Uber and Lyft have developed powerful services that delight their users and are transforming urban transportation. But if they hadn’t been given virtually unlimited capital to offer rides at subsidized prices taxicabs couldn’t match in order to grow their user base at blitzscaling speed, would they be offering their service for less than it actually costs to deliver? Would each company be spending 55% of net revenue on driver incentives, passenger discounts, sales, and marketing to acquire passengers and drivers faster than the other? Would these companies now be profitable instead of hemorrhaging billions of dollars a year? Would incumbent transportation companies have had more time to catch up, leading to a more competitive market? Might drivers have gotten a bigger share of the pie? Would a market that grew more organically—like the web, e-commerce, smartphones, or mobile mapping services—have created more value over the long term?

    We’ll never know, because investors, awash in cheap capital, anointed the winners rather than letting the market decide who should succeed and who should fail. This created a de-facto duopoly long before either company had proven that it has a sustainable business model. And because these two giants are now locked in a capital-fueled deathmatch, the market is largely closed off to new ideas except from within the existing, well-funded companies.


Beat me to it! Great title for the article.

Balanced with the author’s criticism are the steel-man version of the merits of “blitzscaling.” This article really does both sides justice. So many great parts, but what had me cracking up:

    Another story of self-funded growth I particularly like is far from tech. RxBar, a Chicago-based nutrition bar company with $130 million of self-funded annual revenue, was acquired last year by Kellogg for $600 million. Peter Rahal, one of the two founders, recalls that he and co-founder Jared Smith were in his parents’ kitchen, discussing how they would go about raising capital to start their business. His immigrant father said something like, “You guys need to shut the fuck up and just sell a thousand bars.”

posted by kleinbl00: 189 days ago