Supply Chain Council of European Union | Scceu.org
Technology

Quarantine is a quagmire for gig startups

Billions of people around the world are now under orders to stay at home, as governments grapple with a global crisis that’s already killed more than 50,000 people and sickened more than 1 million.

The human toll is clearly the main concern. But this experiment in mass isolation is also giving companies across the gig economy plenty of other things to worry about, including worker strikes, slumps in stock price, mass layoffs and slashed valuations. 

Not all the news is necessarily negative, though. For some, the current crisis could also present a real financial opportunity. If they can keep their workers from revolting. 

After a decade of blue skies, a group of present and former gig-economy unicorns are facing a true test. That’s one of nine things you need to know from the past week:

 

A trip to the grocery store is more fraught than ever before. (the_burtons/Moment/Getty Images) 1. Gigging at a distance This is a simplification, but you can generally divide the most well-funded gig economy startups into two categories: those that help users do things, and those that help users get things. 

The former category has been hit hardest by shutdowns and social distancing. Demand for ridehailing services from Uber and Lyft has fallen off a cliff, and as a result, so have those companies’ stock prices. Dog-walking startup Rover reportedly laid off nearly 200 people this week, or more than 40% of its staff, due to a similar decrease in demand. When you’re not leaving the house, you can take your own pooch for a stroll.

The travel and tourism industries have essentially disappeared, leaving Airbnb and its hosts in the lurch. With bookings in some markets down as much as 90%, the company has written down its valuation from $31 billion to $26 billion, according to the Financial Times. If Airbnb follows through with plans to go public this year, it could be in line for the one of

the biggest IPO haircuts in recent history. 

It’s been a very different story for gig companies that help users get things, namely in-home delivery startups such as Instacart, DoorDash and Postmates. Instead of business drying up, they’ve been overwhelmed by demand. For them, the pandemic is an unprecedented opportunity to peddle their services to a homebound audience, a chance to seize market share and put to rest certain questions about financial sustainability.

But that opportunity is also a paradox. To capitalize on it, companies must put their own workers at risk. In these strange times, every trip to the grocery store, every pickup from a restaurant and every delivery now poses a hazard to a gig worker’s personal health. 

As my colleague James Thorne

wrote last week, some of those workers are pushing back and trying to change the balance of power in the gig economy. Most notable was a national strike conducted on Monday by US-based Instacart shoppers, who sought $5 per delivery in hazard pay, better safety equipment and more generous sick pay. 

Instacart announced Thursday it would begin providing shoppers with a face mask, hand sanitizer and a thermometer, but the company made no other concessions. The nonprofit Gig Workers Collective called the move a “pathetic attempt to buy good PR.” 

Outcry about a lack of worker protection and difficulties in receiving sick pay

have also mounted at DoorDash. The company made a pronouncement of its own Friday, offering additional protective equipment and making it easier for its delivery drivers to access coronavirus-related financial assistance. DoorDash also noted that its drivers have seen an earnings uptick during the current crisis, but made no direct mention of increased pay. 

It will be interesting to see if similar protests and concerns surface in the coming weeks. Instacart’s CEO has previously indicated that it makes a profit on every delivery, so it stands to reason that with more deliveries being done, more money is coming in. It also stands to reason that some of that additional money should go toward compensating workers who are taking on added risk. 

But these gig-economy unicorns have never been known for their friendliness toward labor; for years, tensions have simmered between gig workers and gig companies, a divide exemplified by the designation of Instacart shoppers, Uber drivers and most other gig workers as “contractors” rather than employees. 

One might think that these workers now have a newfound leverage. In some ways, they do. But it’s worth noting that nearly 10 million Americans have filed for unemployment in the past two weeks, and that may just be the tip of the iceberg. If current gig workers aren’t happy with their pay and working conditions, companies might find other contractors to replace them. 

On multiple levels, it’s the most basic story in economics: supply and demand. But on a human level, it’s a moral test for how billion-dollar companies treat their workers when the going gets tough. 2. Biotech boom With healthcare at the front of everyone’s mind, firms and startups in the biotech space are reeling in funding. ARCH Venture Partners closed its latest flagship fund and a related overage fund on a combined $1.46 billion this week, while Flagship Pioneering pulled in $1.1 billion for a new fund. ElevateBio closed a $170 million round to support its cell and gene therapies, while other names like RemeGen and Affinia Therapeutics raised huge rounds of their own. There was even an IPO, as Zentalis Pharmaceuticals raised more than $165 million in its debut on the Nasdaq.  3. Coffee fraud Luckin Coffee emerged from China in recent years with huge sums of funding and rapid growth figures that seemed to position it as a real threat to established industry giants. It went public last year, raising $561 million at a reported $4 billion-plus valuation. But it all seems to be falling apart: The coffee company announced this week the suspension of COO Jian Liu after an internal investigation found that Liu and other employees overstated early revenue figures by more than $300 million. Luckin’s stock cratered as a result, losing nearly 80% of its value this week alone.

 

It’s a messy situation at Luckin Coffee. (Jeffrey Coolidge/Stone/Getty Images) 4. Two mega-deals done T-Mobile and Sprint completed their $26.5 billion combination this week, nearly two years after the original announcement of a deal that will reshape the US wireless industry. On Friday, meanwhile, aerospace and defense giants United Technologies and Raytheon completed their merger of equals, forming a new company called Raytheon Technologies with combined sales of $74 billion in 2019.  5. A mega-deal undone Those two deals got done, but plenty of other major transactions have recently been unwound. Xerox this week withdrew its hostile bid for HP, calling off a potential $35 billion deal that would have combined two of the most notable US tech companies of the 20th century. The decision came after Xerox had seen its stock price decline by more than 50% since the middle of February. 6. Exit delays A handful of private equity firms are putting off planned exits until all the market chaos cools down, according to various reports. In Europe, EQT is delaying a potential $3 billion sale of local software giant IFS, while Bridgepoint is postponing a planned $1 billion exit from Rovensa, a maker of agricultural chemicals. And in Singapore, KKR is said to be pushing back plans for a scheduled exit from Goodpack, a logistics specialist.  7. Paper losses SoftBank officially walked away this week from a deal to acquire $3 billion worth of WeWork shares from a group of existing investors, confirming reports from last month that the secondary sale was on the rocks. One side effect: WeWork co-founder Adam Neumann, who had reportedly planned to unload $970 million worth of shares in the deal, is no longer a billionaire. Bloomberg now pegs his net worth at about $450 million, a 97% decline from last year.  8. Business as usual A dip in private equity fundraising is expected as the coronavirus crisis continues to unfold, but it hasn’t arrived yet. This week saw Ardian bring in a reported $18 billion for a new secondaries fund, while Insight Partners closed its 11th flagship fund on $9.5 billion and CVC Capital Partners pulled in $4.5 billion for a new Asia fund.  9. Perfect timing Several companies whose services are particularly relevant in our current climate lined up major deals this week. Notion, a startup that makes enterprise software focused on collaboration and productivity, reportedly raised $50 million at a $2 billion valuation. Telehealth startup SteadyMD secured $6 million in venture funding. And CloudGenix, a VC-backed cloud networking startup focused on wide-area networks, lined up a $420 million exit to Palo Alto Networks. 

Related posts

Pickrr has launched Pickrr Predict lauded to be a flagship product feature.

scceu

Inflation is soaring. Should the Fed unleash ‘shock and awe’? – Erie News Now

scceu

B2B packaging solutions startup DCGpac.com raises Rs 5 cr in pre-series A

scceu