Remember all the “Uber for x” startups?
A few years ago a ton of “Uber for x” startups got funded, but very few of them – maybe none? – worked out. It sounds good but ultimately most failed on the supply side. Let’s explore why.
Rideshare has better economics, at the same acquisition cost
Rideshare is special. Acquiring a broad base of labor for driving is expensive, often $300+. But then they can get requests all day. You can work 20 hours and even 50 hours a week if you want. You continually need the driver app to find new customers
Where a lot of “Uber for x” companies fall down – valet parking, car washing, massages, etc – is that demand is often infrequent and there’s spikes at a few points in the day. What’s your supply side supposed to do the rest of the time?
In other words, “Uber for x” cos often have the same cost of acquisition and cost of labor as rideshare, but can’t fill their time with work as smoothly / profitably
Marketplace outcomes are sensitive to unit economics
Rideshare networks are fickle and require a long period of being unit economic negative before they can break even, with enough scale/density. But a lot of “Uber for x” cos can never dig out of that hole, and stay unprofitable forever
This is one of the reasons why I’m bearish on food delivery as a stand-alone business in the long run. Uber can tap into their supply side and augment with food delivery earnings. Pure food companies have to get the same drivers but can’t pay as well
The key is to go for a different pool of workers
So what kind of “Uber for x” ideas can work? Ultimately the ones that go for a completely different pool of labor. Folks who prefer to work from home. People who don’t live near a city with rideshare. People who don’t own cars. Etc.
If you can find a different pool of labor, they still have the same motivations around flexible schedules and easy earning potential. You can use the same techniques as Uber – simple UX, transparent pricing, etc – and apply them to these marketplace opportunities
In that way, the lessons from “Uber for x” are a subset of best practices you can learn from marketplaces. You need a strong strategy to get the supply/demand flywheel going. A big market with a defensible moat. Fragmentation that can be solved w transparency and aggregation
Don’t emulate – approach from first principles, starting from the workers’ POV
IMHO “Uber for x” cos failed to become a thing because they sought to emulate ridesharing when they should have just approached their particular market from first principles. There’s still a ton of marketplace opportunities out there and am excited to see what people do!
Because all these marketplaces tend towards supply constrained, you should evaluate each opportunity/company from the POV of the supply side. Does it work for them? Can they do it 40 hours/week and stay sticky? When can you pull away subsidies? These are the key questions
The key lesson!
Supply side is 👑.
If you’re interested in more reading about Uber and marketplaces, I collected my favorite 20 links here
First published on Twitter here!
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Original Post: http://andrewchen.co/why-uber-for-x-failed/