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WeWork parent pulls IPO following pushback: sources (reuters.com)
450 points by jwegan 37 days ago | hide | past | web | favorite | 338 comments



As someone living in SF, I don’t think anyone in SF or SV would ever consider WeWork to be a “Silicon Valley” company in the same way that Uber or Twitter or Slack is.

The company has 0 tech brand among employees (how many ex-FB or ex-Google engineers work there?) and outside of Benchmark’s early round none of the VCs are SV-based.

Point is the media is making this out to be an indictment on some SV tech bubble but people in SV are looking at this from the outside like everyone else.


> "Point is the media is making this out to be an indictment on some SV tech bubble"

Its not the media, I think its just true. Had WeWork IPO'ed under the same conditions a year ago, I think it would have been 'fine'. but the glut of SV unicorns losing money, hating investors, and slowing growth has got people highly concerned.

This list of companies (slack, lyft, Uber, Pinterest, beyond meat, crowdstrike, tesla, spotify, Pinduoduo, Dropbox, Snap, Domo, Blue Apron, Box, Shopify, Zillow) has 310 billion in market cap and -18.67 billion $ in revenue (back of the envelope calculation).

If I missed anyone or made a typeo/mistake, let me know how I came up with the numbers: https://docs.google.com/spreadsheets/d/1L2ElCY853kgWACC3Q48Q...

EDIT: I am not saying all these companies are bad; I am invested in some of them! Just that the sheer size of these companies and their total losses are unnerving lots of people to such a point that the market had no appetite for WeWork.


> -18.67 billion $ in revenue

You’re confusing revenue and earnings/net income. Revenue is the sum of the sales. Net income, or earnings, is how much money is left after accounting for expenses. Uber alone has tens of billions of dollars in revenue.


You're not wrong about OP's confusion, but a quick note that uber recently reported quarterly revenue of ~3.1bn which means "tens of billions" annually is exaggerating a little.

Does uber count it's fees as revenue or does it count fees and the fares (which get passed back to the drivers) as revenue?

My opinionated take is that if uber wants to pretend that drivers are not employees and it's just a marketplace then they shouldn't be booking the fare as revenue, just their cut but I'm not an accountant and I don't make the rules.


> My opinionated take is that if uber wants to pretend that drivers are not employees and it's just a marketplace then they shouldn't be booking the fare as revenue, just their cut but I'm not an accountant and I don't make the rules.

Good point, but Uber literally takes the money through its app, so I don't suppose that would be possible.


Yea, classic case of low vs. high margin businesses. Travel is a great example. You would think sites like Expedia would make a healthy margin on airline tickets. Due to the way it's set up (booking systems, airlines, competition) the actual net per ticket is something like $5 for domestic flights. Last I checked Expedia specifically, most of their revenue was on hotels.

Contrast that with a high margin business like consulting services or a proprietary technology/product and there's a huge difference in net profit between the two at $10m annual revenue.


Revenue is King, margin is Queen.


Does PayPal count money paid through its app as revenue?


Good point. I believe it (and similarly Amazon marketplace sales) uses nominee accounts.

I don't use Uber so I don't know if the payments are always to the same 'Uber Ltd' or not, but you're right that would seem to be a good option.


No. Neither does a bank. That’s, for lack of a better term, escrow.


They only count their share, not the full fare (agent revenue recognition). I was referring to annual numbers.


You're missing Zoom, Pagerduty, and Cloudflare which are all doing phenomenally well.


A cynic might note that they're essentially selling pickaxes in the gold rush, so would be expected to do well in a tech bubble, even when their customers aren't :)


Thanks, didnt have earnings per share on cloudfare so skipped it


Pagerduty's stock is in the toilet. Almost anyone who has bought in the past 5 months has lost money.


Some of those (e.g. Slack) are growing phenomenally fast though, and could become profitable quite easily. Others (e.g. Uber and Lyft) have a questionable business model.

Edit: wow I didn't realize Slack had such a large market cap. That is a LOT of growth priced in, probably more than is justified.


While this is true, I seem to miss what makes Slack special. We use it at work, and it is decent at what it provides, but we could probably just as well switch to Discord, Microsoft Teams or ICQ.

Microsoft Teams especially seems like a deliberate attempt to dethrone Slack, and while it is slightly more annoying to use, it just makes sense for companies to bundle their services and subsciptions.

I do not really see a bright future for slack.


You could switch, sure. But would you ? You would be losing :

- Message history

- Files that have been shared

- Integrations / bots / ...

- Plus you would need to setup everyone again, create channels, ...

Slack goal is to be cheap enough that it does not represent a major cost for the company and integrated enough that moving would be a pain.


Would you, though? My company was a very early user of Slack, and imported our history from Skype group chat, IRC and HipChat over various periods in history. You can get the data out of Slack easily enough, so I don’t see that as a major aspect of lock-in if there is a competitive product.

The integration story is more interesting, but to _be_ a competitive product many of these must already exist.

The job of competing with Slack is harder than it once was (just look at MS Teams) but not impossible (just look at Slack...) - there’s lots of room for improvement.


My company switched from Slack to Mattermost, and then back to Slack. We either did all these things, twice, or lived without them. Switching is not something you'd do on a whim, but it's not really difficult either.


Why back?


The IT department moves in mysterious ways, its wonders to perform.

I think we moved from Slack to Mattermost because our infosec people weren't happy about Slack's handling of our data; there's a line in an email about "discussions with Slack over the past year regarding their data security and AI initiatives". But then Slack sorted that out to infosec's satisfaction, so we moved back, because running your own Mattermost installation is more of a hassle than paying Slack to do the equivalent.


As someone contemplating the move from Slack, I'm also very interested in this response


For the same reasons (good and bad) companies periodically switch other software platforms despite switching costs. History is exportable, and I suspect that for every company that's built clever and essential integrations and comprehensive channel structures there's another one where it's an under-used message board...


I don't think you can post syntax highlighted code snippets, or do automations with ICQ.


This is something they (ICQ team) are working on right now (actually they are launching ICQ-based Slack-alike collaboration solution, Myteam)


Well, probably rpa could help here.. If it makes sense is another story :)


> and could become profitable quite easily

That's easy to say and hard to do, especially when u have to justify a very public valuation


> are growing phenomenally fast though, and could become profitable quite easily.

Exactly. Cut their S&M budgets overnight and you'll see a ton of very profitable companies. Just look at their Gross Margins.


You're missing Eventbrite, which IPOed September 2018 and has lost around half its peak value.

https://finance.yahoo.com/quote/EB/


Maybe you need to flip that envelope around because I don't know how you get that much negative revenue.


Not to be flip, but pretty sure the gp is referring to losses, I.e. burning vc money and not earning enough revenue to break even.


added link above


Revenue and earnings are not the same thing.


>negative revenue

How is that even possible?


WeWork is such a mess that i wouldn't be surprised if their revenue was negative and their profit was a quaternion.


Obviously that happens when your product is so bad that you have to pay people to use it.


That’s called negative profits or earnings before taxes/depreciation/etc.

By definition revenue can’t be negative.


Sorry, my comment was tongue-in-cheek. If revenue is defined as income from operations, having to pay people to use your product could be considered negative income, aka negative revenue (even if that's not how that actually works). I guess it was a bad joke if I have to explain it.


"hating investors"

They don't hate investors, just the likes of you or I, and who can blame them? Softbank gives them money on a $47bn valuation, don't have to deal with reporting requirements, don't have short sellers (which SV types seem to be really annoyed by?!).


Twilio has been non-GAAP profitable for a year now with a positive EPS for the last four quarters (possibly five, but my brain is failing me and Yahoo Finance only lists the last four), but you list it as negative. So that leads me to wonder if many of the other figures you cite have similar issues.

(Disclosure: I work at Twilio.)


> non-GAAP profitable

Like how on my Tinder profile i'm a non-GAAP 10.


Has that been seasonally-adjusted?


it has been community-adjusted


On the merits, yes, We is not a tech company. But bear in mind that the company has gone to extraordinary lengths to cloak itself in the unicorn-tech narrative. It masquerades as a platform for other services; it ascribes its losses to a work-setting variant of the Uber fast-growth strategy; it draws parallels to Airbnb's disruption of the hotel business, etc.

Yes, Silicon Valley's smartest minds may see through it all. But in routine media coverage, the company's own version of its story (OVOIS) gets much of the ink. It takes a while for more investigative reporters to call BS and defy the company's OVOIS.


The general public's impression of WeWork isn't really relevant here, though. It's mainly the opinion of institutional investors that matters. And if they've had the wool pulled over their eyes and believe We to be a tech company, then... well, I'm even more worried than I thought for our financial system.

Actually, my feeling here is that institutional investors have realized that We isn't a tech company. That's why the IPO would probably only have fetched them at most a $20B valuation, rather than the higher valuation they've been awarded from the private markets as a supposed tech company.

So this may not be an indictment of "Silicon Valley IPOs" in particular, just investors saying "no" to a clearly overvalued non-tech company, and that company then deciding that it won't accept a likely more-reasonable valuation.

(Not saying there aren't plenty of overvalued tech companies! But this might not really have anything to do with that.)


All good points. At the same time, there's a bit of "No True Scotsman" going on. https://en.wikipedia.org/wiki/No_true_Scotsman


Not every time when someone says "X is not an example of Y" is the "No True Scotsman fallacy".

Now you may accuse me of the "No true 'No True Scotsman fallacy' fallacy".


The fact that WeWork has received multiple billions in VC money is a pretty damning indictment of the financial sector


I have a friend who joined there last year. He said that the interview process wasn't very hard and they focused on communication. He also said that the engineers there aren't impressive but he likes his coworkers and the job is okay, but the tech definitely isn't impressive at all.


> Point is the media is making this out to be an indictment on some SV tech bubble

It is (too some degree) an indictment on the Softbank and/or blitzscaling strategy that a lot of SV startups follow.


It's not "Silicon Valley", it's Silicon Valley. As in the show.

My wife just started a contract at a new WeWork office in London. The lobby features a giant but non-functional as skateboard ramp, and two DJ booths, both manned (at 9am on a Monday). The bathrooms feature the very latest in digital toilets, but they aren't flushing, and nobody can figure out how to reboot them.

At an aesthetic level, this couldn't be more Silicon Valley if Mike Judge were in charge of the service design.

In this context, the media pile-on may be annoying -- but it's inevitable, and basically deserved.


My WeWork in Gurgaon, India has a biweekly bhangra dance class at 4pm on a weekday

After the third such class, I decided to get the hell out of my lease.

It's like their entire corporate culture is built around finding creative ways to not work. It's awful environment to build a startup in.


Snort!

I am imagining a bunch of microdosing firangi sitting in their gravity pods, asking each other what Indians do to be, like, all cool and stuff. "Build a successful business" is, like, way too square an answer, daddy-o. Anybody can be a dull old business man. Our customers want to be cooool. So what's cool and Indian?

Yoga?

Sure, man, but everyone does yoga. They probably do Yoga in Kansas these days, so how's that gonna build our brand? Yoga goes without saying. We need something way cooler than that. What is it?

(Long awkward silence.)

Ah, I've got it! Bollywood dancing! Yeah, they eat that shit up over there. Let's do that.


This might be 90% accurate.


Panchakarma would also have been an acceptable answer. ;-)


I take it this was just one example of something that didn't agree with you about the location. I've had a good experience at mine with better productivity vs working from home.

Keep in mind, this is an office that aims to keep individual workers paying it, not the other way around, so the environment is going to be different than a lot of employer-owned offices.


Personally, I don't like the chirpiness and faux motivation plastered everywhere. I don't need to be told by posters that my work matters or that "Thank God it's Friday!". I never wanted to be a part of that corporate culture which is why I pursued my own freelance career.

I guess some people don't mind that, but to me, it got too nauseating too quickly.

At my location, it also seems that outside of the dedicated desk area (which is where I sit), a lot of people are there just to get laid. Nothing wrong with that, but that's something I've only found at WeWork of all the coworking places I've been to.


The spaces where you're actually supposed to work are so hostile to productive work anyway - loud, public, and if you're not by a window or at least only one tier in from one, dark.


You nailed it, it's absolute parody.

The graffiti in the Broad St. NYC location is cringe inducing.

On more than one occasion I've witnessed people omit that their office is based out of a we work location. Just too embarrassing to be associated with them.


Never been there but always thought the copy for the Harlem location was special.

https://www.wework.com/buildings/8-w-126th-st--new-york-city...

>If you’re looking for workspace that revels in uptown funk but gets business done with downtown panache, choose WeWork Harlem.

>Our open and airy shared office at WeWork Harlem embodies the future of workspace while embracing Harlem’s rich cultural history. Inspired by the Harlem Renaissance and how Harlem culture continues to express itself today, we looked to jazz legends like Louis Armstrong, Dizzy Gillespie, and Duke Ellington, and teams like the Harlem Globetrotters for design inspiration. “The Stoop,” for example, a wooden elevated seating area with attached nooks, feels as much like a stage or basketball court as it does a common space—it’s an arena for connection. That’s not to mention the generous natural light, warm wood finishes, and vintage art and furniture. Book a tour today to see what WeWork Harlem can do to help your business sing while staying true to its roots.


I work at this location and I can tell you that although I've never read the description that you posted above (sounds very.. cringey) people are putting the common areas to good use, and this applies extra to the stoop. You've always got people sitting around it, getting comfortable and working on their laptops, I think it's something that WeWork has done done well at this location.


Wow. This seems like a very, very lazy interpretation of the jazz age by a particularly unmotivated high school student. Like they took the idea that required absolutely no thinking whatsoever and went with it.


Seems like a perfect place for people who like to pretend to work.


Lifestyle branding for the IT crowd


WeWork's new motto: "No, really, we do work!"


I work at a WeWork in London, which one is your wife going to, that sounds insane...

Ours just has bathrooms & coffee machines that are offline for weeks at a time.


The new one near Waterloo. The DJs are possibly a new-location promotional feature, but they've been around for the past few weeks at least. To be fair, the ones I've been to around town (mostly Moorgate) are generally much more reasonable.


I think that one is London Bridge area...


This sounds a lot more Nathan Barley than Silicon Valley.


I remember watching Nathan Barley and cringing, one of the Easter eggs referring to people on the scene back than worked at the same company I did.

We work does sound like the place The registers Steve Bong! would be hanging out


You just gave me a whole new thing to look at here. Thank you for this.

I can't believe I've never seen it.


The TV show is good, but not as good as the original TVGoHome listings:

http://www.tvgohome.com/0206-2000.html


its more like entertainment 720 or whatever it was called in parks and recreation


They're fluUush with caAash #TheWoOorst


Do they oversell hot desks? Can you usually and easily find a spot to work? A price of $430/mo for a hot desk is a lot more than I was expecting.


What kind of music do djs play in a shared office at 9AM on a Monday morning? My imagination is failing me. You’d think it’d have to be brilliant to avoid an angry crowd.


I think I've heard about that skateboard ramp - they put desks in the middle of it or something?


Desks would be too work-y. They've got half-sofa, half-bed thingies, which nobody can figure out how to use in a dignified fashion in public.


Company with an identity crisis by any chance?


Honestly, who cares about facebook or google employees? They don't actually represent the bulk of software engineers -- instead, a vanishingly small minority.


>Point is the media is making this out to be an indictment on some SV tech bubble but people in SV are looking at this from the outside like everyone else.

Question: How do you think this company got a $40B+ valuation?

Answer: By renting office space to "Silicon Valley" companies with equally silly ideas and terrible financials. It epitomizes SV.


Why would it matter if it's "tech" or not? Being "tech" somehow makes companies magically better than being "not tech"? If so, that's a bubble right there - your valuation depends on whether or not you're considered "tech", rather than what the financial performance data says.

Here's a news headline: "Tech company" brand value damaged by WeWork; WeWork not in the club key investors say


People work with prejudice, if they are aware of it or not. A bunch of companies from the tech sector have managed to earn absurdly high valuations in a short timespan by successfully monopolizing a winner-takes-all market for a service with high initial cost but very low additional cost per customer. This situation is pretty uniquely found only for a certain subset of digital services, but people have already generalized this kind of approach into the word "tech company" - even though far from all tech companies operate in such kind of markets.

What we see now is the second stage of this: companies which have a marginal involvement of technology in their core business (which is true for basically all companies today) try to paint themselves as "tech companies", with the goal being that investors put them in the same box as Amazon, Microsoft, Netflix, Salesforce et cetera.

And since investors are just as stupid as anyone else and just as susceptible to fall for herd-like behavior as anybody, this strategy works to a certain degree.


Precisely my point. Buy high because "OMG look at those past returns". Perfectly fits George Soros' concepts of fallibility ("tech" as a good label) and reflexivity (past returns drive shit ton of new money).

I reckon I should play this like Soros would: first add fuel to the fire, and then short the shit out of the dumpster fire once it becomes clear that it really is a dumpster. And the end is nigh, so keep within reach shortlists of things to short.

Too bad our salaries will suffer too. Nothing one can do about that.


Yeah, I'm not in the valley but I'm worried about a coming bubble-burst. The worst thing is it'll probably affect even those of us who don't work for vapid startups; "tech" will become a bad word instead of a good word, new initiatives even by established companies may dry up, etc. Trying to figure out if there's anything that can be done to prepare.


Diversify investments :)

It's hard for a qualified specialist to diversify his income revenue, though.

Also, with all the bubble-busts it's never total destruction. We may get a haircut to the salary, but I doubt jobs will outright disappear, or even slide into average salary levels.


"And since investors are just as stupid as anyone else and just as susceptible to fall for herd-like behavior as anybody"

Well, you're commenting in a thread about how they didn't. This is one of those instances where I read something and instantly invert it in my mind and think "that makes a lot more sense".


I already think that Uber and Slack are not really Silicon Valley: those are businessy companies but not really tech companies.

WeWork is even taking it one level further. They still have close to thousands software engineers to build... Things though.


Is that true? Then why does it repeatedly end up in the frontpage here?


>I don’t think anyone in SF or SV would ever consider WeWork to be a “Silicon Valley” company

Well it is based in New York, so it really isn't a Silicon Valley company. It's a NYC one.


The only people I know who work at WeWork are NYC people who think WeWork is a tech company


I mean, the company is based in NYC, so it's literally not a SV company.


> how many ex-FB or ex-Google engineers work there?

This sounds like an awful metric.


It really isn’t. FB/Goog compensation is still the benchmark as far as industry comp goes, so a private co really needs to be convincingly successful to attract smart, high paid engineers at top tech companies. If they can’t then it’s a completely valid signal that something is up - either comp is well below market, growth story is fishy, management is weak, or something else.


Assumption: smart engineers only care about money.


His assumption is actually that smart engineers would chase good tech, high stock price increase potential. They already have good compensation being Facebook/Google engineers.


Would you work for less if you only had to work Monday through Thursday?

Or if you could take sabbaticals at will?


Work environment makes a huge difference. My current job is pretty harmonious among the coworkers, the bosses and team-leaders are all engineers themselves or at least tech-literate. They are also very preoccupied with the welfare of employees and even kept a completely unproductive (bad fit) employee on for half a year to help him score a new job first.

The customers are almost always happy with what we produce, and while it is certainly not fast growing, the company is steadily progressing in a good direction.

This environment is worth a lot of money to me.


Stay as long as it remains like this, these places are few and far between!


Probably true for most people, people often Lie about motivations on surveys.


Assumption #2: Google/FB development practices will fit in.


It's a useful proxy metric, but not a metric to optimize for. I wouldn't want to work for a startup that focused on hiring ex-FB or ex-Google engineers, but given that a large fraction of talented engineers have worked at FB or Google, you'd expect to find plenty of them at any reputable large startup.


> large fraction of talented engineers have worked at FB or Google

I'd actually dispute that. The tech world is really, really big. There are a great many extremely talented engineers that have never worked at FB or Google, but they're also the kind of engineers that don't write blog posts or attend conferences, so they're less visible.


Your point is quite reasonable in general but the discussion was for Silicon Valley and San Francisco. My GF has worked for Microsoft, Amazon, FB and now Google (and some startups over the years). How? Well they all have big tech offices close to Palo Alto. When she worked for various startups she was an ex-MS, ex-FB etc person.

If she'd stayed in Chicago (Northwestern grad), that's unlikely. Of course those companies have outposts there, but fewer tech roles by an order of magnitude or two.


I would still maintain that the parent is correct and there is a large quantity of talented developers in SV who have never worked at FB/Google/MS/etc.

I know quite a few of them (and would like to believe I'm talented, too).


A large fraction doesn't not mean "most". 1/4 is a large fraction. 1/10 is still a large fraction. Due to the large amount of people companies like fb, goog, apple etc employ, statistically you should expect that a SV startup on the verge of not being a startup anymore employs some ex-ers. Not having any, will raise questions. This doesn't mean the startup is bad, the answer to said questions might...


My perception is that even 1/10 is vastly overstating the number of engineers in SV who work for those companies. 1/20 might even be on the high side.


Not just "work for" but "have ever worked for" which is, at this point, a much larger number.

What percentage of developers that is I haven't the faintest clue. But definitely significantly more than 10% of my friends have worked for at least one of FAAMNG. And I have a lot of non-nerd friends too.

The propinquity is insane. When my GF decided to leave MS she walked from her MS building on her lunch break to her interviews at Google and LinkedIn (LI has subsequently moved). Of course the inverse is true too: there aren't many startups in that area, except in the Landings complex (where Cygnus used to be!).


You’re missing the point, not working at FB/Google/Microsoft/Yahoo!/Amazon/Apple doesn’t mean you aren’t a talented engineer, but the fact remains, having worked at one of those companies for several years or longer is a sure fire way to get recruiters to chase you. So not having any of those folks (which recruiters lust for) and yet being a “tech unicorn” is generally not a good sign.


No, I'm not missing anything. I agree with the point that you just made, but that wasn't the point that I was replying to.


I understood what you were replying too, just feel you focused to much on being literal with the “large majority”, hence my reply. Glad we agree on the other part, so cheers!


>a large fraction of talented engineers have worked at FB or Google

citation needed


It is a great metric if you are trying to measure software innovation happening at a company. San Francisco/SV is still a relatively tight-knit community, and engineers move around a lot. A company has to pay top dollar AND have enough interesting work going on to retain top talent, or they will move on.


We Co isn't a tech company. Its a landlord subleasing commercial realestate as short term month to month leases with snazzy furniture. They happen to have a mobile app. Its functionality is so poor they removed the pay snack bar in my SF WeWork because no one could pay through the app.

CloudFlare... Now there's a proper tech company.


Ah, but it has/had a tech company valuation.

Why do you think valuations varied so wildly? You get the same thing with Tesla, it's valued more as a tech company than as car company.


The biggest difference between car companies and tech companies is return on invested capital.

According to that Tesla is somewhere inbetween a tech company and car company. Also it's the only car company that used software to substantially improve the performance of the car using software after selling it.


ROIC?

Have you got figures because I just googled for Telsa, Ford and Facebook at that doesn't seem to be the case, albeit with older figures.

Anyway at this stage Tesla are selling luxury cars to the converted, its unclear to me that they can keep doing that. Eventually they'll have to start selling to Joe Bloggs.

https://www.gurufocus.com/term/ROC/NAS:FB/ROC-/Facebook

https://www.gurufocus.com/term/ROC/F/ROC-/Ford-Motor-Co

https://www.gurufocus.com/term/ROC/TSLA/ROC-Percentage/Tesla...


Hackers do this to traditional cars - you can turn a bog standard Audi A6 into almost a RS with some software mods an di think to be safe you beef up the suspension and brakes

There Is of course the fabled Ford FBI chip that was used on FBI pursuit vehicles, knackered the engine life of course. I was told this buy a guy who worked at a Ford dealership.


ROIC is effectively useless for tech companies because they do not capitalize nearly enough R&D.


Clearly it does not have a tech company valuation, hence they pulled the IPO.

You can't put a horn on a dog and call it a unicorn.


I said 'has/had'. Anyway reread the linked article, the IPO is back on.


You can make a reasonable case that Tesla might grow a lot, whereas other car companies not.


Yeah sure, but if its valued similar to Ford, you'd expect it to grow to the size of Ford, at least. That seems a tall order, so then you're looking for other reasons for the high valuation.


Yes! They even use lava lamps in their lobby to generate entropy.


Which is a gimmick, to be clear.


Isn't a normal run of the mill business that happens to have an app the definition of a startup?



By that logic there is a local fish shop in my area that would qualify as a tech company/startup which they are certainly not


The furniture isn’t snazzy it seems like cheap ikea stuff


WeWork has created an incredible sort of social filter though.

At least in NYC, if someone is a member at WeWork its a strong signal you don’t want them at a party.

Maybe it’s some sort of AI they’ve built in house?


Lol how full circle -- WeWork-membership being a negative selector.

I remember when folks were telling me not having a WeWork space was a sign you didn't want to network with other like-minded folks.


Well, those aren't incompatible statements. It just pre-supposes that GP doesn't like the sort of people that WeWork attracts, but that they like each other.

Personally I have no experience with WeWork, but I've never really found the urge to make much of an effort to know people from other companies in shared office environments. Sometimes it happens, sometimes it doesn't. But don't try to make me socialise with them, thanks ...


The Matt Levine saga on this for the past week or so has been fantastic. If you're vaguely interested in corporate / bank finance, I'd encourage subscribing to his newsletter. It's free.


> WeWork Co., is a clever financial engineering company that has managed to tell an appealing fast-growing-tech-company story to equity investors while also telling an appealing stable-real-estate-company story to lenders, but I must say that I am stumped by this:

https://www.bloomberg.com/opinion/articles/2019-09-06/people...


I've moved almost all my news reading to the various Bloomberg newsletters (of which Levine's is the best). They are fantastic, and free.

https://www.bloomberg.com/account/newsletters


Semi related but Blue Apron will forever be my favorite IPO.

5 stock splits and 3 CEOs later, day one investors will receive roughly 2 pennies back for every dollar invested just 2 years ago.

Only people who won were those who dumped free shares on the market (insiders), and maybe consumers for getting subsidized food of questionable quality.

Once valued at 2 billion USD, a paltry 150 million will get the job done now.


Honest question if anyone knows more details. VCs these days are very focused on the "SaaS Quick Ratio": https://www.cobloom.com/blog/saas-quick-ratio-how-to-measure... (Blue Apron isn't quite a SaaS business but close enough for this metric).

The idea is that it not only measures growth, but measures new customers in relation to churn, with the idea that it's a lot easier to have a long term successful business if you have, say, 1000 new customers and 50 that leave in a month (net 950 new customers) vs. 5000 new customers and 4050 that leave in a month (though also 950 net new customers).

Blue Apron was legendary for its huge churn rate and commensurate high customer acquisition costs. Curious what its quick ratio was, and whether it was just basically ignored.


The metrics, "rules of thumb", and "conventional wisdom" that apply to SaaS businesses do not extrapolate well to non-software subscription businesses. The main reason for this is SaaS has enormous gross margins, often upwards of 90%. This makes revenue a reasonable proxy for (gross) profit. The margins on physical goods are tiny by comparison, for food often in the low single digits, and subletting real estate is not much higher (if at alL). When profit is such a small percentage of revenue you have to be a lot more detailed in the math for lifetime value, acquisition cost, and so on, and you can no longer rely on simple formulas based on revenue and run rate.


While I agree with many of your points, I'd add that adding in the additional metrics you mention (lifetime value, acquisition cost, etc.) would make Blue Apron look even worse.

My main point is that basically the only thing Blue Apron had going for it was topline growth, but by pretty much every other metric it looked horrible and unsustainable. SaaS quick ratio alone should have clearly highlighted how unsustainable that topline growth was given their through-the-roof churn rates.


I gotta say, I do hope Blue Apron survives. After all, if it goes under, who will sponsor the entire podcast ecosystem?


Zip Recruiter, until they fail also. I honestly use the ads in my podcasts as a way to know what companies not to invest in. Anyone want a used Quip toothbrush or some Me Undies?


Good thing you didn’t buy an Audible subscription, or use an Epson printer, FreshBooks invoicing, LastPass. Other podcast ads I’ve heard are for AmEx, Deloitte, LinkedIn, various conferences and educational institutions, and more. I agree that certain names always show up, but I’ve also been quite surprised over the years by who’s enlightened enough to advertise in podcasts. I’ll admit, though, I never did buy that Harry’s shaving kit. ;-)


One advertisement I've heard a few times is the "Drive sober or get pulled over" campaign from the NHTSA.

But to JohnJamesRambo's credit, there are a lot of people who don't 'invest' in the US government either.


Recently I've mostly been hearing one from the Irish government telling residents of Ireland using a UK drivers license to convert it to an Irish one immediately (they'll become invalid if there's a no-deal Brexit).

Of course, I'm not sure I'd want to invest in Brexit, so maybe it still holds.


Those are free placements.


I was just about to post the same thing. Clearly a lot of companies do negative-EV blanket podcast advertising to juice their customer numbers before an IPO. Sonos was another famous example (although I like Sonos a lot). There's no way ZipRecruiter is getting payback from their insane ad spend.


It's been a long time ago that I heard the last Blue Apron ad in a podcast.

Seems as if the stick was handed over to a suitcase company whose "smart" suitcases cannot be checked in to flights due to batteries, that already-mentioned annoying prefab website company and underwear manufacturers offering to put decorative metals around my testicles.


Maybe Hello Fresh will expand their sponsorship from Youtube Sloggers...


Square space maybe


Definitely Squarespace and Skillshare. I still can feel the moment where I can exactly predict the Youtuber or Podcaster is about to launch into their canned sales pitch for how life got so much better and easier when they learned how to do xyz on zyx platform.

I'm surprised Youtube made the "tap here to move forward 30 seconds" feature because it always takes me right to the end of the "native ad"


>VCs these days are very focused on the "SaaS Quick Ratio"

VCs are focused on whatever metric reels in the next layer of suckers. GAAP exists for a reason.


Except that VCs themselves are highly focused on SaaS Quick Ratio to decide where to invest their own capital. That's quite different than coming up with some vanity metric to hoist a loser onto the public.


I actually still use Blue Apron. It's not that much more expensive than grocery shopping (I live in New York so groceries are expensive) and you never end up with wasted food. The recipes are generally very quick to make and far better than anything I could make on my own in a comparable amount of time. While the business may not have worked out so well their service is still pretty good.


Blue Apron just seems so unnecessary. You still have to do all the work! Just go to the grocery store and buy stuff there? You can get recipes online for free. I do all my shopping on Saturday at Trader Joe's and spend very little for lots of food which I then cook. There's so much wasted materials and trash with Blue Apron.

I don't get it, but then I don't have any trouble cooking for myself and my family. I didn't grow up learning how to cook. I spent a little bit of time figuring it out and then it became easy and didn't require a subscription to some sketchy company.

There's also no way that you're coming close to the prices at a supermarket when you're buying individual meal's worth ingredients instead of bulk, a bag of potatoes, or a bottle of seasoning instead of one potato and one pinch of whatever inside some single serving plastic wrapping.


> Blue Apron just seems so unnecessary. You still have to do all the work!

Not to mention the impact of the packaging materials and shipping. I can't speak to Blue Apron but my daughter used Freshly for a bit and I was shocked to the point of laughter at what was showing up at our house once a week: a big cardboard box with this thick, plastic-wrapped insulating material fitted to all six faces, and inside were nestled six individual meals, also packaged in cardboard with some plastic. My daughter told me they claim some level of recyclability for the insulating material, and of course the box can probably be shredded and re-boxified, but I bet 90+ percent goes right in the can and out to the curb.


Certainly not as much, but there is still quite a lot of invisible packaging you don't see up the grocery store supply line.

Just about everything in the grocery store comes in a big cardboard box.


However grocery stores and other businesses in that chain have bailers for the cardboard and other processes to insure recycling.

blue apron's fault is trying to enter a space too easily replicated by others including the very grocery stores who have everything mostly in place except for the recipes.

it wasn't long after services like Blue Apron came about and were newsworthy before many grocery stores started having prepackaged fresh items you could mix and match for a quick meal.


And just about everything that Blue Apron or any of these other companies package comes with similar invisible packaging, so the delta is still the same per amount of veggies. Or is your point something different that I missed?

Also note that the delta is a big big percentage of the base packaging, and I am willing to bet it's over 100%, if not 500%, just cause there are so many packages made from few large boxes.


Plus the existing physical stores have the advantage of economies of scale. I always wonder what that means for the whole B2C e-commerce supply chain compared to individual traffic to brick and mortar stores.


> but I bet 90+ percent goes right in the can and out to the curb

Source? Or are you just speculating based on nothing?


Just to elaborate: The comment is basically saying they are lying without any proof of such. Is it OK to blatantly and unfoundedly accuse companies of fraud like that?


This isn't an accusation of fraud. Note that the post you quoted includes the words "I bet", so you should know its speculation. Accusing them of fraud would be claiming the packaging materials aren't recyclable. Note that the OP's claim is that most of the packaging probably doesn't get recycled. I don't find this at all far-fetched, as many people who are environmentally conscious enough to care about recycling everything will also be bothered by the amount of packaging material.

Recyclable materials that end up in a landfill are no better than non-recyclables in that same landfill, as even organic materials don't really decompose in a landfill.


> Just to elaborate: The comment is basically saying they are lying

The comment absolutely does not accuse them of lying. They claim the material is recyclable, not that it is actually being recycled. I don't contest their claim that it can be recycled, and I simply speculate that most of it isn't.


It's the same reason, I sometimes still like to watch classic television; rather than choosing specific programmes to watch, I want them curated for me. And while television channels offer a mediocre experience on average, watching something I wouldn't have picked myself is a way to expand my horizons.

In the same vein, Blue Apron and Hello Fresh, I'd imagine, are there to expand your horizons in terms of culinary options. If it's just me going to the grocery store, then I'll just get for any old recipe I know.

They both remind me of a Danish company, Aarstiderne, which has been around since 1999, where the sales pitch is fresh organic vegetables with curated recipes by chefs every week. Particularly in 1999, when organic vegetables were harder to come by - even in Denmark, it made a lot of sense. Now they have so many different subscription choices (that offer different kinds of culinary experiences), that it's akin to picking the channel on television, but letting the programmers pick the programmes.

That's the appealing thing to me, it's actually less the convenience.


Download their online recipes and do a rand on them.

It's 100% about convenience. They offer nothing more than you picking up your own food. Plus they ship as much packaging as food so it's probably far from being the most ecological solution.


The problem with that approach is that often they include ingredients in very small quantities that most people won't have, and buying the ingredient yourself requires getting a container with 1000x the amount you need. Even if it's cheap, people balk at that.

But yes, the packaging is insanely wasteful, not to mention the ecological cost of shipping itself.

I definitely cooked more often when I had a HelloFresh subscription. And when I do cook now, the variety of things I make is much smaller.


>The problem with that approach is that often they include ingredients in very small quantities that most people won't have, and buying the ingredient yourself requires getting a container with 1000x the amount you need. Even if it's cheap, people balk at that.

This is more of a problem with how fucked American supermarkets are and how much food wasted is generated not just by too much being packaged. I go out of my way to shop at Asian supermarkets because at least I can buy alot of produce individually and not massive bags of shit that'll spoil before I can eat it like American supermarkets push.


That's interesting because, by the nature of needing to appeal to everyone, I find Hello Fresh recipes to be very safe and often quite bland tasting. If you already know how to cook it's easy to make them tasty according to your preferences but if you don't I suspect people just churn out middling-tasting food.


I have no experience with Hello Fresh, but Aarstiderne in Denmark strives on making their offerings uncommon. They arrange their subscriptions by how difficult they are. Of course, there is no 'chef' level, so to speak, because if you're at that point, you don't really need something like this.

But as someone who is reasonable acceptable at cooking, I do like the idea of something where I can get outside my comfort zone.


Everything you said is accurate, but that doesn't mean there isn't a place in the market for Blue Apron.

People are paying for convenience. Think of it like a house cleaning service. You don't NEED to hire someone to clean your house, but it makes your life a little easier and for some, that's worth it.


Except this is like buying a small package of cleaning utilities for one cleaning and then cleaning the house with it yourself. In your analogy, the cleaning service would be ordering food from a restaurant.

The utility here is very marginal, and there are alternatives that make your life even easier.


You need to understand that people do irrational things all the time but feel like they get a positive benefit from it. Meal kit delivery is easier than picking out recipes yourself and then buying ingredients yourself. It's certainly not easier than ordering takeout from a restaurant. But there's the "feel good factor" of doing the cooking yourself but removing some of the prep and decision-making. It's not all about utility; emotion factors in heavily sometimes.


With services like Blue Apron and HelloFresh, you're paying for convenience. Perhaps you don't want to go to the grocery store, look up recipes, etc.


As a terrible cook I love that they do all the work of finding an achievable recipe and shopping for all the (sometimes obscure) ingredients. I've improved my cooking skills significantly as a result and I'm almost ready to move on from them now.


Agreed, I've tried blue apron, home chef, and green chef and it has been an overall positive experience


It's a valid first choice. Once you order and see what you get and understand how it's made reordering would be a challenge. The problem is the product teaches you how you don't need the product.


I am surprised that M&S did not make it work in the USA - M&S food stores would seem a natural fit for Cities like NYC.


I have a coworker who puts in fairly insane hours and he and his wife do Blue Apron every single day.

They haven't missed a day in a few years. I only realized the importance of Blue Apron in his life when he told me he does about 8-10 hours at work and 2-8 hours at home most days.

Blue Apron affords them the time to get to even be a family.


I would still just do Whole Foods delivery and cook together if that’s what they’re after. It sounds like they’ve memorized the recipes if they really cook them that much.

Or order take out and save even more time and share dinner together.


> I spent a little bit of time figuring it out

And yeah I dont want to do that! :)

I’m glad Blue Apron and other services are like “hey thats a valid perspective and is underserved” instead of being dismissive


Isn't this a re-run of 'Dropbox is unnecessary when we have rsync'?


Except the average Joe has no idea what rsync is let alone how to set it up. Not sure we can say the same thing about grocery shopping

You can criticise a company without being in a Dropbox<>rsync situation. Especially when that company is not doing so well.


I hate shopping and I hate having to constantly figure out what to cook.

I use an equivalent in my country and it's worth any premium I'm paying.


Me, too. I already owned a bunch of cookbooks and knew how to cook before I started this sort of service. I still hate shopping and planning, after years of getting a box.


The introductory pricing was a reasonable deal for two people. We learned some new recipes (always nicely-printed and savable) and the meals were always tasty. But once the introductory pricing was over, and once we got tired of the obscene amount of packaging we had to throw away, we stopped it. Chalk up another churned customer.


Glad you like it and hope the price continues to be reasonable as they continue to cut expenses while trying to maintain food quality :)

For me I eat a very peculiar diet so I usually just pick up yogurt and fresh bread from the grocery store on my way home from work, and when I'm feeling particularly lazy I will order steamed chicken and steamed broccoli from the local Chinese shop who really have this amazing technique of steaming that I seem unable to grasp!!


Sometimes I feel for a company like that that at least 60% of their spend is on podcast advertising.


This was a pretty good article about Blue Apron from last week: https://pitchbook.com/news/articles/recipe-for-disaster-the-...


This gets me thinking. They validated or at least thought they validated their idea because they gained traction at the start correct? But clearly they didn't validate the business because the price point wasn't at a profitable level? Was this the mistake?

Or is it that the price point allowed for marginal profits and they thought that by scaling up it would cover the fixed operational costs and thus lead to profits.

Where do you think it went wrong?


The cost of acquiring new customers once they reached scale was the issue. The cost went up significantly making their unity economics unfavourable.


Back the day I had a short stint at Flixbus in Germany. Being an ops / logistics guy I wasn't that impressed by their operations at the team I was at (their line business seemed different but grew out of one of Flixbus earlier acquisitions, mein fernbus). Also the tech didn't look revolutionary. What was top notch, and backed by serious money, was advertising and marketing. They had all the metrics, the strategy, the budget, knew the processes, everything.

It was that what gave them the market penetration in new countries, out spending and out performing competition until competition faulted or was bought out. So, the lesson I took, was that a lot of the latest b2c e-commerce start-ups are to a very large extent marketing driven.


It's easy to measure an LTV that doesn't turn out to be accurate many months later.


They had an excellent service, which upon having recipes we promptly dropped. It simply wasn't worth it and even cooking 3 means a night was too much.



Google trends is probably not a good way to assess Pinterest.

Want to browse Pinterest? Open the app. Want to get Pinterest? Go to the App Store. Heard someone say 'pinterest' but don't know what it means? Search google.

Your link is only showing that last one.


Google Trends takes advantage of the Google knowledge graph for deeper understanding of entities and companies. This is showing "Pinterest the social network" not just "Pinterest the search term". You can toggle with the menu at the top.


>This is showing "Pinterest the social network" not just "Pinterest the search term"

I believe this is just a broader result set that includes searches for anything that Google deems to be related to 'Pinterest the social network'.

Google doesn't have access to internal Pinterest metrics.


Google also knows how many Android users search/download the app. I don't use pinterest, but if they use Google analytics or ads then Google also has a fair amount of data on usage.

Google is very much a panopticon, I doubt any other single entity has as much knowledge of the internet as a whole. Now whether this reflects in Google analytics I don't know, as I've never really used their analytics for anything serious.


Yet Google Trends exactly reflects (exhibits?) Google Play data of our app that has 37 million registered users.


And for "Facebook", Google Trends shows a 71% drop worldwide over the last 5 years. Their Q2 2019 earnings showed a 20% worldwide growth in monthly users over the last two years alone. "YouTube" shows a 45% drop over 5 years. "Google" itself shows a 60% drop over 5 years.

Google Trends can't reliably tell you anything useful about a site's growth or activity. I'm not denying it correlates with your specific app, but that doesn't mean it will work for everything, and it clearly works very poorly for popular services.


I honestly feel those numbers are correct.

Remember when everyone was sharing youtube videos. Or when you would sit and endless watch. I feel like that faded about 45%.

Google dropping makes sense. I visit less sites and the search results are not that great for discovery. Most sites I visit by typing a letter in the browser and auto completing.

Facebooks earnings raising 20% makes sense as more people are advertising on it. I notice 71% less people less original activity.. photos/status updates more groups/ads filling the gap. I spent 71% less time on and reduced my daily visits.

We're always chasing yesterday's tail. I bet twitter's numbers are down.


Facebook user growth was 20%. You said earnings.


And how do you know this is all wrong? At least I get to look at our app internal analytics and compare. Do you have access to their internal analytics? Also contrast this to https://trends.google.com/trends/explore?date=today%205-y&ge... . Instagram is 9 years old


Wow, interesting, that map is really correlated with my (biased) perception of where "percentage of people under 40 who are married" is highest


Idaho’s killer app


Also, cold winters; scrapbooking; applique vests


FWIW (sample size of one) my wife switched from Pinterest to Instagram. Same shit, arguably better interface.


Their finance doesn't look bad. Revenue trended up. Flush with cash. Making money. The 5 year chart look bad, but they've stabilized in the past couple years and it looks like they've found way to actually remain profitable.


I'd think that at P/E of 65 you'd expect some future growth?


That actually looks catastrophic. Stock price doesn't reflect it yet. Shadenfreude isnt my thing but this looks bad and insiders must already be aware.


Can't believe the market is currently valuing Pinterest at 16B


Guess these guys didnt get the memo.

https://www.google.com/amp/s/seekingalpha.com/amp/article/42...

To be clear, I dont trade stocks and couldn't care less which way this moves. Just seems like the Google trends data is a bit of information asymmetry that the market hasn't caught on to, yet.


From the article you quoted (call me cynical):

"Disclosure: I am/we are long PINS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha)"


>insiders must already be aware

The lockup period does not expire till mid-october.

I read their 10-Q and found this gem about "user re-authentication":

"Users

MAUs at quarter-end were 300 million, representing growth of 30% year-over-year. This represents an acceleration in user growth, in part due to one-time changes to SEO algorithms and user re-authentication that impacted Q218. International growth drove the majority of global MAU expansion."


I'm sorry, I'm an idiot. Wtf does "user re-authentication" mean?

They're counting MAUs as number of logins and not number of active users?


I can only interpret that they are talking about logged in users with accounts. The users were logged out during the pre-IPO and that resulted in some double counting in their second post IPO 10-Q.

I was researching this because I asked myself a general question: "Why is the stock price of non dividend paying companies correlated to the performance at all?"


Ah.

Amazon is a good case study for you. Didn't pay dividends for a decade or more. Reinvested everything. Pissed off analysts. And killed it.

In that world as long as you can keep delivering growth, you're good. Miss once and you're toast.


> Didn't pay dividends for a decade or more.

Amazon has never paid a dividend.


Looks very similar to the trajectory of Facebook (although very different in scale).

https://trends.google.com/trends/explore?date=today%205-y&ge...


FB owns Instagram

https://trends.google.com/trends/explore?date=today%205-y&ge...

and WhatsApp. I would argue that the market is a bit more rational there.


I got a phone call from them recently. Not automated. Asking "how the experience has been". I wonder if they're increasingly panicking. I ordered less than a handful of boxes in the past few years with them.


Ahem. https://www.mcsweeneys.net/articles/please-forgive-us-at-blu...

That’s a parody from 2017. It’s probably more true now than ever. We actually cancelled our BlueApron last year in favor of another meal kit service - and might end up canceling them overall for grocery pickup from our local grocery chain.


Wonderful link. To be objective, one of my most recent handful of boxes arrived recently because I forgot to cancel it. Every few weeks, I login to turn off the next months' worth of auto-scheduled deliveries. The ingredient quality is still there. A third of the box is broccoli and it's still $60, so those features haven't changed.

I go to the grocery store and re-make a good number of the recipes. I'm appreciative of the expanded palate BA has given me as well.


BA was pretty decent. My wife subscribed us to it and we used it for a couple of months. Restaurant quality meals for real. But the whole business model is idiotic at the small scale. Amazon with its gigantic distribution network (as well as Whole Foods) could pull it off I suppose, but I just felt bad that this stuff had to be shipped to me from hell knows where, with lots of packaging, and an ice pack to boot. Not "environmentally friendly" in the least. Besides both my wife and I can cook perfectly fine without any help. So after 2 months we got rid of it.


Blue Apron and WeWork share a common problem, they’re viewed as tech companies, even when they’re clearly not.

Being tech companies means that they’re viewed as part of a group of companies who have pulled of billion dollars IPO, so they’re wrongly focus on “no less than the one billion”. Mentally the jump from 1 billion to 2 billion is also a lot less that the jump from 150 million to 1 billion, so why not go for 2 billion.


By any standard whatsoever a 100% jump is a lot less than one that's 500%+. What does that even mean?


What a true unicorn.


But the stock is going up now !


WeWork is a real estate company and not a software company. They don't have any worthy propriety tech and their business model is collecting rent. How they were once valued at 47 billion just straight up doesn't make any sense.


I don't think big investors are that stupid. They don't think an office rental business is a tech business, that's just a really convenient story to tell. Because if it's NOT a tech company, you have to look at why it's worth so much and come to the conclusion that all the fundamentals point to. It's worth a huge premium because it's getting a monopoly. My suspicion is that WeWork thinks that they can use their scale to drive their landlords prices down the way Uber does to their drivers, and jack up the rent.

"We're going to really fuck anyone willing to do business with us" is not a compelling story for a company trying to grow, but it's great for investors. Also, I'm not just talking about the landlords and customers, you better believe the plan is for the lenders to get pennies back on the dollar too.


> It's worth a huge premium because it's getting a monopoly.

A monopoly on real estate?

Yeah no.


The commercial real estate market in just the US is valued at $16 TRILLION. It's absurd to even be discussing a monopoly.


I think the reason is softbank and other large late pre-IPO investors trying to push WeWork as a tech IPO. Once they dump their shares on the public market I guess they don't care that much again.

Doesn't change the fact WeWork is an overvalued real estate company that believes it is a tech company.


In my country WeWork offices are more expensive than competitors?


And the tech they do have is crappy, error prone, and inconsistent.

If they could figure out how to do printing without PCClient, now that would be a business worth 47B all on it's own...


Raspberry Pi + CUPS.

Can I have some billions now?


You need to dress it up a bit, like this:

Rpicup.com, the global leader in non augmented reality solutions, leveraging modern technologies to anticipate trends in the digital/reality interface. Rpicup brings printing, or as we like to say rpinting(tm) in to the 21st century.

Rpicups: Print your way to world peace.

Edit: I am of course available for consulting work, and to ensure my neutrality in such matters will only take my very modest fee as cash, no options.


I don't see blockchain or AI/ML in there??


Isn't that for after the pivot and or a Series B to C?


Has Softbank rung you up yet?


I would hope Softbank use instagram or something, telephones are so last century.


If you're good enough at sales, probably.


So true!!!


"They don't have any worthy propriety tech and their business model is collecting rent"

To be fair, you could say that about many 'tech' companies. Weworks 'innovation' may well be getting to over the hill tech company in record time!


What a wild ride. Maybe there is hope for the bullshit industrial complex around tech to finally start unwinding a little bit.


> This target is tied to a $6 billion credit line We Company secured from banks last month, that calls for an IPO to take place by the end of the year and raise at least $3 billion, one of the sources said.

> Were the New York-based company to fail to meet this target by the end of the year, it would need to secure alternative funding.

Does this mean, its now a ticking time bomb?


It definitely is.

When you read this and that Softbank has committed to buy 1/3 of the shares sold at IPO it does sound like it's going to pop sooner than later (that may include the vision fund if WeWork crashes)


I would not be surprised if Softbank's commitment ultimately changes to "we'll buy however many shares we need to buy to ensure the IPO raises at least $3B and the debt covenant is preserved".


So basically it depends on the founder / CEO to raise money to keep the burn rate up to keep the evaluation up. Stops working when the narrative changes.


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