Interesting analysis of the difficulties that many platform firms are facing now that venture capital is starting to dry up. I also love the phrase “a contagion of pivots” more than I can express:
A contagion of pivots began happening among other sharing economy startups. Companies like Cherry (car washes), Prim (laundry), SnapGoods (gear rental), Rewinery (wine), HomeJoy (home cleaning) all went bust, some of them quietly and others with more headlines. Historical experience shows that three out of four startups fail, and more than nine out of 10 never earn a return. My favorite example is SnapGoods, which is still cited today by many journalists who are pumping up the sharing economy (and haven’t done their homework) as a fitting example of a cool, hip company that allows people to rent out their spare equipment, like that drill you never use, or your backpack or spare bicycle—even though SnapGoods went out of business in August 2012. It just disappeared, poof, without a trace, yet goes on living in the imagination of sharing economy boosters.
The rather provocative conclusion drawn is that the so-called sharing economy ultimately amounts to nothing more than a series of digitally mediated niche temp agencies:
A pattern has emerged about the “white dwarf” fate of many of these once-luminous sharing startups: after launching with much fanfare and tens of millions of VC capital behind them, vowing to enact a revolution in how people work and how society organizes peer-to-peer economic transactions, in the end many of these companies morphed into the equivalent of old-fashioned temp agencies (and others have simply imploded into black hole nothingness). Market forces have resulted in a convergence of companies on a few services which had been the most used on their platforms. In a real sense, even the startup king itself, Uber, is merely a temp agency, where workers do only one task: drive cars. Rebecca Smith, deputy director of the National Employment Law Project, compares the businesses of the gig economy to old-fashioned labor brokers. Companies like Instacart, Postmates and Uber, she says, talk as if they are different from old-style employers simply because they operate online. “But in fact,” she says, “they are operating just like farm labor contractors, garment jobbers and day labor centers of old.”