one way for another, even if the opportunities you are chasing don't measure up. The CEO convinces themselves their time is worth $50,000 an hour and suddenly it's irresponsible not to fly private, etc.
It smacks of exactly the result you expect when the money they are investing isn't "real". When what you're spending is actually funny money, why not ring up a $1B+ valuation just for the sake of being able to call the company a unicorn? Maybe they are hoping for self-fulfilling prophecy. But underneath you have money chasing problems which are completely uninteresting, non-technical, or niche markets which will never support the valuation.
The money then proceeds to corrupt the teams which have raised it, because if someone just handed you half a billion dollars you better "put it to work" one way for another, even if the opportunities you are chasing don't measure up. The CEO convinces themselves their time is worth $50,000 an hour and suddenly it's irresponsible not to fly private, etc.
I wonder if the general problem of having a huge volume of money and trying to make returns from it is more about what you are talking about.
The money stops being real, becomes funny money, and the investment behavior changes.
The money stops being real, becomes funny money, and the investment behavior changes.
To be fair, low interest rates all over the world are leaving zombie companies alive everywhere.
In Japan, the problem is particularly absurd -- with the BoJ owning like 77.5% of their ETF market, and days passing where not a single Japanese bond sells (of which there are USD $10 Trillion outstanding, and the BoJ owns 43%!)
In Japan, the problem is particularly absurd -- with the BoJ owning like 77.5% of their ETF market, and days passing where not a single Japanese bond sells (of which there are USD $10 Trillion outstanding, and the BoJ owns 43%!)
Whatever happened to f’edcompany.com?
I know! I opened it a few hours ago to see if any of the old stories were still there.
Now it's just the logo and an email list sign-up.
Now it's just the logo and an email list sign-up.
Softbank's boss is a world famous investor.
Looking back, the only bet he won big is Alibaba, the rest are either lukewarm, or disaster.
Statistically, he is probably worse than ordinary people like us as far as investing goes, the difference only lies in that he has guts, he can call the shots no matter what. Other than that, he is probably no better than anyone else here?
he is a good business man for sure, that's why he collected his first bucket of gold, but a good investing guy? to me not so at all.
Looking back, the only bet he won big is Alibaba, the rest are either lukewarm, or disaster.
Statistically, he is probably worse than ordinary people like us as far as investing goes, the difference only lies in that he has guts, he can call the shots no matter what. Other than that, he is probably no better than anyone else here?
he is a good business man for sure, that's why he collected his first bucket of gold, but a good investing guy? to me not so at all.
That's really not accurate if you read more about him and his story. He made a ton of money early on by designing some electronic game system. He also made a lot on Yahoo Japan. And he saw the opportunity of the iPhone when no other big business in Japan did, and immediately moved to capture and leverage that opportunity in a massive way. But I am the first to admit that his recent picks in the Vision Fund are highly questionable. I doubt he would have been as reckless if it were his own (or Softbank's) money that he was investing and not Saudi royal money.
> not Saudi royal money
That's the missing piece of all this. The Saudis may legitimately be in the market for turning $15B into $10B, and being happy.
Oil is under a LOT of pressure, and while it won't go away anytime soon, the Saudis need to put their money somewhere. They likely already have a diversified portfolio of other stocks, they have after all made billions for almost a half century, and risking a smallish percentage of their wealth (there's a terrifying thought) is likely a smart move, even if they lose big, by anyone else's standards.
As a political strategy it is also probably sane. Vision Fund is likely good for the Saudi's reputation, as investment in innovation over, say, real estate in London or SF is less politically charged.
The Saudi's likely get a lot of this investment.
That's the missing piece of all this. The Saudis may legitimately be in the market for turning $15B into $10B, and being happy.
Oil is under a LOT of pressure, and while it won't go away anytime soon, the Saudis need to put their money somewhere. They likely already have a diversified portfolio of other stocks, they have after all made billions for almost a half century, and risking a smallish percentage of their wealth (there's a terrifying thought) is likely a smart move, even if they lose big, by anyone else's standards.
As a political strategy it is also probably sane. Vision Fund is likely good for the Saudi's reputation, as investment in innovation over, say, real estate in London or SF is less politically charged.
The Saudi's likely get a lot of this investment.
The demise of Softbank seems largely exaggerated [1]. While surely some investments are struggling, overall the company seems still to be in good shape.
[1] https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
[1] https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
> overall the company seems still to be in good shape
One, that article [1] precedes the WeWork debacle.
Two, it refers to SoftBank Corp., a conglomerate that also holds a large stake in Alibaba. Nobody doubts SoftBank Corp’s solvency. Its Vision Fund is the dubious foray, to which the Corp is insufficiently exposed to be tanked by.
[1] https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
One, that article [1] precedes the WeWork debacle.
Two, it refers to SoftBank Corp., a conglomerate that also holds a large stake in Alibaba. Nobody doubts SoftBank Corp’s solvency. Its Vision Fund is the dubious foray, to which the Corp is insufficiently exposed to be tanked by.
[1] https://www.japantimes.co.jp/news/2019/08/07/business/corpor...
I'm under the impression that Kyle Bass and a lot of other investors think Alibaba and Ten Cent could be cooking their books. Is this not true?
It's China so they must be cooking their books to keep their Chinese Communist Party partners happy.
It’s possible, but it’s important to note Kyle Bass has been short China for a very long time and has been spreading FUD (true or not) since 2008.
[deleted]
You're way overstating that. The important part of that article is in the first paragraph:
boosted by a special profit from selling part of its stake in Chinese e-commerce giant Alibaba Group Holding Ltd.
After they sold 11.1B of Alibaba shares[0] (virtually all booked as profit because of when they bought them), they ended the quarter with $10.6B in profits. So excluding that, they actually had a loss of 500m in one quarter.
Softbank owned over $100B in alibaba shares... all derived from a single purchase of $20m of alibaba shares in 1999.
Softbank's market cap is currently $77B. They're worth less than their Alibaba stake.
0. https://www.bloomberg.com/news/articles/2019-06-04/softbank-...
boosted by a special profit from selling part of its stake in Chinese e-commerce giant Alibaba Group Holding Ltd.
After they sold 11.1B of Alibaba shares[0] (virtually all booked as profit because of when they bought them), they ended the quarter with $10.6B in profits. So excluding that, they actually had a loss of 500m in one quarter.
Softbank owned over $100B in alibaba shares... all derived from a single purchase of $20m of alibaba shares in 1999.
Softbank's market cap is currently $77B. They're worth less than their Alibaba stake.
0. https://www.bloomberg.com/news/articles/2019-06-04/softbank-...
SoftBank is that saddad that keeps lending his dirtbag son money, the son blows it all on lotto cards and shit food at Mohegan Sun, and then begs for more money.
It'll blow up soon.
It'll blow up soon.
That's a suspiciously precise description...
especially given Mohegan Sun is a singular place?
Softbank made the vast majority of its profits off a lucky bet on Alibaba back in 2000 (not unlike Yahoo). So using your analogy, saddad got rich off lotto cards and the son is just copying Dad.
Hasn't blown up for my uncle and he's nearly 50
Kind of a shame that all the comments are focused on Softbank here and no one is discussing Fair. I know what HN generally thinks of Softbank. What I want to know is what HN thinks of Fair and this layoff.
Usually people work for startups for low pay/high hours for a big payoff of stock options.
Will those laid off get nothing?
That doesn't seem fair.
You almost always get nothing unless your startup IPOs, which historically is about ~0.01% of all seed-funded startups.
Even if the company sells privately, which does happen quite often, there's a liquidation preference so that investors usually get all of the money, leaving nothing for founders or employees.
Someone posted an excellent example of it today: https://news.ycombinator.com/item?id=21358531
Even if the company sells privately, which does happen quite often, there's a liquidation preference so that investors usually get all of the money, leaving nothing for founders or employees.
Someone posted an excellent example of it today: https://news.ycombinator.com/item?id=21358531
Setting aside SoftBank, let's talk about Fair.
I'm a Fair customer, and I like the service, but I don't think it's a steal. It's a fair deal (no pun intended), but by no means would I call it a ridiculous, out-of-this-world deal.
Surely some fellow New Yorkers will remember the good old days of the Uber-Lyft price war, when it was possible to travel from the low 90-s & York to the low 80-s & Columbus for $2 on an Uber Pool. Or how during the morning rush an Uber Pool would take one from the UWS to FiDi for about $5. Those were unimaginably good deals because they were heavily subsidized by the VC cash that was flowing so easily into rideshare companies and out the other end into riders' wallets. Those were the days!
Fair is nothing like that. I pay $266/month for a 2018 CPO Honda Accord that I received with 2k miles and most of its original warranty. I reckon this costs me about 15-20% more than a dealership lease of a brand new car. I consider this a fair (...) premium for the flexibility that a Fair lease affords me: I can end it at any time without undue shenanigans, whereas a traditional lease would require me to either transfer it or pay an early termination fee.
Why is this important? With Fair I don't feel as if some hapless VC is subsidizing my use of the vehicle. The whole thing feels like an actual business with assets and employees and some kind of plan, not a reckless gamble for market share that in itself is worth nothing to begin with. It all makes a certain kind of cold sense: when you browse Fair's app for a vehicle, the cars you see aren't actually on Fair's balance sheet until the lease has started. Since their prices aren't too good to be true, my gut tells me that, at the very least, they have a spreadsheet somewhere that spits out the price they should charge a customer after having quantified the risk of this customer ending the lease before its break-even date, thus saddling Fair with the car for which it now has to pay out of its own coffers.
SoftBank being SoftBank, it's possible that Fair is one of its better bets.
I'm a Fair customer, and I like the service, but I don't think it's a steal. It's a fair deal (no pun intended), but by no means would I call it a ridiculous, out-of-this-world deal.
Surely some fellow New Yorkers will remember the good old days of the Uber-Lyft price war, when it was possible to travel from the low 90-s & York to the low 80-s & Columbus for $2 on an Uber Pool. Or how during the morning rush an Uber Pool would take one from the UWS to FiDi for about $5. Those were unimaginably good deals because they were heavily subsidized by the VC cash that was flowing so easily into rideshare companies and out the other end into riders' wallets. Those were the days!
Fair is nothing like that. I pay $266/month for a 2018 CPO Honda Accord that I received with 2k miles and most of its original warranty. I reckon this costs me about 15-20% more than a dealership lease of a brand new car. I consider this a fair (...) premium for the flexibility that a Fair lease affords me: I can end it at any time without undue shenanigans, whereas a traditional lease would require me to either transfer it or pay an early termination fee.
Why is this important? With Fair I don't feel as if some hapless VC is subsidizing my use of the vehicle. The whole thing feels like an actual business with assets and employees and some kind of plan, not a reckless gamble for market share that in itself is worth nothing to begin with. It all makes a certain kind of cold sense: when you browse Fair's app for a vehicle, the cars you see aren't actually on Fair's balance sheet until the lease has started. Since their prices aren't too good to be true, my gut tells me that, at the very least, they have a spreadsheet somewhere that spits out the price they should charge a customer after having quantified the risk of this customer ending the lease before its break-even date, thus saddling Fair with the car for which it now has to pay out of its own coffers.
SoftBank being SoftBank, it's possible that Fair is one of its better bets.
On the back end, that flexiblity to let you end at any time costs more than the 10 to 15 percent premium you pay. Equity dollars are used to recondition and transport your car and also to pay the debt on it until a new customer can get in it. Since the majority of their customer base churns through the platform with low tenure and is not retained (short term Uber drivers), it is a major problem and has destroyed every other player who tried to do short term leasing. You need a longer tenure to cover the cost of turning the car around.
Your gut is very wrong on this one, sorry.
Your gut is very wrong on this one, sorry.
> Equity dollars are used to recondition and transport your car
Not true! I get charged at the end of my lease for any "wear & tear above normal". Fair allows the customer to pre-pay a monthly surcharge to avoid the lump sum W&T charge at the end. Transport is cheap: I can get the car towed across town for <$100, which is less than 40% of a single monthly payment.
> Since the majority of their customer base churns through the platform with low tenure and is not retained (short term Uber drivers)
How can you possibly know that? Here in NYC driving for Uber is not a short-term thing by any means. TLC licensing cost and the time it takes to obtain this license is sufficient overhead to lock Uber drivers in for a long time in the hope of perhaps one day breaking even. Fair also charges a relatively hefty (I paid ~$2k) lease start fee in order to discourage customers from churning too quickly.
> Your gut is very wrong on this one, sorry.
I encourage you to present information in support of your assertion.
Not true! I get charged at the end of my lease for any "wear & tear above normal". Fair allows the customer to pre-pay a monthly surcharge to avoid the lump sum W&T charge at the end. Transport is cheap: I can get the car towed across town for <$100, which is less than 40% of a single monthly payment.
> Since the majority of their customer base churns through the platform with low tenure and is not retained (short term Uber drivers)
How can you possibly know that? Here in NYC driving for Uber is not a short-term thing by any means. TLC licensing cost and the time it takes to obtain this license is sufficient overhead to lock Uber drivers in for a long time in the hope of perhaps one day breaking even. Fair also charges a relatively hefty (I paid ~$2k) lease start fee in order to discourage customers from churning too quickly.
> Your gut is very wrong on this one, sorry.
I encourage you to present information in support of your assertion.
That lease start fee has gone up about 3x, to about 6k, so obviously it was not enough. And at that rate people are better off getting a new car via a typical lease agreement.
How about insurance though? If it’s included it could easily be the best deal around.
For young drivers like me my premiums are through the roof.
For young drivers like me my premiums are through the roof.
There's a "Fair Insurance" product which, IIRC, is not available in my market (NYC). I got the impression that it does cost extra per month in addition to the base lease payment, but I couldn't see what the amount would have been.
I cannot believe this is Fair’s business model. Any leasing company could duplicate this with a week’s planning.
> SoftBank being SoftBank
Somehow everyone forgot that Son lost $70bn in the dot-com crash, gave him the money to do it all over again, and he's still relying on the reputation of prior (and a few current) winners.
Son's track record should be a cautionary tale -- not markers of success.
Somehow everyone forgot that Son lost $70bn in the dot-com crash, gave him the money to do it all over again, and he's still relying on the reputation of prior (and a few current) winners.
Son's track record should be a cautionary tale -- not markers of success.
He was able to talk Steve Jobs into a network exclusive release deal on the original iphone in Japan.
I don't know how much smooth talking that required. I don't see how Apple would have penetrated the Japanese market otherwise.
iPhones were a literal sea change compared to how folks used phones in Japan at the time. iMode _dominated_ the market there.
iPhones were a literal sea change compared to how folks used phones in Japan at the time. iMode _dominated_ the market there.
the original iphone was network exclusive to AT&T in the USA, I don't think there are many corporate visionary geniuses there personally.
Yeah sorry, the reason this matters is that the ipod had just come out and he saw the next step was a phone.
The way I remember it was everyone was anticipating the Apple phone, but nobody knew what it would be. It wasn't like only visionaries had the concept.
I remember (back when Cingular was a thing) seeing the iTunes phone in a store, and thinking "really? ok, I guess.."
https://www.cultofmac.com/444315/apple-history-motorola-rokr...
Now in restrospect, apparently the party line was it was a massive failure, because that's what everything is that isn't the largest success in history. But living through it, it seemed like just a headfake before the inevitable "real" Apple phone, and an early attempt at extending the iPod to a multifunction device.
I remember (back when Cingular was a thing) seeing the iTunes phone in a store, and thinking "really? ok, I guess.."
https://www.cultofmac.com/444315/apple-history-motorola-rokr...
Now in restrospect, apparently the party line was it was a massive failure, because that's what everything is that isn't the largest success in history. But living through it, it seemed like just a headfake before the inevitable "real" Apple phone, and an early attempt at extending the iPod to a multifunction device.
Seems too good to be true. So I checked their website.
> After you return your Fair car, you will receive a final bill, which may include any past due amounts, fees, excess wear and tear, or excess mileage.
> To keep monthly payments low without locking you in to a long-term contract, every car you get through Fair requires a Start Payment. It's an upfront fee due at signing to drive away. It is not refundable past the 3-day cancellation period.
> After you return your Fair car, you will receive a final bill, which may include any past due amounts, fees, excess wear and tear, or excess mileage.
> To keep monthly payments low without locking you in to a long-term contract, every car you get through Fair requires a Start Payment. It's an upfront fee due at signing to drive away. It is not refundable past the 3-day cancellation period.
[deleted]
Fair is probably done al la WeWork. Out of money, living a 25 million dollar loan from Softbank, and abandoning everything but their Uber rental product. The Uber product is the Xchange Leasing one they took over from Uber because Uber was constantly losing money on it. In exchange for taking over that Softbank had given Fair a pile of money that lasted just over a year. Now that is gone and Softbank is just trying to figure out how to keep a pale shadow of Fair alive because Uber needs those cars on the road.
This 40% came very hastily and was focused on product and eng. 4 weeks severance and no clarity on if you have benefit coverage during this. This was cutting for the sake of cutting, no clear consolidation of teams. Folks on the lots are expected to go in the next wave. Word is there is another 25 million out there Softbank will give Fair once Fair cuts enough overhead.
Also some suppliers haven't been paid for months, some going back to July. At one point an irate supplier blocked the entries to the Irvine lot with his tow trucks until Fair paid at least some of the 700k they owed.
This 40% came very hastily and was focused on product and eng. 4 weeks severance and no clarity on if you have benefit coverage during this. This was cutting for the sake of cutting, no clear consolidation of teams. Folks on the lots are expected to go in the next wave. Word is there is another 25 million out there Softbank will give Fair once Fair cuts enough overhead.
Also some suppliers haven't been paid for months, some going back to July. At one point an irate supplier blocked the entries to the Irvine lot with his tow trucks until Fair paid at least some of the 700k they owed.
Isn't car subscription called leasing?
Fair does much shorter terms. Month to month.
Traditional leases have multi-year contracts. These cars don't.
Given the recent issues they've had with other portfolio companies, I wonder if the C suite moves were based on family ties that Softbank didn't like. Seems like a lot of upper management at Fair were related to each other.
Softbank Vision Fund looks like a Saudi money laundering scheme to me.
Good riddance.
Really curious how OpenDoor is doing. They've raised a ton from SoftBank as well.
Recent Recode interview, mentioned 3500 house sales per month.
Latest round wasn't led by Softbank. Softbank just led the D.
"The round was co-led by General Atlantic, Access Technology Ventures, and Lennar Corporation (the leading homebuilder in the U.S.), with additional participation from new investors Andreessen Horowitz, Coatue Management, 10100 Fund, and Invitation Homes (a leading property owner of homes for lease in the U.S.). Existing investors Norwest Venture Partners, Lakestar, GGV Capital, NEA, and Khosla Ventures also participated in the round."
https://www.businesswire.com/news/home/20180613005382/en/Ope...
"The round was co-led by General Atlantic, Access Technology Ventures, and Lennar Corporation (the leading homebuilder in the U.S.), with additional participation from new investors Andreessen Horowitz, Coatue Management, 10100 Fund, and Invitation Homes (a leading property owner of homes for lease in the U.S.). Existing investors Norwest Venture Partners, Lakestar, GGV Capital, NEA, and Khosla Ventures also participated in the round."
https://www.businesswire.com/news/home/20180613005382/en/Ope...
> another startup is taking a proactive step to get ahead of the story, by cutting costs and restructuring before public opinion forces the issue on them.
I thought the proactive approach was to get bought out by Facebook? And that was the entire goal all along...not to make an actually viable business.
I thought the proactive approach was to get bought out by Facebook? And that was the entire goal all along...not to make an actually viable business.
There was a post here a little awhile ago from Fair Eng. team that mentioned how they _saved_ hundreds of thousands annually on their AWS ES bill through some change or another.
Hundreds. of. thousands.
I couldn't fathom a situation where they needed that much hardware to return some car listings. Even if you had every car in the world in their database (~1 billion) at ~10k/doc, that's only 10GB of data. And how many people could possibly be looking to rent/lease a car at any single time? So between two pretty guessable ceilings (data size + traffic) it was red flags everywhere.
Hundreds. of. thousands.
I couldn't fathom a situation where they needed that much hardware to return some car listings. Even if you had every car in the world in their database (~1 billion) at ~10k/doc, that's only 10GB of data. And how many people could possibly be looking to rent/lease a car at any single time? So between two pretty guessable ceilings (data size + traffic) it was red flags everywhere.
There's some juicy stuff in the recent Glassdoor reviews.