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Comment by spaceman_2020 | Hacker News Reader

spaceman_2020

The second type of company will never be sustainably profitable. The barrier for entry is so low that the moment it turns on the profitability levers, some new startup will pop up with a slightly different model.

Happening to Uber in my local market. A new startup (BluSmart) with an all-electric fleet and full-time driver employees showed up. Uber's service quality declined as they started squeezing drivers for profits. The new startup has stolen a big chunk of marketshare (and more importantly, mindshare) and Uber is now considering exiting this market altogether.

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If Uber can't make the economics work with an assload of venture capital to be able to take huge losses, how would a (presumably?) less well funded competitor succeed? Uber too big/slow to adopt the second-comer's strategy?

Well, the second comer is raising a bunch of VC funding too (iirc raised $25M so far and in talks to raised $250M more). VCs buy in because "this time, it's different" narrative. Or more likely because they know they can offload their shares to the next VC in the next round (who can then dump on retail).

It's a game of musical chairs with the ultimate goal of dumping on retail investors. If not that, at least dump it on other VCs.

I'll bet that Uber has a lot of waste and bloat that the new guys could avoid

I've heard some horror stories about a rideshare rider paying inflated surge prices while the driver just gets the normal rate, for example. (not sure which service this was)

Theoretically it should be dirt cheap for Uber to leverage its customer service and app for any new market to compete on razor-thin margins, but in practice they could be wasting most of that money and leaving the door wide open to a really lean competitor

This new startup has a different model:

- Drivers are full-time employees, not contractors. They don't care about waiting or not showing up for short/long rides - they get paid either way.

- Currently, you can only schedule rides in advance. Rides are available in 15 minute intervals. Doesn't work for a lot of situations but is perfect for going to the airport - the drivers always show up on time and will happily wait (for a small per minute fee) as long as necessary. WAAAAY less hassle than booking an Uber.

- All vehicles are owned by the startup itself.

It's essentially a taxi company with electric cabs and a good app.

I am assuming it is Delhi-NCR in India. I got a chance to use BluSmart this week. I am impressed. The driver was courteous and the cab quality was good compared to the abused vehicles used by Uber drivers in India.

- Also no surge pricing. Pricing is fixed by a rate chart based on KM travelled.

The only issue right now is availability. From Delhi airport it is OK but when I tried to book one from the hotel to a friend's place the earliest availability was after 4 hours whereas Uber was 5 mins.

Yeah, agreed on all points. But if you know you have to be somewhere ahead of time, scheduling rides is such a better experience than the last minute dash for an Uber.

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