Numlock Sunday: Ali Griswold talks the implosion of the sharing economy
By Walt Hickey
Welcome to the Numlock Sunday edition.
Companies that made a play for the so-called “instant delivery” market where they’d zoom wares to buyers inside of 30 minutes have taken a serious beating, and it’s causing a whole lot of money to evaporate. All told, some 13 firms have raised on the order of at least $14 billion from investors, and the market sure seems no closer to actually making it work. This included $4.93 billion raised by Gopuff, $2.75 billion for Rappi, $1.82 billion for Getir, $1.37 billion for Glovo, $1.31 billion for Gorillas and $1.1 billion for Flink. Add in some pocket change for some other Pokémon-sounding companies — many of which have been bought or which have collapsed — and you’re talking real money thrown at stuff that in retrospect seems a lot like a lockdown flash in the pan, doomed like so many sourdoughs and knitting hobbies to the 2020–22 history books.
We spoke about the bubble popping in instant delivery, the enormous amount of red ink across all the publicly traded sharing economy companies, Bird’s troubles amid the broader scooter crisis, and the very real possibility that Ali’s beat is becomes a smoking crater.
Ali can be found atand on Twitter.
This interview has been condensed and edited.
Ali Griswold, thank you so much for coming back on.
Yeah, love to be here, Walt.
Folks know you from Oversharing, which is just a magnificent newsletter, all about the sharing economy and smart cities and all that. One of the reasons that I really wanted to talk to you was you had this really great analysis of instant delivery and how the bubble seems to have popped in some regards. This was something people really thought was going to be a huge market and threw a bunch of money at, but that hasn't really become the case.
I'm going to say generally it does kind of feel like we're living in the end times of my beat, because all the companies I cover in the various sectors are slowly imploding one by one. It's the biggest bubble bursting, but it's also kind of niche, but I'm enjoying it.
With instant delivery, like you were saying, it's just this fascinating part of the economy. It's almost the holy grail of logistics, I would say. Because first we had Amazon and that was really big, that people could order things and have them delivered to their homes in a couple days. Pretty soon after Amazon, you got other companies that were , what if we do it instantly?
There's just always been this fascination with on-demand and instant delivery. Way back when, in the first dotcom bubble, we had Kozmo and we had Webvan, and both of those became pinups for the first dotcom bust. And then you got the gig economy boom, which was Postmates, Uber, DoorDash, Instacart, Caviar, Favor, a bunch more. And now we're in this new and current phase of instant delivery, which is like your Jokr, Gorillas, Getir, Gopuff, Zapp, Jiffy, Fridge No More, all these companies that, as far as I can tell, are mostly unified by having terrible names.
You kind of alluded to this, for whatever reason when these companies emerge onto the market, it's the end of the good times.
They raised a ton of money, the latest wave of instant delivery. When I say instant delivery, usually the companies will talk about that as 30 minutes or less, sometimes even 15 minutes or less. This batch of startups has collectively raised to date at least $14 billion. A lot of that has gone to the biggest player, which is Gopuff, but it's been spread throughout a dozen or so of these competitors.
The current ones are using what we call the dark store model; the easiest way to think about that is just a lot of little tiny delivery shops throughout your city, and they're not places that you as a customer can go and buy something from, but they're just purely tiny warehouses that allow the companies to be a 10-minute drive from your home instead of 30 minutes or an hour. Those are the companies that everyone was hyped up about in the latest delivery cycle.
Then a couple folks at Businessweek had an excellent profile of Gopuff that came out a couple weeks ago, and it just made all these points really well about yet another phase of instant delivery fervor. It had lots of great anecdotes about the Gopuff team and how they were sure, like everyone is, that this time they were going to make it work, and this time they had the model right. They brought in some more senior Amazon executives who were like, "Oh, it's really hard to deal with perishable food, you might not want to do this." And they were like, "No, we can do it. We figured it out. We've cracked the code."
And spoiler, they didn't.
You had this fascinating analysis that was basically just like, they plowed at least $14 billion into this. And two of them have just gone belly up. Several of them have cashed out for fairly low. The valuations don't seem to necessarily meet this a lot of the time.
A question I posed in my newsletter was, does hyper growth always end in a crash? Obviously, "always" is a big statement, and the answer is probably no. But I think what we're seeing a lot of lately with Silicon Valley, I mean, we're seeing it with instant delivery, we're this week seeing it with FTX, and with Bird scooters, which is what I was tweeting about right before we hopped on this call.
It's like there's this disease in Silicon Valley where companies that get hyped up a lot are given a lot of money because there's often a winner-takes-all mindset that if you get more money, it's going to give you the advantage you need to become the biggest, best player. Then receiving so much money, especially when the people running the companies often are young and inexperienced, the money allows them to detach growth from economic reality, which is maybe fine for a little bit, but the problem is the reality often doesn't set back in until it's too late.
That happens when the money runs out. Whether you can't get it from private investors anymore, or you go public and the public markets don't have the same sort of blind faith in your company that maybe your VC backers did. That's what we're seeing happen with a lot of these startups that are going bust.
I want to talk about that analysis that you did too, where you looked at the gig economy in public markets and there are only two companies that are above water.
Yeah, definitely. It was really interesting. So again, I just put together a list of companies I cover that are in or adjacent to the gig economy and that have gone public. One is doing very well, and that's Airbnb. I actually have been spending some time looking at Airbnb's financial statements this week. It's super interesting, they're definitely doing well, unqualified statement, they're doing well.
Then Fiverr. Fiverr was unexpected because I don't follow Fiverr that closely, but they're like a TaskRabbit, or Mechanical Turk. They do small, white collar tasks on a platform. They don't really get a lot of coverage, but they're doing well. They're up 32 percent.
And then everyone else is down. The worst performers are Bird and Helbiz, which are both scooter companies, which are down 97 percent, maybe more now.
We shall talk about Bird in a moment, but it's a blood bath across the board.
Lyft, WeWork, Grab. Wag and Rover, which you might recall are the dog walking companies, because surely a dog walking company is worth billions of dollars. They're all doing badly.
I don't want to generalize too much without having looked really closely at all of them, but I do think you could have this broad thesis about economic reality and the oversight of public markets and investors who have access to financial statements and these sorts of things that public companies are required to provide, compared to venture capitalists who are investing based on a combination of personality, hype and faith.
Can you expand on that?
Yeah. Look, I think a lot of VC firms are really good at what they do and they have lots of smart people who do due diligence and financial analysis. But it's always been true that there's a thing in Silicon Valley where people say they invest based on vibes.
Obviously, that's hugely problematic. That's how we see so many white men and it keeps out women and people of color and it excludes certain issues and types of businesses where the vibes aren't right. Not that someone would say that, but when you invest on vibes, often there's a certain kind of vibe.
I think that same thing tends to blind investors to holes or issues with companies when the thing that's magnetized them to it is maybe the personality of the CEO. One of the most prominent examples of this, of course, was WeWork and Masa Son, the CEO of SoftBank, who did very well early in his career, but has since truly lost a spectacular amount of money betting on companies that have just not lived up to his expectations of them.
It is interesting how America has a system where literally four times a year, companies are legally required to be honest. And that can be jarring for a startup that, as you mentioned, is kind of vibes based. Do you want to talk about Bird in that context?
Bird said Monday that it had inflated revenue figures for the past two and a half years. The reason for this is that one of the ways you can pay for a Bird scooter ride is they have what they call a Bird wallet in their app. So instead of paying with your credit card or hooking your credit card up for the ride, you can add cash to your Bird wallet and then pay out of that balance, kind of like you would with a gift card or if you got a Metro card for the subway and you loaded 20 bucks onto it and then you just swiped. This is a system we're all pretty familiar with.
Anyone who has taken a metro system with one of these cards knows that sometimes you run out of money. Depending on where you are, different things happen. In New York, if you don't have enough money, you can't swipe onto the subway. In Washington, D.C., you used to be able to go in, but then maybe you'd have to top up your credit before you exit. There are different ways of dealing with it that transit systems have.
Bird, it turns out, spent two and a half years, maybe more, recording as revenue people who didn't have enough money to pay for their rides. If I had $3 in my Bird wallet, but I took a ride that came out to $5, Bird wrote down on their balance sheet $5 in revenue from this ride, even though actually it was three because I still owed them two, but they didn't collect the other two.
This became a big problem for them, and led to them having to recalculate a lot of their balance sheet, which they're still in the process of doing. Today they just released some numbers on the changes in the revenue figures they'd put out, but it worked out to each quarter they said revenue was maybe 6 to 15 percent higher than it actually was, which is pretty big. That's not a rounding error, that's a noticeable error.
I thought that this was going to be a rounding error. I thought that they were doing just whatever due diligence. This is like $30 million over a year and a half.
Yeah, it's a lot of money. I was just doing the numbers and in the second quarter of this year they said revenue was $77 million, and then when they restated it, it was $67 million, so that's a $10 million difference. That's a lot of money, that's a seventh of their revenue. On a percentage basis it's also quite big.
This is sort of in the weeds media stuff, but it's especially satisfying because Bird has a quite aggressive comms team, and their CEO, Travis VanderZanden, got in a Twitter fight a couple years ago with an reporter from The Information, who had done a great article about how Bird was close to running out of cash because they burned $100 million in a single quarter.
Travis, the CEO, tweeted, "I'm on a flight back from Paris on a business trip and catching up on some fake news about Bird's financials," because everyone likes to call news they don't like "fake news" in the Trump era. Then he said, "Here's a chart that shows we're doing great," which had no axes labels, which is my favorite kind of chart. For Bird a couple years later to come out and be like, "Hey, just kidding. We were telling you the wrong numbers for our revenue," there's sort of a poetic irony to it.
I want to get back to what you were saying earlier, where you at some level fear that this is the end of your beat.
I mean, let's just talk about that seriously for a second. This is a pretty substantial reckoning in tech space. What do you think is happening at this point? Are you actually a little worried about a lot of the companies that compose this beat?
I would say yes and no. And I'll answer that so that it's not one of those vague, unsatisfying yes and nos.
I think companies like Uber are going to be fine because I think they really have achieved the scale they need to be ubiquitous. The reality of Uber is that even if it's currently cheaper to take a taxi in a lot of cities, which it is, people in the past 10 years have gotten so used to taking an Uber and using an app to get it. I just don't see a mass abandonment of that platform and going back to old ways of hailing a cab.
That doesn't mean that Uber will continue to always look like it is now, but I think they're going to stick around. I had an interesting conversation with an economist, Marshall Steinbaum, a couple months ago, and we were talking about this question of antitrust in the gig economy. He alluded to companies like Uber that subsidized their service for a long time being in what he called the "recoupment phase," which is the phase in which a company has become such a dominant platform and competitor that it's able to use its almost monopoly-esque scale to raise prices and sort of claw back the losses it made in the beginning, which also is what we've seen companies like Amazon do.
I think that would be the "and no" part of my answer.
I do think a lot of the companies, as always is true in startups, are not going to survive. I very much doubt Bird is going to survive. I think even scooters is a question mark. Micro-mobility is certainly very important to climates in cities in our urban future, but I think there's a real reckoning that has to happen with whether a scooter is something that makes sense for a private company to operate in the city, or if people are just going to buy them and use them as private devices.
I also think there are real questions about where money is going. If you look at the total amount of money that's gone to micro-mobility companies and places like Bird, there are different ways to look at it. You could argue that it's almost like R&D money and governments wouldn't have developed products, and we need Silicon Valley to test out new innovations that might break through and change our urban landscape.
You could also say, what would metro systems do with that money? What if instead of giving a billion dollars to Bird to burn on scooters, we gave a billion dollars to the MTA and let them really modernize the subway and made it an amazing system where the trains come every four minutes. What would that do to transit and ridership?
I think those would be the deeper questions I would want to sit down with, and I would hope that people in tech are having those conversations, but part of me doubts they are.
That seems like a good place to end it. Where can folks find you now?
Yeah. Well, that is the question of the moment, isn't it?
I am on Twitter for now @AlisonGriswold. I am on Substack at oversharing.substack.com. And beyond that, if you want to find me, I don't know, running into the forest off the grid as the digital world goes up in flames.
Yep. Well, I'll see you there.
If you have anything you’d like to see in this Sunday special, shoot me an email. Comment below! Thanks for reading, and thanks so much for supporting Numlock.
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