

Cash Burns Fast for Uber-Like Startups That Grow City by City - marcusgarvey
http://www.bloomberg.com/news/articles/2015-03-12/cash-burns-fast-for-uber-like-startups-that-grow-city-by-city

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saosebastiao
_Instacart needs less cash to expand (compared with Amazon, which also
delivers groceries in some urban areas) since it doesn 't have to build
warehouses or large stores._

If your gross margin is negative, then the "extra cash" from not investing in
warehouses just goes straight to the customer's pocket instead, instead of
towards a capital asset that actually lowers your variable costs.

And lets not kid, anybody who knows instacart's revenue model and the margins
of the grocery industry knows with about 99% certainty that instacart is
losing money with every sale. Buy it all up while the VCs are feeling
charitable, cause its going to dry up very quickly.

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cylinder
Most of these businesses are unprofitable and unsustainable at their core.
Once the funding washes away they will be exposed.

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fsk
A bunch of delivery services crashed and burned during the first .com bubble,
for precisely that reason. But there's a new generation of gullible investors!

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jseip
This was certainly true for us at Livingsocial and, to an extent, it was true
for Groupon as well.

The cash burn sucks, but you have to love the unit-level economics that this
model provides. Want to turn on new revenue? - just open up another city!

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anon808
yes, but how do you turn on the new profit?

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brianbreslin
in many cases thats not a short term concern. They see it as "let me spend $1M
to buy $1M in revenue." Thinking is they can buy revenue, and then downline
achieve efficiencies of scale to earn profits.

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pbreit
I would think startups would be a little smarter than just doing the same
thing in each geo. Surely fixed costs can be minimized. The warehousing
infrastructure won't be that valuable if the company goes under.

