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Comment by hef19898 | Hacker News Reader

hef19898

Burried in Petersons mail is one nugget every B2B start-up needs to take to heart:

>> It's clear that our customers want us to be a profitable company they can rely on to solve important problems in their supply chain.

An endless stream of VC money allowing you to sell dollars for dimes does not achieve that.

Also, I had a feeling that Flexport might run into problems one day, when Softbank invested, Softbank being such a harbinger of problems its only saving grace is setting Saudi money on fire. Also also, Flexport is the most impressive comoany coming out of YC if you ask me. All they have to do, is to aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing" and they'll be fine.

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> Also, I had a feeling that Flexport might run into problems one day, when Softbank invested, Softbank being such a harbinger of problems its only saving grace is setting Saudi money on fire. Also also, Flexport is the most impressive comoany coming out of YC if you ask me. All they have to do, is to aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing" and they'll be fine.

One very underestimated aspects of the logistics business is trust. Specifically trust in your carrier/forward-freight/etc company.

The least thing that you as a SME and/or a BigCo. wants is to have one of the companies that deliver your physical goods (that implied some manufacturing and other resources in advance) being carrier for some unstable company[1] in terms of cash with financiers (e.g. Venture Capital) that characteristically has the reputation to make it or fail.

[1] - Of course airlines and some other companies has those two issues, but differently than most of VC business, in some cases the government and/or the market will come for a bail out.

I think this is an interesting point - I work in supply chain and commonly when tendering companies will say things like:

"We have been profitable for 20 years straight"

Being profitable in SCM is a sales point, being unprofitable is a risk.

> "We have been profitable for 20 years straight"

I don't know why this is more of a thing for other fields as well. I like my suppliers to be profitable for decades. All the new and shiny is ... well, new and shiny. Long term, I want stability, not new and shiny.

I have a close non-business connection to a reasonably large Intermodal carrier that serves the rails and the ports in the northeast US, and featured very prominently on their website page header is the number of years that they have been in continuous operation.

Fluffy promises of service or growth or expansion are either completely absent from their corporate Identity material or buried on second and third tier links away from the simple and straightforward proof that they have quite literally delivered, for the past two plus decades.

> aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing"

But that's the entire game. Being "tech-only" is attractive due to the magical thinking that drives its valuations, particularly in stodgy, capital-intensive industries like logistics and real estate (WeWork).

Companies like Schenker have tens of thousands of employees too, some unionized and some not. Startup companies aren't equipped to handle things like organized labour strikes.

> An endless stream of VC money allowing you to sell dollars for dimes does not achieve that.

It depends on who your customers are: if you're consumer-facing then perhaps an acquisition (with or without an IPO first) is just fine as you may be rolled into other product offerings.

Also, if consumer-facing, clones may pop up (even open source), so if you go broke then folks can perhaps transition somewhere else.

Softbank is the VC worlds' equivalent of the kiss of death.

Which raises the question why they are not involved in the eVtol sector, doesn't it?

Maybe give them a hint ;)

Also: AH is in Flexport as well, so that's two of those long shot investors.

I'm out of the eVtol stuff now, so they can talk to Softbank themselves ;-) Just wondering if Softbank not investing in something means the thing has actual potential or it is so far beyond hope even Softbank avoids it.

Flexport is intersting, on the one hand they have a solid future in the freight forwarding and 3PL sector. On the other hand they attract investors by selling themselves as tech disruptors. Not sure if that mix doesn't create quite some tension down the road, that go beyond 20%+ layoffs.

I definitely think there is a market for their services but the silly money approach won't play well in the logistics world where everybody else is running as lean and mean as they can. It's a world that I've had some business in (but years ago), your typical manager/executive in that world is very much feet-on-the-ground and a shaky promise that you are going to be in business a year or two out would already make some class of customers doubt about about whether this is the right time to bet on you.

Ironically, Flexport could do very well as a lean business, but I'm not so sure if it can succeed under competitive pressure if they don't get their house in order quickly.

Initially, meaning years ago, I saw Flexports strategy as positioning themselves as an acquisition target for a legacy forwarder. We'll see if they can successfully pivot to being a modern, lean logistics conoany able to stand on its own feet or not. Wouod be a shame if not, but then most investors, at least it seems so from the outside, have been investing based on the assumption of Flexport being a "tech" company. If those investors don't go along with a more cobservative, logistics focused path, well, Flexport might be in deep trouble.

This is a fairly common occurrence, a company taking on investment not realizing that this is giving them both an opportunity and a massive change in direction as well as reduced options. Because to keep those investors happy a lot of those 'lean' landing strategies are no longer on the table, it's a bit like a junkie getting a first shot of a new and dangerous drug. The drug isn't free but you don't quite realize that at that moment in time. But once your initial supply runs low and you need more it turns out that there was a price to pay after all.

CEO's believing that investors and company/founder goals are aligned are in for a very rude awakening except in the 3% or so cases where it all works out. For the rest of them that initial boost can cause spending and a company profile well in excess of what is sustainable and the step down to a sustainable level may well kill the company. That's sad, but what's even more sad is that a company in the same space that was run in a responsible way without playing the VC game may well end up being outcompeted before the VC money runs out in their funded competitor.

The main reason I bootstrapped my, now defunct, attempted start-up. I didn't want a boss, so why would I take on something even worse, an investor? I wanted to be able to settle for a profitable boutique kind of thing, only a small number of investors would be fine with that and I had neither money nor time in finding those.

You nailed it with your last sentence, VC nacked companies can simply out spend competitors, upsetting markets by virtue of having, or rather having had, endless money. And then some still go bust. And there is a complete generation of people thinking that is just normal, a good thing even, and see funding as a success for a company. Hopefully that changes now, but we'll see I guess.

I do tech DD and get to see the other side of the table as well, which can be pretty interesting. Some VCs are cautious and spend wisely, others are reckless and will throw money away in the hope of a jackpot. I've seen business cases that were so broken they essentially amounted to VC subsidized re-sale of luxury goods and yet nobody thought twice about it. I think I understand the rationale behind about the 50% or so of the deals that I see. But - and this is where it gets really interesting - I've been wrong on a low number of occasions too (from the investors perspective, they made out like bandits) and there is a pattern here: VCs don't necessarily need for the company to work out long term, they just need for it to work out until they sell their shares. This is known as the 'bigger fool' theory and you have to wonder how many of the 50% of the deals remaining falls into that category.

Finally: some VCs have a model that drives them to do this, they get paid over 'funds under management', and whether or not that eventually works out or not doesn't matter all that much, they get paid in the meantime. It will ultimately affect their ability to launch new funds but by then they usually have three funds in flight due to the delay between launching the first fund and the problems in the investments catching up with them, companies with money to burn can take a long time to fail.

I always thought that finding the "bigger fool" is annactual VC strategy, simply because it explains so much! YC play this really well, don't they? Getting in very early, having a lot of clout, making it easy for their portfolio companies to find invetstors, spreading their bets far and wide. Coming back to Softbank, they seem to be one of those "even bigger fools", short of a SPAC / ICO, don't they?

All in all, I realized I am quite happy doing a specialized job at big corp, not having to worry (I'm still interested, but is doesn't directly affect me anymore) about those things.

Edit: Always a pleasure running into discussions with you!

I think the 'bigger fool' is more of a 'plan-B' than a main strategy. And it only works so often.

Edit: likewise.

Well, at least they have a plan B, and, presumably, also a plan A!

That is two plans more than some!

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