Local service companies like Uber, how to burn 100 million dollars less

Bill Gurley recently raised the popularity of the internet industry's "burning Money", and Fred Wilson even suggested that the rate of burning money was a powerful measure of the technology bubble. James Wise, investor, thinks: how do we not burn so much money? He mainly thinks of service companies like Uber, because the companies that serve the local life will need to burn money when they are promoted in different places.

For companies that serve local life, they burn money very quickly. Companies such as Uber, Airbnb and Homejoy have been shunned by VCs because the cost of setting up such companies is too high, but there are now billions of of dollars invested in such companies.

But the reason for concern is still there, it's complicated to spread a service to different places, and you don't see the obvious scale effect, which is different from the traditional software industry. In short, people and software cannot expand as much as they can, so there are plenty of things to be done with the people-led services themselves, and the companies that have gotten a lot of money are struggling, which exceeds the risk tolerance of most VCs.

Only a handful of companies are looking for ways to expand without burning 100 million of dollars, which is why we have recently invested in 3DHubs, the world's largest 3D print platform. Although the 3DHubs is still in its early stages, they are already working to spread the service around the world, maintaining the scale effect of the software, which is a key point of our liking for the company. But it is hard to maintain this scale effect, and here are some modes of operation, some of which we have invested, some of which are not, that can help those service companies expand more easily:

1. Find the local champions: It takes a lot of money to put employees in a new place, so why not go to the people who are already there? A major factor driving 3DHub development is its "local administrator" model, which finds the most influential people in the community, who are the key to promoting the service locally, and who quickly become as important as full-time employees. This method has been tried many times, such as Airbnb, and when you find someone who is passionate about the service, it will make the most of it.

2. The establishment of a viable minimum team: This approach is very common, but it is extremely difficult to implement, because you have to promote in the Non-core cities before the pilot, which is the pattern of burning money is very different. The first trial service in San Francisco is more likely to be successful, and I think one of the reasons is that there are not many people here, but enthusiastic ordinary people are the best test platform to try out these local service models. In Europe, Amsterdam and Copenhagen have the same effect, before you have a more mature development model, it is a good choice to pilot a service in these two places first.

3. The person who sustains the service: opening up the market is a delicate matter, especially when opening the market for a person-led service. Service is different from other products, such as clothing, you can sell in different markets, and one person can only provide one service at a time. One way to make it more and more loyal to service providers is to provide valuable tools that will allow these people to continue to provide services in times of low demand. Many of the local services offered by companies are still being managed using spreadsheets, so this electronic tool is particularly useful here.

4. Brand is the scale: Suppose that people are your products, and people can not scale, then you have to find your business in other parts of the scale, branding is the most obvious part. The technology industry is now undergoing a shift from disgust to traditional advertising, such as the AdWord price of Google. Y-plan, who has a fortune in London, is an app that finds local activity and is adept at advertising. Every subway store in London is now plastered with technology companies ' ads, because advertising based on local markets is crucial to attracting customers.

5. Partners or partners: most local services cannot initially be said to have any market, but they can start with a few big partners. So, finding your initial partner in a new place can help you get started quickly so you can spend millions of of dollars less. But it's hard to deal with the relationship correctly, which is a delicate balance, because partners can also be tough customers. But every company has its own partners, whether it's the landlord of Airbnb, or the Michelin restaurant that works with Bookatable.

For investors, one of the most important things in the past few years is that while it's hard and expensive to promote local services, once you've found the right model, you'll win all of them. But relying on capital injections to sustain development is not a viable strategy in the long run, and it is important to find a more sustainable development model.

These are just a few examples of establishing a workable financial model, and these examples also show that not everything is as easy to produce as a product. We are looking forward to hearing more feasible models.