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Venture capital's renewed focus on profits instead of growth at any cost will make younger, urban lifestyles more expensive. Boardroom conversations are shifting in the wake of WeWork's failed IPO, and investors are urging money-losing start-ups to tighten operations and eventually bump up prices. "The reality of the gig economy is that prices need to be raised and ultimately consumers will bear the costs," said Dan Ives, managing director of equity research at Wedbush Securities. "The current business model is not built to be profitable and with investor pressure building on private and public names to get out of the red — the clock has hit 12 for the unprofitable models." WeWork has become the poster-child for that model not cutting it for public market investors. The real estate company ultimately pulled its IPO after weak demand, and received a rescue package from its biggest investor, SoftBank. CEO of the Japanese investing giant Masayoshi Son said earlier this year as a result, "investors are becoming more careful." To hit profitability sooner, management teams "will need to cut costs and ultimately raise prices which could markedly impact demand," Ives said. Uber, Lyft, and Peloton -- which all made public debuts this year — are also bleeding money. Uber has said it expects to lose $3.2 billion this year, while Lyft reported a roughly $1 billion loss for the first quarter alone. Of the venture-backed U.S. companies that went public this year, only 9% were profitable, according to Pitchbook. That total was down from roughly 30% a decade ago.

Venture capital subsidies

Historically, these gig-economy start-ups have been able offer lower prices as an incentive to sign up for their service. Founders often point to Amazon as a success story that didn't turn a profit for four years after going public. Analysts say that has resulted in lower costs for younger, mostly urban consumers. Annie Kadavy, general partner at Redpoint, said because buyers think about price on a relative basis, start-ups have to compete for the lowest price tag. "In a market where venture dollars are widely available to subsidize and barriers to entry are relatively low, platforms have no choice but to compete on price to gain market share," she said. "This is an expensive and risky game and there will be a lot of money lost in the process — but, for the winners, also a lot of upside." Ride hailing giants have slowly started raising prices to appease investors. Lyft CEO Logan Green told investors on a conference call last week that it implemented "modest pricing increases" over the last two quarters, which he said were matched by competitors. "Belts are getting tightened," said Gene Munster, managing partner at Loup Ventures. "We're starting to see some increase in pricing from Lyft and Uber the past six months and would expect other gig economy and service-related companies to follow."

Price of convenience