industryterm:venture capital

  • When a Town Takes Uber Instead of Public Transit - CityLab
    https://www.citylab.com/transportation/2019/04/innisfil-transit-ride-hailing-bus-public-transportation-uber/588154
    https://cdn.citylab.com/media/img/citylab/2019/04/RTS28UAK/facebook.jpg?1556565008

    Ihr Gemeinde hat keine öffentliches Busnetz, sie brauchen aber eins? Kein Problem, Uber macht das. Sofort, unkompliziert, flexibel, alle sind froh. Dann kommt der Erfolg. Und dann wird es teuer. So geschehen in einer Gemeinde in Kanada.

    Will das jemand in Deutschland?

    Das Rechenexempel zeigt, dass es egal ist, wie der private vermittler oder Beförderer heißt. Öffenliche System werden mit zunehmendem Erfolg immer billiger, private immer teurer. Ergo sind private Anbieter gut für Zwischenlösungen bis zum Aufbau eines funktionsfähigen öffentlichen Nahverkehrssystems. Wer sie beauftragt, muss den Zeitpunkt des Wechsels zur öffentlichen Lösung von Anfang an planen, sonst schlägt die Kostenfalle zu.

    Noch dümmer ist es, wenn öffentliche Angebote privatisiert werden. Dann wird es auch bei eingeschänktem Service sofort teuer.

    LAURA BLISS APR 29, 2019 - Innisfil, Ontario, decided to partially subsidize ride-hailing trips rather than pay for a public bus system. It worked so well that now they have to raise fares and cap rides.

    In 2017, the growing Toronto exurb of Innisfil, Ontario, became one of the first towns in the world to subsidize Uber rides in lieu of a traditional bus. Riders could pay a flat fare of just $3-$5 to travel to community hubs in the backseat of a car, or get $5 off regular fares to other destinations in and around town.

    People loved it. By the end of the Uber program’s first full year of service, they were taking 8,000 trips a month. Riders like 20-year-old Holley Hudson, who works for daycare programs at YMCAs around the area, relied on it heavily, since she doesn’t drive. To get to the college course practicums she was taking when the service launched, “I used Ubers on a Wednesday, Thursday, Friday basis,” she said.

    Now “Innisfil Transit” is changing its structure. As of April 1, flat fares for the city-brokered Ubers rose by $1. Trip discounts dropped to $4, and a 30-ride monthly cap was implemented. Town leaders say this will allow Innisfil to continue to cover costs.

    But Hudson and others see the changes as harmful, and a strange way of declaring success. As cities around the world turn to Uber, Lyft, and other apps as a quick fix for mobility service gaps, what’s now happening in Innisfil may be a good example of the risks.

    Innisfil’s journey with Uber began in 2015. Thickening traffic and an expanding population of seniors, students, and carless adults all signaled the need for some sort of shared mobility option in town. Just 45 minutes north of Toronto, the once-agricultural hamlet has recently ballooned in population, growing 17 percent from 2006 to 2016 to 37,000 residents.

    But as local leaders studied options for a fixed-route bus service, the cost/benefit analysis didn’t seem to add up. One bus to serve a projected 17,000 annual riders would cost $270,000 in Canadian dollars for the first year of service, or about $16 per passenger. And designing the system would be a drawn-out process.

    So instead, Innisfil did as so many people do when they’re in a hurry and facing a cumbersome bus ride: It hailed an Uber instead.

    “Rather than place a bus on the road to serve just a few residents, we’re moving ahead with a better service that can transport people from all across our town to wherever they need to go,” Gord Wauchope, then the mayor, said at the time.

    That logic is informing ride-hailing partnerships in dozens of communities across North America, all testing the notion that companies like Uber and Lyft can supplement or substitute for traditional service in some fashion. In certain cases, ride-hailing is replacing bus routes wholesale. In others, it’s responding to 911 calls, paratransit needs, and commuters traveling the last leg of a transit trip. Innisfil’s program was unique, in that the city branded the Uber partnership not as a complement to public transit, but as transit itself in a town without existing bus lines.

    Adoption of Innisfil Transit was fast and steady: The program racked up 86,000 rides in 2018. Nearly 70 percent of respondents to a city survey said that they were satisfied or more than satisfied with the new service—figures that would be the envy of any traditional public transit agency.

    But that popularity meant costs grew for the town. So now residents will have to cover more of their own trips. “It’s the growing ridership and popularity of the service,” town planner Paul Pentikainen said. “It’s been a great success, but there are also challenges with working with a budget.”

    “I would never get on a bus in Toronto and hear the driver say, ‘Sorry, but you’ve hit your cap.’”
    Normally, though, raising transit fares when ridership is growing is backwards logic. While passenger fares almost never cover the full cost of service, more passengers riding fixed-route buses and trains should shrink the per-capita public subsidy, at least until additional routes are added. On a well-designed mass transit system, the more people using it, the “cheaper” it gets.

    But the opposite is happening in Innisfil. Only so many passengers can fit in the backseat of an Uber, and the ride-hailing company, not the town, is pocketing most of the revenue. With per-capita costs essentially fixed, the town is forced to hike rates and cap trips as adoption grows. But this can create a perverse incentive: Fare bumps and ridership drops tend to go hand-in-hand on traditional systems.

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    The trip cap in particular bothers Hudson, who continues to rely on the Uber service as her primary mode of transportation. She expects that she’ll burn through her allotted 30 trips in a couple of weeks. The city has an application for residents to qualify for an extra 20 trips per month, but Hudson doesn’t plan to file. She’s opposed to the idea on principle.

    “I would never get on a bus in Toronto and hear the driver say, ‘Sorry, but you’ve hit your cap,’” Hudson said. “Uber was supposed to be our bus.”

    Hudson emailed town officials to complain about the new trip limit. In a reply, a city councillor named Donna Orsatti wrote that the cap had been implemented because “the system was being abused by those in the youth bracket who were using Uber at $3 to go to Starbucks (as an example), purchase a drink, then go back to school or meet their friends.”

    That sounded oddly judgmental to Hudson’s ears. And it’s not how public transit is supposed to work: “We shouldn’t be criticized for where we’re going,” she said.

    In an email to CityLab, Orsatti explained her intentions. The cap was never meant to restrict residents, but rather “to ensure it is available to all residents to allow them transportation to essential service areas,” she wrote. And Pentikainen acknowledged that, while the rate structure might work differently from traditional transit, Uber still makes more sense for Innisfil. The city’s subsidy for the program grew from $150,000 in 2017 to about $640,000 in 2018, and for 2019, it has allocated another $900,000. On a per trip basis, Pentikainen said, it’s still a lot cheaper than the projected bus costs, and more equitable.

    “It’s a service that the whole town has access to, versus providing a service that only those who can walk to bus stops can,” he said.

    Pentikainen says that—despite Orsatti’s email—no city report called out Starbucks-toting teens for “abusing” the system. But he did note that the cap was partly designed to discourage short-distance trips that can be accomplished on foot or bike for most people.

    According to an Uber spokesperson, the ride-hailing company also advised the city to implement the cap as a way to control costs.

    Uber has touted the success of the Innisfil program as it invites other cities to adopt its model. Part of the attraction is that ridership is sinking on public transit systems across North America, as on-demand transportation apps has boomed. City decision-makers sometimes opt for Lyft and Uber as a way to lure travelers back, or to cut costs on low-performing routes. In other cases, the rise of ride-hailing is used as a bad-faith justification for further slashing bus service.

    Success has been mixed for transit agency/ride-hailing marriages. Many programs have seen weak ridership, and cities can find themselves hamstrung in their ability to make adjustments, since ride-hailing companies are famously guarded about sharing trip data. Some, including Pinellas County, Florida, which subsidizes certain Uber trips, have heard complaints that municipal discounts don’t go very far as the on-demand transportation giant has raised its own fares.

    Now that both Uber and Lyft have filed initial public offerings, industry analysts predict that the costs of these services—which have been heavily subsidized by their billions in venture capital backing—will creep steadily upwards as public investors expect returns. And city governments and commuters who come to rely on ride-hailing as a social service won’t have much control.

    In Innisfil, Uber fares have held steady, according to Pentikainen. And the company has shared certain data upon request. As the city grows and ride-hailing services evolve, it will continue to evaluate the best way to mobilize its residents, Pentikainen said. Eventually, Innisfil might be interested in adopting Uber’s latest transit-like offering, which is called Uber Bus. Similar to the microtransit startup Via and its failed predecessors Chariot and Bridj, riders are scooped up in larger vans at designated locations on a schedule that is determined based on demand.

    And if Uber ever raised fares to the point where riders could no longer rationalize the costs, the city would go back to the drawing board. In some parts of town, Pentikainen said, they might even consider a regular fixed-route bus. “There are a range of ways to consider efficiencies from the town’s perspective,” he said. “All along, this was a starting point. We have to react along the way.”

    Still, the idea of further changes made in reaction to the app’s contingencies worries Hudson. That doesn’t sound like very reliable service for her, nor for the older people and students she sees riding in Ubers en route to school and doctor’s appointments. If Innisfil makes further tweaks, Hudson says she might consider getting her license in order to avoid the stress. But she fears more for what could happen to those who can’t.

    “Uber was supposed to be our public transit,” she said. “Now we have to think about whether we can take an Uber or not.”

    #Kanada #ÖPNV #Bus #Taxi #Uber #disruption #Rekommunalisierung

  • Founder Interviews: Todd Olson of Pendo
    https://hackernoon.com/founder-interviews-todd-olson-of-pendo-4d0f1030d4ca?source=rss----3a8144

    Learn how Todd Olson created Pendo, a product experience platform that helps software product teams deliver software users love.What’s your background?Before I started Pendo in 2013, I had a long career building companies and products. I had a passion for programming and entrepreneurship from the beginning. I was writing code as an intern at a large commercial bank when I was 14, and in my senior year at Carnegie Mellon, I became a part-time student in order to start a software company with a friend. It was called Cerebellum Software, and we raised more than $20 million in venture capital. I went on to found another company called 6th Sense Analytics which was acquired by Rally, where I became VP of product and contributed to a successful IPO.At Rally, I experienced the need that would (...)

    #founder-interview #founders #davis-baer #founder-stories #founder-advice

  • Five #bootstrapping Hacks Every Founder Should Know
    https://hackernoon.com/considering-bootstrapping-your-startup-follow-these-tips-to-reach-your-g

    From investigating coworking spaces to avoiding credit cards, here’s some advice on bootstrapping a #startup in 2019.Have you ever heard about the old saying, “Pull yourself up by your bootstraps?” It means improving one’s situation or getting success through one’s own efforts, without outside help. Why am talking about bootstrapping here?It applies to your startup, too.Bootstrapping your startup means that keeping your #business updated and on the growing stage with little or no venture capital or you can say without any external investment. In short, this word symbolizes the business owners typically relies on their own savings and revenues in order to operate and grow their business entity in the race.Image credits: Photo by Danielle MacInnes on UnsplashIt’s not easy to do, but the rewards (...)

    #startup-lessons #entrepreneur

  • Seed #fundraising — The 4 Stages of a VC Process
    https://hackernoon.com/seed-fundraising-the-4-stages-of-a-vc-process-ef1c2039e398?source=rss---

    Seed Fundraising — The 4 Stages of a VC ProcessThe venture capital (“VC”) meeting process can be opaque and leave you wondering when you’ll get a decision on if they’ll invest in your company or not. Here’s an overview of the standard process for seed funds (in Silicon Valley) and what you should expect at each stage.Stage 1 — Initial FilteringThis first meeting is an introduction between the VC and yourself. Their goal is to find out if your company is worth exploring further for investment.What to expect: These meetings are usually casual and sometimes scheduled outside of an office setting, such as a coffee shop or members club (e.g. Philz Coffee). Because investors like to talk, it’s up to you to focus their attention on your pitch; and always use your deck if you can. If the VC is interested, (...)

    #venture-capital #startup #seed-investment #seed-funding

  • How To Master the Art of the Elevator Pitch
    https://hackernoon.com/how-to-master-the-art-of-the-elevator-pitch-2d5e81bd2133?source=rss----3

    If you’re serious about raising venture capital, you’ve got to master the art of the elevator pitch. The prototypical pitch is a 30-second (or less) description of what your company does, why it’s unique, and what type of problem it is trying to solve. The best elevator pitches are memorable and attention-getting and set you apart from all the other companies in your industry. Easy, right?In many ways, you can think of an elevator pitch functioning much like a movie trailer for an upcoming Hollywood blockbuster movie — studio execs want to show just enough of the “good stuff” to get people excited about seeing the movie. In any movie trailer, big explosions are good. So are big-name Hollywood stars. If a major media outlet has already said something like, “This is the must-see movie of the (...)

    #startup #pitching #elevator-pitch #seed-investment #venture-capital

  • Scaling AI Startups
    https://hackernoon.com/scaling-ai-startups-e4f85e194eaf?source=rss----3a8144eabfe3---4

    Not so long ago, AI startups were the new shiny object that everyone was getting excited about. It was a time of seemingly infinite promise: AI was going to not just redefine everything in business, but also offer entrepreneurs opportunities to build category-defining companies.A few years (and billions of dollars of venture capital) later, AI startups have re-entered reality. Time has come to make good on the original promise, and prove that AI-first startups can become formidable companies, with long term differentiation and defensibility.In other words, it is time to go from “starting” mode to “scaling” mode.To be clear: I am as bullish on the AI space as ever. I believe AI is a different and powerful enough technology that entire new industry leaders can be built by leveraging it, as (...)

    #scale-ai-startups #hackernoon-top-story #ai-startups #scaling-ai-startups #startup

  • Top European VCs for Seed #funding | Startup Stash
    https://hackernoon.com/top-european-vcs-for-seed-funding-startup-stash-198cea58b7fa?source=rss-

    Top European VCs for Seed FundingWhen you create your own startup, one of the most important things to consider is where you will get your early funding from. When you begin your project, revenue is likely to be scarce or merely stable, rather than abundant and the success of your business may be centered around whether or not you can secure external investment to jumpstart your venture.With this in mind, we will be exploring seven European venture capital firms that are experts in their selected industries, who may be able to help you secure the funding that is necessary for your sustained success.SNÖ VenturesSNÖ Ventures are a Norweigan early-stage venture capital firm, that offers investments to technology-related startups and business owners. The team at SNÖ Ventures have extensive (...)

    #seed-investment #european-venture-capital #european-seed-investing #european-vcs

  • D2C 2.0: The Rise of Infrastructure
    https://hackernoon.com/d2c-2-0-the-rise-of-infrastructure-d2172fdf59d4?source=rss----3a8144eabf

    Billions of dollars in venture capital have poured into direct-to-consumer (D2C) brands over the past ten years, funding hundreds of upstart brands challenging the incumbents in nearly every product category. These brands, once ignored by investors, are now raising multi-million dollar rounds pre-launch and recruiting top talent.There’s no question that there’s hype around the D2C space, but we’ve seen far less interest in the infrastructure that allows these brands to scale. D2C brands uniquely own every step of their production and distribution process — from product design to packaging to marketing to fulfillment. New brands can struggle to put all these pieces together, while established brands face challenges like figuring out how to serve an international audience and maintaining (...)

    #venture-capital #startup #branding #hackernoon-top-story #entrepreneurship

  • The world’s 310 unicorns are valued at over $1,000 billion
    https://hackernoon.com/the-worlds-310-unicorns-are-valued-at-over-1-000-billion-3987e8a56900?so

    According to CB Insights’ unicorn tracker, unicorns have raised a combined total of nearly $257 billion.Data by #startup and venture capital intelligence firm CB Insights show a total of 310 private companies around the world valued at more than $1 billion as of January 2019. Last year, 112 new companies joined the global unicorn club, a 58% increase from the 71 new unicorns in 2017.The collective worth of all unicorns currently identified by CB Insights — and published in a new infographic under 13 categories — is $1,052 billion. They have raised a combined total of nearly $257 billion.Credits: CB InsightsThe top 10 unicorns by market value are:Bytedance (valued at $75 billion)Uber ($72 billion)Didi Chuxing ($56 billion)WeWork ($47 billion)Airbnb ($29.3 billion)SpaceX ($21.5 billion)Palantir and (...)

    #tech-unicorns #all-tech-unicorns #all-unicorn-companie #how-many-tech-unicorn

  • My 2018 #cryptoart/Music ReCap
    https://hackernoon.com/my-2018-cryptoart-music-recap-12c8aa45a22d?source=rss----3a8144eabfe3---

    I decided to focus full-time in this space towards the end of 2017. Seems like a decade ago now.::::Signal Warning::::I think it’s important to note that as an independent creative, I have the luxury to speak freely and I don’t have to tailor my thoughts to appease a venture capital investor or boss. I’m a Bitcoiner. I play with #ethereum too, but mainly because that’s where much of the cryptoArt experimentation has moved to over the past year but I would love to help some more #bitcoin-specific art/music projects get on their feet as well. (I’ve also fiddled with Waves, EOS and Tron but not enough to incorporate their protocols into my work yet.)So, I’ve recapped my contributions and content last year and hope to expand and continue learning more in 2019.Art On The Blockchain Podcast (...)

    #art-on-the-blockchain #counterparty

  • 2018: The Downfall of Crypto Funds
    https://hackernoon.com/2018-the-downfall-of-crypto-funds-9d7a2642dc96?source=rss----3a8144eabfe

    “Past performance is not a reliable indicator of future performance”Crypto hedge funds are part of a larger group of crypto funds, including those based on venture capital and private equity. Grouped together, there are currently 622 crypto funds across all categories, 303 of those being crypto hedge funds, which represent assets of less than $4 billion, according to the research. Half of the funds are based in the U.S., multiple launches have been seen in Australia, China, Malta, Switzerland, The Netherlands and the U.K. this 2018. 2017 was a great year to start a crypto hedge fund. Great returns.Is it hard to perform in bull markets?2018, on the other hand, has seen a significant downturn in many of the cryptocurrencies. Many of these coins make up a strong percentage of most of the (...)

    #cryptocurrency #finance #blockchain #investing #bitcoin

  • How A World Driven By The #blockchain Might Look Like
    https://hackernoon.com/how-a-world-driven-by-the-blockchain-might-look-like-6ebff6ee3e50?source

    According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others).In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).However, according to blockchain investor Paivinen due to ease of forking, incentives to compete and improved interoperability and interchangeability also in a blockchain-based economy, protocols might get thinner.Although the marginal value of scale might be lower compared to a web-based economy, where massive scale created an economic advantage. The success of the Blockchain will depend on its (...)

    #blockchain-driven #blockchain-world #hackernoon-top-story #blockchain-driven-world

  • Who Is Satoshi? A Collection of Bitcoin Interviews
    https://hackernoon.com/who-is-satoshi-a-collection-of-bitcoin-interviews-def08f8dc35?source=rss

    The following three conversations represent a wealth of knowledge from some of the biggest movers and shakers in the blockchain industry.Arianna Simpson provides some expert commentary on the venture capital front, Peter Todd breaks down the technical background of Bitcoin, and Tone Vays gives a first-hand account of the carnivore diet (among a few other insights).Security, Venture Capitalism, and Macro Trends in Crypto: A Conversation with Arianna SimpsonIf you haven’t heard of Arianna Simpson, then most likely you’re just joining the crypto world. The BitGo PM turned venture capitalist has had skin in the game since 2012, which in crypto years, is more than enough to solidify one’s credibility. Simpson has developed a keen eye since reading Satoshi’s white paper six years ago, working (...)

  • STO Market Outlook 2019
    https://hackernoon.com/sto-market-outlook-2019-8d504732854a?source=rss----3a8144eabfe3---4

    By Tatiana KoffmanIf 2017 was the year of the utility token, with ICO’s raising more than $5.6B, 2018 will be remembered as having paved the way for a new generation of security tokens. Issuers and investors continue to remain curious about the benefits of tokenization such as increased liquidity, fractional ownership, decreased issuance costs, innovative structures and greater pricing efficiency. After conducting an independent study of 130+ STOs currently on the market, the following are some trends forming for 2019.Market TrendsDeal Size: The current range of deals run from $2M for smaller equity fundraises for consumer tech companies to $1B for institutional venture capital deals.Industry: The vast majority of STOs are are happening in the Real Estate, Finance, Tech and Energy (...)

    #sto-market-outlook #cryptocurrency #venture-capital #fundraising #blockchain

  • 2019’s Security Token Market Trends
    https://hackernoon.com/8-security-token-market-trends-to-watch-out-for-in-2019-718f8b7652cd?sou

    By: Kadeem Clarke, Investment Manager at 8 Decimal CapitalAs a #blockchain-focused venture capital fund, 8 Decimal Capital is focused on assisting in the mass adoption of blockchain technology. We believe that this can be done by investing in the future, not only what’s popular. This is why we are consistently conducting thorough research, due diligence, and speaking to industry leaders. As of recent, our research has been primarily geared towards the security token space.Based on our research, here are 8 security token market trends to look out for in 2019:Note: This is merely my opinion and I expect many readers to have differing viewpoints.1. Exchanges won’t be successful in 2019As the security token market gains popularity among the blockchain community, many people are focused on the (...)

    #market-trends #security-token #finance-and-banking #blockchain-development

  • Kraken Is Valued At $4 Billion, And #bitcoin Tops Google Search In 2018
    https://hackernoon.com/kraken-is-valued-at-4-billion-and-bitcoin-tops-google-search-in-2018-c65

    The State of The Market — December 13, 2018BTC: $3,440.26 (-1.17%)XRP: $0.304427 (-1.03%)ETH: $90.52 (-0.44%)After a few action-packed days, the market is relatively calm today. Bitcoin is trading above $3,400 and is not expected to crash below $3,000 anytime soon. With a few more days left for 2018, a short-term rally is possible as institutional platforms launch. The market changed by just $1 Billion today. Dentacoin (DCN) is up by nearly 18%, making it the top gainer in the last 24 hours.In other news, Basis, a stablecoin which raised $133 million from Alphabet’s venture capital arm GV, Baincapital Ventures, Andreessen Horowitz and others, is closing its doors due to regulatory issues, according to The Block. Basis plans to return most of the funds it raised. Also, Allianz Global (...)

    #cryptocurrency #blockchain #cryptocurrency-news #cryptocurrency-investment

  • The VC Approach In Today’s Tech Markets with Steve Schlafman
    https://hackernoon.com/the-vc-approach-in-todays-tech-markets-with-steve-schlafman-c0366c792c0f

    Episode 13 of the Hacker Noon #podcast: An interview with venture capitalist Steve Schlafman from Primary Ventures.Listen to the interview on iTunes, or Google Podcast, or watch on YouTube.In this episode Trent Lapinski and Steve Schlafman discuss venture capital, leadership, executive coaching, and even mediation.“For me I always ask myself is this an entrepreneur who that is special, talented, tenacious, and on a mission.”“Is this someone who can go and tell a great story, inspire potential employees, investors, partners. Is this someone who people are going to gravitate towards? In a competitive hiring environment, are they going to be able to build a World class team?”“I don’t need to see a huge amount of traction. I need to answer the question: Is there enough evidence or an unique (...)

    #venture-capital #executive-coaching #hacker-noon-podcast #technology

  • How To Assert Yourself As A Woman In Tech
    https://hackernoon.com/how-to-assert-yourself-as-a-woman-in-tech-6c329611f7b8?source=rss----3a8

    It’s tough to be a woman in the male-dominated tech world.As a female front-end developer for over a decade, I often hear feedback from #women who are told they aren’t able to do the job as well as men. That they’re too emotional, and incapable of understanding the more technical concepts — the code or the #technology.This narrative is completely false. But it’s one that women themselves take on as a self-fulfilling prophecy: because they’re treated so poorly, they think they must be less worthy.It breaks my heart when extremely smart, talented women say they don’t feel heard or respected by men in their industry.Unfortunately, the stats reinforce this gender inequality. In 2017, female founders of all-women teams received just 2% of all venture capital dollars. And most firms don’t even report (...)

    #empowerment #women-in-tech #empowering-women

  • Uber Releases Ugly 3Q 2018 Results: Losses Widen to $1.1 Billion, Growth Slows | naked capitalism
    https://www.nakedcapitalism.com/2018/11/uber-releases-ugly-3q-2018-results-losses-widen-to-1-1-billion-grow

    Uber has no plan to make money – it would have to raise fares 2 to 3 times to become profitable – how long will investors continue to subsidize a Company that promises to make it up in volume.

    Alles klar?

    Posted on November 15, 2018 by Yves Smith
    From Hubert Horan:

    3q P&Ls released tonight. Losses and margins got worse. Gross revenue growth continues to slow down, showing their inability to fix the fundamental weakness in the core car service business.

    Expenditures on the marginal business (food delivery, scooters) that are key to the longer term growth narrative drag results down further.

    Mainstream media coverage hasn’t reached “The Emperor has no clothes” point yet, but stories are raising explicit doubts about the viability of next year’s IPO.

    Actually, as we’ll discuss, there are Uber skeptics, just not necessarily among reporters.

    First, from Eric Newcomer at Bloomberg, who shows doubts about Uber’s proposed IPO valuation of $100 billion and its oft-made claims that it’s another Amazon:

    Uber’s sales are dramatically slowing even as the ride-hailing company is spending more to fuel global growth, particularly in its food delivery business. Revenue growth of 38 percent in the third quarter was almost half of what the growth rate was six months earlier, when the company was negotiating a $9.3 billion investment led by SoftBank Group Corp.

    That’s a troubling sign for a serially unprofitable business that hopes to get valued like a technology company in a planned initial public offering next year. Uber Technologies Inc. lost $1.07 billion in the quarter ended Sept. 30, an improvement over a year ago, but the loss widened 20 percent from the second quarter.

    Highly valued companies typically grow quickly or generate big profits — and great ones do both. In the fourth quarter of 2005, Amazon.com Inc. had about the same revenue as Uber’s today — just under $3 billion, not adjusted for inflation. Yet, Amazon earned $199 million in profit and was worth about a fourth of Uber’s $76 billion valuation.

    TechCrunch was more credulous, and also touted a more flattering profit metric:

    Uber, which is expected to go public sometime next year, just released its Q3 2018 financial results. Uber’s net losses increased 32 percent quarter over quarter to $939 million on a pro forma basis, though Uber expected these losses as it continues to invest in future growth areas.

    On an earnings before interest, taxes, depreciation and amortization basis (EBIDTA), Uber’s losses were $527 million, up about 21 percent quarter over quarter. And as Uber prepares to go public, the company has started presenting the income statements with stock-based compensation.

    Ten years from now, Uber CEO Dara Khosrowshahi envisions its core ride-hailing business accounting for less than 50 percent of Uber’s overall business, Khosrowshahi told me at TechCrunch Disrupt SF 2018. That means Uber expects businesses like Eats, scooters, bikes and freight to contribute to be more of Uber’s business, which requires Uber to invest heavily in those businesses.

    And why should we expect UberEats and scooters to become profitable? Just because Uber wants it to be so?

    The New York Tines’ story came off like a string of Uber talking points, with the only apparent real cause for pause that Lyft is also planning its IPO for 2019. For instance:

    Uber’s I.P.O. is likely to create an enormous financial bonanza for its many investors and shareholders, including the company’s co-founder, Travis Kalanick, as well as venture capital firm Benchmark and the Japanese conglomerate SoftBank.

    To get ready for a public offering, Mr. Khosrowshahi has been trimming Uber’s money-losing businesses. Uber has withdrawn from markets including Southeast Asia and Russia, where it faced stiff competition and was spending a lot of money. It has focused on other areas, like food delivery, as well as other geographies that show more potential for growth. On Wednesday, Uber began a loyalty program that will give riders access to extra perks the more frequently they use Uber services.

    Uber said Uber Eats, its food delivery business that started in 2015, was growing rapidly, with bookings through its separate app up 150 percent from last year.

    Yet Uber’s spending also continues to rise. The company said its total costs and expenses were $3.7 billion in the third quarter, up from $3.5 billion in the prior quarter.

    It would be more accurate to say that Uber is cutting some loss-generating operations while expanding others.

    Finally, to the Wall Street Journal:

    The results for the three months ending in September show that Uber is still growing quickly but is likely to be unprofitable for some time. In documents for a bond offering last month, Uber said it expected it wouldn’t reach a profit for at least three years.

    Uber has turned its attention to providing customers with a host of transportation options in addition to its core ride-hailing service. Mr. Khosrowshahi said he is particularly hopeful about electric-scooters and bicycle rentals, which he has said can be a low-cost replacement for short car trips in urban centers.

    “What we’re going after is essentially to debundle car ownership,” Mr. Khosrowshahi said in an interview at The Wall Street Journal’s WSJ Tech D.Live conference Tuesday. “A world in which the people who cannot afford to buy a car have access to consistent mobility wherever they are, that’s a better world.”

    Of the 22 comments on the story so far, only one read as positive, and other readers dismissed it as bad sarcasm. And remember that WSJ readers viciously attacked the initial stories on the Theranos fraud, accusing the journalists of being jealous of a talented entrepreneur. A sampling:

    charles cotton

    I’ve been tracking Uber and its copy cat, Lyft since 2013. The underlying root of their both their problems is that there business platform is toxic and can not ever make a profit. The burn rate is over 90% of investors money which has resulted in a meltdown. Outside investors have dried up and quite frankly dismayed. Such investors were all reckless, naive, and greedy being lured by hyped, false financials and advertising.

    The promise of “get in quick, we’re going public’” being the worm on the hook. There were no accurate disclosures or prospectus given to the investor…. No one really knows what is going on at Uber.”

    Joseph Swartz

    Uber may be the biggest con game the Street has seen in decades…..an IPO of a Company that loses billions of dollars, subsidizes every ride we take, and has gone off the path with Uber Eats, a ridiculous venture. I recently read it’s drivers last about 6 months, on average, before quitting.

    Uber has no plan to make money – it would have to raise fares 2 to 3 times to become profitable – how long will investors continue to subsidize a Company that promises to make it up in volume.

    Gary Ayer

    Uber is raising money via a public offering because otherwise they would go out of business due to continuous losses.

    Jef Kurfess

    Doing a thriving business selling dollar bills for $.85?

    So Uber’s PR machine is having less and less success in keeping its story going. But will polite press amplification be enough to save Uber’s bacon.

    #Uber

  • Founder Interviews: Ayush Jaiswal of Pesto
    https://hackernoon.com/founder-interviews-ayush-jaiswal-of-pesto-bd3144f42e9a?source=rss----3a8

    After seeing how little the average software engineer in India makes compared to their peers in the US, Ayush created a bootcamp that teaches coders how to be effective remote employees, then helps them get full-time remote jobs at US tech companies, making up to 10x more than they were making before.Davis Baer: What’s your background, and what are you working on?I’m Ayush from New Delhi. I dropped out of college after a year to work fulltime on the startup I wanted to build. I was disappointed looking at the broken education system. I decided to self-study.A couple of years ago, I found venture capital very cool. I made a TV show (Shark tank of India) as an associate producer and invested in a few startups as a scout for another firm- Project Guerrilla.I’ve been working on different (...)

    #davis-baer #remote-working #founder-stories #founder-advice #founders

  • Top 5 industries Where Accelerators are Investing in Latin America
    https://hackernoon.com/top-5-industries-where-accelerators-are-investing-in-latin-america-c33a6

    Venture capital investments in Latin America have already surpassed US$600 million for the first half of 2018. This is significant, given that the amount of venture capital investment annually from 2013 to 2017 was around US$500 million, according to the Latin American Private Equity and Venture Capital Association (LAVCA).We can deduce that this significant rise of investment is largely from the increase of foreign and corporate investors in Latin America, as well as the strengthening presence of Latin American accelerators.Accelerators are vital programs that help startups in the early stages of their businesses. The programs often have a highly competitive application process, and accept startups in cohort batches one or more times per year. Typically, a seed investment is offered (...)

    #venture-capital #latin-american-startups #latin-america #startup-ideas #startup

  • The mad, twisted tale of the electric scooter craze
    https://www.cnet.com/news/the-mad-tale-of-the-electric-scooter-craze-with-bird-lime-and-spin-in-san-fran

    Dara Kerr/CNET

    For weeks, I’d been seeing trashed electric scooters on the streets of San Francisco. So I asked a group of friends if any of them had seen people vandalizing the dockless vehicles since they were scattered across the city a couple of months ago.

    The answer was an emphatic “yes.”

    One friend saw a guy walking down the street kicking over every scooter he came across. Another saw a rider pull up to a curb as the handlebars and headset became fully detached. My friend figures someone had messed with the screws or cabling so the scooter would come apart on purpose.

    A scroll through Reddit, Instagram and Twitter showed me photos of scooters — owned by Bird, Lime and Spin — smeared in feces, hanging from trees, hefted into trashcans and tossed into the San Francisco Bay.

    It’s no wonder Lime scooters’ alarm isn’t just a loud beep, but a narc-like battle cry that literally says, “Unlock me to ride, or I’ll call the police.”

    San Francisco’s scooter phenomenon has taken on many names: Scootergeddon, Scooterpocalypse and Scooter Wars. It all started when the three companies spread hundreds of their dockless, rentable e-scooters across city the same week at the end of March — without any warning to local residents or lawmakers.

    Almost instantly, first-time riders began zooming down sidewalks at 15 mph, swerving between pedestrians and ringing the small bells attached to the handlebars. And they left the vehicles wherever they felt like it: scooters cluttered walkways and storefronts, jammed up bike lanes, and blocked bike racks and wheelchair accesses.

    The three companies all say they’re solving a “last-mile” transportation problem, giving commuters an easy and convenient way to zip around the city while helping ease road congestion and smog. They call it the latest in a long line of disruptive businesses that aim to change the way we live.

    The scooters have definitely changed how some people live.

    I learned the Wild West looks friendly compared to scooter land. In San Francisco’s world of these motorized vehicles, there’s backstabbing, tweaker chop shops and intent to harm.

    “The angry people, they were angry,” says Michael Ghadieh, who owns electric bicycle shop, SF Wheels, and has repaired hundreds of the scooters. “People cut cables, flatten tires, they were thrown in the Bay. Someone was out there physically damaging these things.”

    Yikes! Clipped brakes

    SF Wheels is located on a quaint street in a quintessential San Francisco neighborhood. Called Cole Valley, the area is lined with Victorian homes, upscale cafes and views of the city’s famous Mount Sutro. SF Wheels sells and rents electric bicycles for $20 per hour, mostly to tourists who want to see Golden Gate Park on two wheels.

    In March, one of the scooter companies called Ghadieh to tell him they were about to launch in the city and were looking for people to help with repairs. Ghadieh said he was game. He wouldn’t disclose the name of the company because of agreements he signed.

    Now he admits he didn’t quite know what he was getting into.

    Days after the scooter startups dropped their vehicles on an unsuspecting San Francisco, SF Wheels became so crammed with broken scooters that it was hard to walk through the small, tidy shop. Scooters lined the sidewalk outside, filled the doorway and crowded the mechanic’s workspace. The backyard had a heap of scooters nearly six-feet tall, Ghadieh told me.

    His bike techs were so busy that Ghadieh had to hire three more mechanics. SF Wheels was fixing 75 to 100 scooters per day. Ghadieh didn’t say how much the shop was making per scooter fix.

    “The repairs were fast and easy on some and longer on others,” Ghadieh said. “It’d depend on whether it was wear-and-tear or whether it was physically damaged by someone out there, some madman.”

    Some of the scooters, which cost around $500 off the shelf, came in completely vandalized — everything from chopped wires for the controller (aka the brain) to detached handlebars to bent forks. Several even showed up with clipped brake cables.

    I asked Ghadieh if the scooters still work without brakes.

    “It will work, yes,” he said. “It will go forward, but you just cannot stop. Whoever is causing that is making the situation dangerous for some riders.”

    Especially in a city with lots of hills.

    Ghadieh said his crew worked diligently for about six weeks, repairing an estimated 1,000 scooters. But then, about three weeks ago, work dried up. Ghadieh had to lay off the mechanics he’d hired and his shop is back to focusing on electric bicycles.

    “Now, there’s literally nothing,” he said. “There’s a change of face with the company. I’m not exactly sure what happened. … They decided to do it differently.”

    The likely change? The electric scooter company probably decided to outsource repairs to gig workers, rather than rely on agreements with shops.

    That’s gig as in freelancers looking to pick up part-time work, like Uber and Lyft drivers. And like Nick Abouzeid. By day, Abouzeid works in marketing for the startup AngelList. A few weeks ago, he got an email from Bird inviting him to be a scooter mechanic. The message told Abouzeid he could earn $20 for each scooter repair, once he’d completed an online training. He signed up, took the classes and is ready to start.

    “These scooters aren’t complicated. They’re cheap scooters from China,” Abouzeid said. “The repairs are anything from adjusting a brake to fixing a flat tire to adding stickers that have fallen off a Bird.”

    Bird declined to comment specifically on its maintenance program, but its spokesman Kenneth Baer did say, “Bird has a network of trained chargers and mechanics who operate as independent contractors.”

    All of Lime’s mechanics, on the other hand, are part of the company’s operations and maintenance team that repairs the scooters and ensures they’re safe for riders. Spin uses a mix of gig workers and contract mechanics, like what Ghadieh was doing.
    Gaming the system

    Electric scooters are, well, electric. That means they need to be plugged into an outlet for four to five hours before they can transport people, who rent them for $1 plus 15 cents for every minute of riding time.

    Bird, Spin and Lime all partially rely on gig workers to keep their fleets juiced up.

    Each company has a different app that shows scooters with low or dead batteries. Anyone with a driver’s license and car can sign up for the app and become a charger. These drivers roam the streets, picking up scooters and taking them home to be charged.
    img-7477

    “It creates this amazing kind of gig economy,” Bird CEO Travis VanderZanden, who is a former Uber and Lyft executive, told me in April. “It’s kind of like a game of Pokemon Go for them, where they go around and try to find and gobble up as many Birds as they can.”

    Theoretically, all scooters are supposed to be off city streets by nightfall when it’s illegal to ride them. That’s when the chargers are unleashed. To get paid, they have to get the vehicles back out on the street in specified locations before 7 a.m. the next day. Bird supplies the charging cables — only three at a time, but those who’ve been in the business longer can get more cables.

    “I don’t know the fascination with all of these companies using gig workers to charge and repair,” said Harry Campbell, who runs a popular gig worker blog called The Rideshare Guy. “But they’re all in, they’re all doing it.”

    One of the reasons some companies use gig workers is to avoid costs like extra labor, gasoline and electricity. Bird, Spin and Lime have managed to convince investors they’re onto something. Between the three of them they’ve raised $255 million in funding. Bird is rumored to be raising another $150 million from one of Silicon Valley’s top venture capital firms, Sequoia, which could put the company’s value at $1 billion. That’s a lot for an electric scooter disruptor.

    Lime pays $12 to charge each scooter and Spin pays $5; both companies also deploy their own operations teams for charging. Bird has a somewhat different system. It pays anywhere from $5 to $25 to charge its scooters, depending on the city and the location of the dead scooter. The harder the vehicle is to find and the longer it’s been off the radar, the higher the “bounty.”

    Abouzeid, who’s moonlighted as a Bird charger for the past two months, said he’s only found a $25 scooter once.

    “With the $25 ones, they’re like, ’Hey, we think it’s in this location, it’s got 0 percent battery, good luck,’” he said.

    But some chargers have devised a way to game the system. They call it hoarding.

    “They’ll literally go around picking up Birds and putting them in the back of their car,” Campbell said. “And then they wait until the bounties on them go up and up and up.”

    Bird has gotten wise to these tactics. It sent an email to all chargers last week warning them that if it sniffs out this kind of activity, those hoarders will be barred from the app.

    “We feel like this is a big step forward in fixing some of the most painful issues we’ve been hearing,” Bird wrote in the email, which was seen by CNET.

    Tweaker chop shops

    Hoarding and vandalism aren’t the only problems for electric scooter companies. There’s also theft. While the vehicles have GPS tracking, once the battery fully dies they go off the app’s map.

    “Every homeless person has like three scooters now,” Ghadieh said. “They take the brains out, the logos off and they literally hotwire it.”
    img-1134

    I’ve seen scooters stashed at tent cities around San Francisco. Photos of people extracting the batteries have been posted on Twitter and Reddit. Rumor has it the batteries have a resale price of about $50 on the street, but there doesn’t appear to be a huge market for them on eBay or Craigslist, according to my quick survey.

    Bird, Lime and Spin all said trashed and stolen scooters aren’t as big a problem as you’d think. When the companies launch in a new city, they said they tend to see higher theft and vandalism rates but then that calms down.

    “We have received a few reports of theft and vandalism, but that’s the nature of the business,” said Spin co-founder and President Euwyn Poon. “When you have a product that’s available for public consumption, you account for that.”

    Dockless, rentable scooters are now taking over cities across the US — from Denver to Atlanta to Washington, DC. Bird’s scooters are available in at least 10 cities with Scottsdale, Arizona, being the site of its most recent launch.

    Meanwhile, in San Francisco, regulators have been working to get rules in place to make sure riders drive safely and the companies abide by the law.

    New regulations to limit the number of scooters are set to go into effect in the city on June 4. To comply, scooter companies have to clear the streets of all their vehicles while the authorities process their permits. That’s expected to take about a month.

    And just like that, scooters will go out the way they came in — appearing and disappearing from one day to the next — leaving in their wake the chargers, mechanics, vandals and people hotwiring the things to get a free ride around town.

    #USA #transport #disruption #SDF

  • Behind the Messy, Expensive Split Between Facebook and WhatsApp’s Founders

    https://www.wsj.com/articles/behind-the-messy-expensive-split-between-facebook-and-whatsapps-founders-152820

    After a long dispute over how to produce more revenue with ads and data, the messaging app’s creators are walking away leaving about $1.3 billion on the table​
    By Kirsten Grind and
    Deepa Seetharaman
    June 5, 2018 10:24 a.m. ET

    How ugly was the breakup between Facebook Inc. FB 0.49% and the two founders of WhatsApp, its biggest acquisition? The creators of the popular messaging service are walking away leaving about $1.3 billion on the table.

    The expensive exit caps a long-simmering dispute about how to wring more revenue out of WhatsApp, according to people familiar with the matter. Facebook has remained committed to its ad-based business model amid criticism, even as Facebook Chief Executive Mark Zuckerberg has had to defend the company before American and European lawmakers.

    The WhatsApp duo of Jan Koum and Brian Acton had persistent disagreements in recent years with Mr. Zuckerberg and Chief Operating Officer Sheryl Sandberg, who grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase of the messaging app, according to the people.

    Many of the disputes with Facebook involved how to manage data privacy while also making money from WhatsApp’s large user base, including through the targeted ads that WhatsApp’s founders had long opposed. In the past couple of years especially, Mr. Zuckerberg and Ms. Sandberg pushed the WhatsApp founders to be more flexible on those issues and move faster on other plans to generate revenue, the people say.

    Once, after Mr. Koum said he “didn’t have enough people” to implement a project, Mr. Zuckerberg dismissed him with, “I have all the people you need,” according to one person familiar with the conversation.
    Facebook CEO Mark Zuckerberg testified about privacy issues and the use of user data before a Senate committee in April.

    Facebook CEO Mark Zuckerberg testified about privacy issues and the use of user data before a Senate committee in April. Photo: Alex Brandon/Press Pool

    WhatsApp was an incongruous fit within Facebook from the beginning. Messrs. Acton and Koum are true believers on privacy issues and have shown disdain for the potential commercial applications of the service.

    Facebook, on the other hand, has built a sprawling, lucrative advertising business that shows ads to users based on data gathered about their activities. Mr. Zuckerberg and Ms. Sandberg have touted how an advertising-supported product makes it free for consumers and helps bridge the digital divide.

    When Facebook bought WhatsApp, it never publicly addressed how the divergent philosophies would coexist. But Mr. Zuckerberg told stock analysts that he and Mr. Koum agreed that advertising wasn’t the right way to make money from messaging apps. Mr. Zuckerberg also said he promised the co-founders the autonomy to build their own products. The sale to Facebook made the app founders both multibillionaires.

    Over time, each side grew frustrated with the other, according to people in both camps. Mr. Koum announced April 30 he would leave, and Mr. Acton resigned last September.
    Big Bet
    Facebook paid substantially more for WhatsApp than any other deal.

    Facebook’s five largest deals*

    WhatsApp (2014)

    $21.94 billion

    Oculus VR (2014)

    $2.30 billion

    Instagram (2012)

    $736 million

    Microsoft† (2012)

    $550 million

    Onavo (2013)

    $120 million

    *price at close of deal †approximately 615 AOL patents and patent applications

    Source: Dealogic

    The WhatsApp co-founders didn’t confront Mr. Zuckerberg at their departures about their disagreements over where to take the business, but had concluded they were fighting a losing battle and wanted to preserve their relationship with the Facebook executive, people familiar with the matter said. One person familiar with the relationships described the environment as “very passive-aggressive.”

    Small cultural disagreements between the two staffs also popped up, involving issues such as noise around the office and the size of WhatsApp’s desks and bathrooms, that took on greater significance as the split between the parent company and its acquisition persisted.

    The discord broke into public view in a March tweet by Mr. Acton. During the height of the Cambridge Analytica controversy, in which the research firm was accused of misusing Facebook user data to aid the Trump campaign, Mr. Acton posted that he planned to delete his Facebook account.

    Within Facebook, some executives were surprised to see Mr. Acton publicly bash the company since he didn’t seem to leave on bad terms, according to people familiar with the matter. When Mr. Acton later visited Facebook’s headquarters, David Marcus, an executive who ran Facebook’s other chat app, Messenger, confronted his former colleague. “That was low class,” Mr. Marcus said, according to people familiar with the matter. Mr. Acton shrugged it off. Mr. Marcus declined to comment.
    Staff at Facebook headquarters in Menlo Park, Calif. Small cultural disagreements between Facebook and WhatsApp staffs, involving issues such as noise, size of desks and bathrooms, created friction.

    Staff at Facebook headquarters in Menlo Park, Calif. Small cultural disagreements between Facebook and WhatsApp staffs, involving issues such as noise, size of desks and bathrooms, created friction. Photo: Kim Kulish/Corbis/Getty Images

    The posts also prompted an angry call from Ms. Sandberg to Mr. Koum, who assured her that Mr. Acton didn’t mean any harm, according to a person familiar with the call.

    When Mr. Acton departed Facebook, he forfeited about $900 million in potential stock awards, according to people familiar with the matter. Mr. Koum is expected to officially depart in mid-August, in which case he would leave behind more than two million unvested shares worth about $400 million at Facebook’s current stock price. Both men would have received all their remaining shares had they stayed until this November, when their contracts end.

    The amount the two executives are leaving in unvested shares hasn’t been reported, nor have the full extent of the details around their disagreements with Facebook over the years.

    “Jan has done an amazing job building WhatsApp. He has been a tireless advocate for privacy and encryption,” Mr. Zuckerberg said in May at the company’s developer conference about Mr. Koum’s departure. He added he was proud that Facebook helped WhatsApp launch end-to-end encryption a couple of years after the acquisition.

    In many ways, Facebook and WhatsApp couldn’t have been more different. Facebook from its beginning in 2004 leveraged access to user information to sell targeted advertising that would be displayed as people browsed their news feeds. That business model has been hugely successful, driving Facebook’s market value past half a trillion dollars, with advertising accounting for 97% of the firm’s revenue.
    A sign in WhatsApp’s offices at Facebook headquarters. Some Facebook employees mocked WhatsApp with chants of ‘Welcome to WhatsApp—Shut up!’

    A sign in WhatsApp’s offices at Facebook headquarters. Some Facebook employees mocked WhatsApp with chants of ‘Welcome to WhatsApp—Shut up!’

    It is also the antithesis of what WhatsApp professed to stand for. Mr. Koum, a San Jose State University dropout, grew up in Soviet-era Ukraine, where the government could track communication, and talked frequently about his commitment to privacy.

    Mr. Koum, 42, and Mr. Acton, 46, became friends while working as engineers at Yahoo Inc., one of the first big tech companies to embrace digital advertising. The experience was jarring for both men, who came to regard display ads as garish, ruining the user experience and allowing advertisers to collect all kinds of data on unsuspecting individuals.

    WhatsApp, which launched in 2009, was designed to be simple and secure. Messages were immediately deleted from its servers once sent. It charged some users 99 cents annually after one free year and carried no ads. In a 2012 blog post the co-founders wrote, “We wanted to make something that wasn’t just another ad clearinghouse” and called ads “insults to your intelligence.”

    Text MeWorld-wide monthly active users for popularmessaging apps, in billions.Source: the companiesNote: *Across four main markets; iMessage, Google Hangoutsand Signal don’t disclose number of users.

    WhatsAppFacebookMessengerWeChatTelegramLine*00.511.52

    The men are also close personal friends, bonding over ultimate Frisbee, despite political differences. Mr. Koum, unlike Mr. Acton, has publicly expressed support for Donald Trump.

    When Facebook bought WhatsApp in February 2014, the messaging service was growing rapidly and had already amassed 450 million monthly users, making it more popular than Twitter Inc., which had 240 million monthly users at the time and was valued at $30 billion. WhatsApp currently has 1.5 billion users.

    The deal still ranks as the largest-ever purchase of a company backed by venture capital, and it was almost 10 times costlier than Facebook’s next most expensive acquisition.

    Mr. Zuckerberg assured Messrs. Koum and Acton at the time that he wouldn’t place advertising in the messaging service, according to a person familiar with the matter. Messrs. Koum and Acton also negotiated an unusual clause in their contracts that said if Facebook insisted on making any “additional monetization initiatives” such as advertising in the app, it could give the executives “good reason” to leave and cause an acceleration of stock awards that hadn’t vested, according to a nonpublic portion of the companies’ merger agreement reviewed by The Wall Street Journal. The provision only kicks in if a co-founder is still employed by Facebook when the company launches advertising or another moneymaking strategy.

    Mr. Acton initiated the clause in his contract allowing for early vesting of his shares. But Facebook’s legal team threatened a fight, so Mr. Acton, already worth more than $3 billion, left it alone, according to people familiar with the matter.

    Some analysts in the tech community said a clash was inevitable. Nate Elliott, principal of Nineteen Insights, a research and advisory firm focused on digital marketing and social media, said the WhatsApp founders are “pretty naive” for believing that Facebook wouldn’t ultimately find some way to make money from the deal, such as with advertising. “Facebook is a business, not a charity,” he said.

    At the time of the sale, WhatsApp was profitable with fee revenue, although it is unclear by how much. Facebook doesn’t break out financial information for WhatsApp.
    David Marcus, vice president of messaging products for Facebook, spoke during the company’s F8 Developers Conference in San Jose on May 1.

    David Marcus, vice president of messaging products for Facebook, spoke during the company’s F8 Developers Conference in San Jose on May 1. Photo: David Paul Morris/Bloomberg News

    Facebook’s hands-off stance changed around 2016. WhatsApp topped one billion monthly users, and it had eliminated its 99 cent fee. Facebook told investors it would stop increasing the number of ads in Facebook’s news feed, resulting in slower advertising-revenue growth. This put pressure on Facebook’s other properties—including WhatsApp—to make money.

    That August, WhatsApp announced it would start sharing phone numbers and other user data with Facebook, straying from its earlier promise to be built “around the goal of knowing as little about you as possible.”

    With Mr. Zuckerberg and Ms. Sandberg pushing to integrate it into the larger company, WhatsApp moved its offices in January 2017 from Mountain View, Calif., to Facebook’s Menlo Park headquarters about 20 minutes away. Facebook tried to make it welcoming, decorating the Building 10 office in WhatsApp’s green color scheme.

    WhatsApp’s roughly 200 employees at the time remained mostly segregated from the rest of Facebook. Some of the employees were turned off by Facebook’s campus, a bustling collection of restaurants, ice cream shops and services built to mirror Disneyland.

    Some Facebook staffers considered the WhatsApp unit a mystery and sometimes poked fun at it. After WhatsApp employees hung up posters over the walls instructing hallway passersby to “please keep noise to a minimum,” some Facebook employees mocked them with chants of “Welcome to WhatsApp—Shut up!” according to people familiar with the matter.

    Some employees even took issue with WhatsApp’s desks, which were a holdover from the Mountain View location and larger than the standard desks in the Facebook offices. WhatsApp also negotiated for nicer bathrooms, with doors that reach the floor. WhatsApp conference rooms were off-limits to other Facebook employees.

    “These little ticky-tacky things add up in a company that prides itself on egalitarianism,” said one Facebook employee.

    Mr. Koum chafed at the constraints of working at a big company, sometimes quibbling with Mr. Zuckerberg and other executives over small details such as the chairs Facebook wanted WhatsApp to purchase, a person familiar with the matter said.

    In response to the pressure from above to make money, Messrs. Koum and Acton proposed several ideas to bring in more revenue. One, known as “re-engagement messaging,” would let advertisers contact only users who had already been their customers. Last year, WhatsApp said it would charge companies for some future features that connect them with customers over the app.

    None of the proposals were as lucrative as Facebook’s ad-based model. “Well, that doesn’t scale,” Ms. Sandberg told the WhatsApp executives of their proposals, according to a person familiar with the matter. Ms. Sandberg wanted the WhatsApp leadership to pursue advertising alongside other revenue models, another person familiar with her thinking said.

    Ms. Sandberg, 48, and Mr. Zuckerberg, 34, frequently brought up their purchase of the photo-streaming app Instagram as a way to persuade Messrs. Koum and Acton to allow advertising into WhatsApp. Facebook in 2012 purchased Instagram, and the app’s founders initially tried their own advertising platform rather than Facebook’s. When Instagram fell short of its revenue targets in its first few quarters, Facebook leadership pushed the founders to adopt its targeted advertising model, and the transition was relatively seamless, according to current and former employees. Today, analysts estimate that Instagram is a key driver of Facebook’s revenue, and its founders, Kevin Systrom and Mike Krieger, remain with the company. The men didn’t respond to requests for comment.

    “It worked for Instagram,” Ms. Sandberg told the WhatsApp executives on at least one occasion, according to one person familiar with the matter.
    Attendees used Oculus Go VR headsets during Facebook’s F8 Developers Conference.

    Attendees used Oculus Go VR headsets during Facebook’s F8 Developers Conference. Photo: Justin Sullivan/Getty Images

    Other high-profile acquisitions such as developer platform Parse, ad tech platform LiveRail and virtual-reality company Oculus VR have fallen short of expectations, people familiar with those deals say.

    The senior Facebook executives appeared to grow frustrated by the WhatsApp duo’s reasons to delay plans that would help monetize the service. Mr. Zuckerberg wanted WhatsApp executives to add more “special features” to the app, whereas Messrs. Koum and Acton liked its original simplicity.

    Mr. Zuckerberg and Ms. Sandberg also wanted Messrs. Koum and Acton to loosen their stance on encryption to allow more “business flexibility,” according to one person familiar with the matter. One idea was to create a special channel between companies and users on WhatsApp to deal with issues such as customer-service requests, people familiar with the matter said. That setup would let companies appoint employees or bots to field inquiries from users and potentially store those messages in a decrypted state later on.

    Last summer, Facebook executives discussed plans to start placing ads in WhatsApp’s “Status” feature, which allows users to post photo- and video-montages that last 24 hours. Similar features exist across Facebook’s services, including on Instagram, but WhatsApp’s version is now the most popular with 450 million users as of May.

    Mr. Acton—described by one former WhatsApp employee as the “moral compass” of the team—decided to leave as the discussions to place ads in Status picked up. Mr. Koum, who also sat on Facebook’s board, tried to persuade him to stay longer.

    Mr. Koum remained another eight months, before announcing in a Facebook post that he is “taking some time off to do things I enjoy outside of technology, such as collecting rare air-cooled Porsches, working on my cars and playing ultimate Frisbee.” Mr. Koum is worth about $9 billion, according to Forbes.

    The next day, Mr. Koum said goodbye to WhatsApp and Facebook employees at an all-hands meeting in Menlo Park. An employee asked him about WhatsApp’s plans for advertising.

    Mr. Koum responded by first alluding to his well-documented antipathy for ads, according to people familiar with his remarks. But Mr. Koum added that if ads were to happen, placing them in Status would be the least intrusive way of doing so, according to the people.

    Some people who heard the remarks interpreted them as Mr. Koum saying he had made peace with the idea of advertising in WhatsApp.

    In his absence, WhatsApp will be run by Chris Daniels, a longtime Facebook executive who is tasked with finding a business model that brings in revenue at a level to justify the app’s purchase price, without damaging the features that make it so popular.

    Among WhatsApp’s competitors is Signal, an encrypted messaging app run by a nonprofit called the Signal Foundation and dedicated to secure communication, with strict privacy controls and without advertising. Mr. Acton donated $50 million to fund the foundation and serves as its executive chairman.

    Corrections & Amplifications
    Facebook Messenger has 1.3 billion monthly users. An earlier version of a chart in this article incorrectly said it had 2.13 billion users. (June 5, 2018)

    Write to Kirsten Grind at kirsten.grind@wsj.com and Deepa Seetharaman at Deepa.Seetharaman@wsj.com

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