Netflix, Uber, WeWork, and CHINA!

Whew it's been a big week in the tech/startup world.

1. Uber IPO went sour

The ride-hailing giant capped off its tumultuous journey with a NASDAQ listing Friday.  Shares disappointed, falling well below IPO price, but the company still commands a whopping $69bn market cap.... which is still lower than the pre-IPO valuations at which investors in the past 3 years entered.  Maybe it's because Silicon Valley loves Uber -- its constant fights, breaking of laws, habit of pouring VC money (=lobbyists) onto problems -- more than the wider public does?

Investors are basically betting that the juggernaut will continue to dominate the market, until such time that autonomous vehicles can replace those pesky (costly) drivers.  By that [undetermined time in the future, can be up to 30 years??], Uber's bottom line will turn green -- otherwise the company has shown no visible path to profitability (it burned $2bn of cash in 2018 alone).  But in the meantime, Softbank to the rescue (again) ?

2. China's Luckin Coffee also failed to excite

An outlet in Beijing

China's Starbucks/convenience-store-coffee competitor Luckin Coffee listed on NASDAQ Wednesday.  Shares fell below IPO price -- not unlike Uber and Lyft -- but the barely-two-year old 2,100-strong coffee chain still raised $560m, putting its market cap at $4.0bn.  Luckin has achieved "hyperscale", but let's hear it from Peking University professor Jeff Towson on the bottom line: the Chinese "don't seem to really like coffee" that much, so do any of those metrics even matter?  

Maybe it's just another case of China imitating a Western invention, and replicating it to scale [usually with the help of friendly government regulations/direct support].  -->See: Weibo.

Outlet at Jakarta's Grand Indonesia mall

If that seems rough, here in Indonesia a number of similar startups (Kopi Kenangan, Fore, Tuku, etc) looks to be modeled closely after Luckin.  Expect scenes like this in other markets.

3. WeWork also plans for IPO, skepticism abound

Co-working behemoth WeWork is a really strange animal.  Just like Uber, it's backed by Softbank, so operating losses never seem to faze them.  It's already the biggest tenant in Manhattan, and it's moved into co-living and other co-activities that generate no profits whatsoever -- I guess even the company doesn't believe its own core business could be viable.  It blindly focuses on the high-end segment, seemingly disregarding local market nuances. Now founder Adam Neumann wants to set up a real estate investment fund (named "ARK", after Noah, naturally) to buy up office properties to lease to WeWork.  Unsurprisingly everybody's screaming bloody murder conflict of interest.

Articles about WeWork are eerily reminiscent of how people described the past decade's housing crisis.  Just like the mid-2000s, "property values always rise... ", but now it's "... thanks to WeWork's presence".  Sure its sites are hip and wildly popular with clients, but that itself doesn't necessarily make the business model sustainable.  [I too can pitch an idea: why don't we sell $100 bills for $10?]  Ellen Huet from Bloomberg notes:

'...even by the standards of its cash-incinerating startup cousins, the company’s business model—taking out long-term leases and renting out short-term parcels—doesn’t deserve the favorable treatment of a tech company and looks glaringly vulnerable to an economic downturn as the global bull market in equities stuttersteps toward Year 12. “They don’t make money even with the economy roaring,” says Scott Crowe, the chief investment officer at CenterSquare Investment Management, which focuses on real estate. “If the economy softens, [it's all over].”'

4. Netflix faces impending doom

The video streaming/cord-cutting pioneer has less than 180 days to answer to a new competitor.  Disney is launching its video streaming platform, Disney+, and it will undercut Netflix's subscription pricing *and* pull all of its content out of Netflix.  We are talking all of Marvel, Pixar Animations, Star Wars, ESPN, NatGeo, Modern Family, The Simpsons, and all the classic characters like Mickey Mouse and Donald Duck.

Content is king, and Disney is still the king of content, for better or worse.

5. Tight driver market can bring autonomous trucks sooner

There's actual interesting development within autonomous vehicles, and it has nothing to do with Uber.  The US Postal Service, working with startup TuSimple, is testing self-driving trucks to deliver mail across Arizona, New Mexico and Texas.  USPS expects the technology to improve delivery times and costs, noting severe driver shortages and regulatory constraints among interstate freight haulers.

Amazon faces a similar issue, but is proposing a totally different solution: offering its own employees $10,000 to quit and become its delivery drivers.  

If anything, this suggests that maybe the coming robot apocalypse is just a tad overhyped.  In the future, *we* will be the robots.