Tag: techcrunch

• Rich people and nerds (in Miami)

  

  Back in 2006, Paul Graham penned an essay about how to be Silicon Valley. Since then, it seems like every city on the planet has tried to replicate the successes of the Valley. At the time, his argument was pretty simple. Geography used to be destiny when it came to cities. New York City, for example, is arguably what it is today because of its geography and its deep harbor, which created a natural competitive advantage compared to other east coast cities such as Boston and Philadelphia. But this, he argues, has become far less relevant. Now, you can create a great city pretty much anywhere. So what are the necessary ingredients?

  Paul argued that you only really need two kinds of people to create a technology hub: rich people and nerds. You need people creating new things and you need rich people to fund those new ideas. That’s it. So in theory, if you could just dump a bunch of these kinds of people in one place — Nunavut? — you’d perhaps get unicorns coming out the other end. He goes on to say that Miami is a perfect example of a city that has lots of the former, but very few of the latter. It has lots of rich people, but, in his words, it’s not the kind of place that nerds like. So it is/was not a good startup city. (I’m a nerd and I like Miami.)

  But the year is now 2021 and a global pandemic seems to be helping to change this dynamic. Every tech entrepreneur and/or investor now seems to want to move to either Austin or Miami. To that end, SoftBank recently announced that it has earmarked $100 million for startups that are based in Miami or that plan to be based in Miami in the near future. It’s perhaps a good testament to the momentum that seems to be developing around the startup scene in the city, which is something that their mayor has been incredibly vocal about.

  But here’s something to consider. Was Paul right about the two requisite ingredients for a successful startup hub? And if so, does Miami now have enough nerds? Maybe this recent influx of people was just what it was missing.

  Photo by Cody Board on Unsplash

  2021.01.28

• Uber to close 45 of its offices

  On Monday it was reported — by the Wall Street Journal, Tech Crunch, and others — that Uber will be laying off another 3,000 employees and closing 45 of its offices around the world. Here is a quote from TechCrunch:

  “I knew that I had to make a hard decision, not because we are a public company, or to protect or stock price, or to please our Board or investors,” Uber CEO Dara Khosrowshahi wrote to employees today in a memo, viewed by TechCrunch. “I had to make this decision because our very future as an essential service for the cities of the world — our being there for millions of people and businesses who rely on us — demands it. We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding, and innovating.”

  According to this SEC filing, the company expects to pay approximately $110 million to $140 million in severance and other termination benefits, and somewhere between $65 million to $80 million in costs related to closing its offices.

  All of this is, of course, being driven by a steep decline in ride bookings, which is about 70% of the company’s revenue. Ride bookings were down 80% in April from a year earlier. For Q1 2020, they were down about 5% compared to 2019.

  

  Uber Eats has seen a spike in demand with people staying at home. Bookings were up 52% in Q1 2020 from a year earlier. The problem is that, unlike its rides business, their food delivery business is far from profitable. That’s the point of the possible merger with Grubhub.

  The company has said that they are seeing some signs of a recovery in markets that have begun to reopen. But it’s too early to predict what that will really look like. The hole is pretty deep.

  Pre-COVID, ride hailing demand tended to surge on the weekends as people went out to restaurants, bars, and clubs. So presumably those activities will need to return for its revenue to return. But I also think we could see a spike because of people being nervous to take public transit.

  Either way, the company is making some really tough decisions right now. But it seems to be doing what it needs to do in order to get to the other side of this and become a self-sustaining and profitable business. Full disclosure: I own some $UBER.

  Chart: Uber Q1 2020 results

  2020.05.18

• Opendoor.com is so risky that it may just work

  

  I have been writing about the startup Opendoor.com for over 2 years now. And I continue to believe that they are the most promising disruptor in the residential real estate space. 

  Here is the first post that I wrote back in July 2014 after they raised their first round of funding. Here is the second post that I wrote after they launched in Phoenix. And here is another post that I wrote 6 months ago where I argued, once again, that they are doing something worth paying attention to. (This last post explains how the platform works.)

  Well, about a week ago it was announced that they have raised another round of funding: a $210 million Series D. In all likelihood, the company’s valuation is now over $1 billion. Here’s the Techcrunch announcement where the message was: huge ass number; risky business model.

  In response to this, Ben Thompson wrote a terrific and widely shared blog post called, Opendoor: A Startup Worth Emulating. I love his post because he says what I have firmly believed and argued for many years: Zillow and Redfin are not disruptive real estate startups.

  This is what he says about Zillow:

  “And yet, the most successful real estate startup, Zillow (which acquired its largest competitor Trulia a couple of years ago), is little more than a glorified marketing tool: the company makes most of its revenue by getting real estate agents — the ones collecting 6% of fees, split between the buying and selling agents — to pay to advertise their houses on the site. Certainly a free tool that makes it easier to find houses in a more intuitive way is valuable — Zillow has acquired the sort of userbase that allow it to build an advertising business for a reason — but at the end of the day the company is a tax on a system that hasn’t really changed in decades.”

  And though very risky, he argues that Opendoor is far better positioned to shake up the status quo. 

  Here are two of his key points:

  “Sellers are uniquely disadvantaged under the current system, which is another way of saying they are an underserved market with unmet needs.” [Sellers are the side of the market that Opendoor is specifically targeting.]

  “Opendoor has a new business model: taking advantage of a theoretical arbitrage opportunity (earning fees on houses sold at a slight mark-up) by leveraging technology in pursuit of previously impossible scale that should, in theory, ameliorate risk.”

  And here’s what that could ultimately mean for the industry:

  “Opendoor has many more reasons why it might fail than Zillow or Redfin, but its potential upside is far greater as a result. First is the immediate opportunity: sellers who can’t wait. However, as Opendoor grows its seller base, especially geographically, its risk will start to decrease thanks to diversification and sheer size; that will allow it to lower its “market risk” charge which will lead to more sellers. More sellers means both less risk and an increasingly compelling product for buyers to access, first with a real estate agent and eventually directly. More buyers will mean lower marketing costs and faster sell-through, which will lower risk further and thus lower prices, pushing the cycle forward. It’s even possible to envision a future where Opendoor actually does uproot the anachronistic real estate agent system that is a relic of the pre-Internet era, and they will have done so with realtors not only not fighting them but, on the buying side, helping them.”

  I’m with Ben on this.

  2016.12.08

• Is venture-based real estate development coming to the Bay Area?

  

  https://500px.com/embed.js

  Chamath
  Palihapitiya is a Sri Lanka born, Canada educated, venture capitalist in
  Silicon Valley, who made a boatload of money as one of the early employees of
  Facebook. He now runs a VC firm called Social +
  Capital and owns part of the Golden State Warriors.

  The other
  night he was interviewed at a StrictlyVC event in San Francisco and I think
  that many of his comments would also be of real interest to the Architect This City
  community. He’s super passionate in interviews and always fun to listen to.

  Below is what
  he had to say about the San Francisco startup scene. It really speaks volumes
  about what people will put up with in order to live in an awesome place/city that they love. All of his responses below are from this
  TechCrunch article.

  “The city has to be doing more, around
  transportation, around housing… You have to get rid of the nimbyism and you
  need to quadruple, if not quintuple, the amount of housing. You need to tell
  that engineer from the University of Michigan that he can live here on a salary
  of $80,000.

  [In the meantime], we look at our startups, and
  the minute that they start to spend more than 15 percent of their burn – good
  money that we give them – on rent, a huge red flag goes up. When they, on a
  per-head-count basis, are spending so much, we start looking at the
  productivity of the technical team. And if it’s good but not great and they’re
  spending this insane amount of money [versus] a different team in Redwood City,
  we start to ask ourselves: “Are you so convinced that success is going to
  happen in this city at 1.5x the cost?”

  Because for every dollar that someone in
  Mountain View or Redwood City is raising, you [in San Francisco] have to raise
  one-and-a-half to two times that just to get to the same point. So you’re cutting
  your half life in half. To prove that you can take an Uber from some fuckin’
  shitty bar to another shitty bar? Like, I don’t understand.”

  And here he
  talks about the possibility of his venture firm also getting into the real
  estate development business. I couldn’t resist blogging about this.

  “We made a big
  decision with our last fund to build an organization that looks really
  different than a venture firm, and that organization is going to be this
  hybrid, bastard stepchild of Berkshire Hathaway and Blackstone and BlackRock.

  What I mean by this is
  that we want to have a large permanent capital base and we want to make really
  long, discontinuous bets on companies and sectors and trends.

  And one of the things
  we talked about was having a real estate fund …[because] we owe it to our
  companies to alleviate some of these problems when no one else is going to. If
  we went and built one million square feet somewhere of mixed use, where you
  work and live, and we rethink what it means to have a modular living environment
  for a millennial cohort that wants to work at companies and doesn’t necessarily
  have kids, we can do that in a way and give that back to our CEOs as a benefit
  of working with us.

  And you can probably
  make the economics work. Because we only really care about the equity of the
  company anyways. And the equity in the real estate will take care of itself if
  you take the 30-year view. So we’re at the point now where we’re like, wow, we
  should raise a few billion dollars and get into the real estate business and
  solve this problem systematically for our companies. And maybe in that, it
  becomes a blueprint for how others should do it. We’re just basically going to
  act as our own city-state and decide how to do it ourselves.”

  It’s
  interesting to think about what the economics might look like if your primary goal is
  simply to provide space to your portfolio companies (entrepreneurs) so that
  they get more (financial) runway and, therefore, have a greater chance of success. I’d love to see that pro forma.

  2015.09.18

• Made in Toronto: 500px

  

  Sunset in Toronto by Daniel Fernandes on 500px

  https://500px.com/embed.js

  If you’re a regular reader of Architect This City, you’ll know that I generally like to include at least one photo with every post. Sometimes I run out of time and I don’t always do that, but that is at least the intent.

  You might have also noticed that my go-to for stock photography is 500px. That is the case for a few reasons. 

  I find the photos to be of higher quality than any other service. I can easily “embed” them into my posts while giving appropriate credit to the author and linking back to 500px. The company was founded by a good friend of mine and snowboarding compadre. And the company is made in Toronto.

  That’s why it’s exciting to report that yesterday the company announced an additional $13M in funding (Series B). To date the company has raised $23M of outside funding, from some big names like Andreessen Horowitz. This is great for the everyone in the company, and I believe it’s great for this city.

  Why is that?

  Well, here’s a video from the New York Times’ Cities For Tomorrow conference, where Andrew Ross Sorkin and Fred Wilson talk about creating startup hubs. It’s about 20 minutes long and well worth a watch.

  2015.07.22