
Unicorns Watch in Horror as Uber Careens Towards a Down Round - hammock
https://markstcyr.com/2017/04/16/unicorns-watch-in-horror-as-uber-careens-towards-a-possible-extinction-event-a-down-round/
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hn_throwaway_99
This is some of the worst writing I've read in quite some time. It seems like
we're so excited about the chance to upvote bad news about Uber that even
poorly written (and poorly reasoned) pieces are bubbling up.

~~~
Animats
Yes. There's no new info there. I thought this was going to reflect Uber going
for a round of financing on bad terms. But it's just blithering.

The numbers are clear. Here are Uber's financing rounds so far.[1] The $1.1
billion in loans in 2016 from Morgan Staley [2] wasn't on favorable terms for
Uber. What's keeping them alive right now is a $3.5 billion equity investment
from Saudi Arabia's sovereign wealth fund. That was made before Uber pulled
out of China, and may have been made for political reasons involving Saudi
Arabia's relationship with China. They also got some undisclosed amount of
money from Victor Orlovski, but the biggest investment to date from that
source is $27 million, so it's probably not that big compred to Uber's burn
rate. So Uber raised about $4.1 billion in 2016, $1.1 billion of which is debt
which must be repaid.

Uber lost about $3 billion in 2016. There's been no new capital in 2017.
Unless they can find a bigger sucker than the Kingdom of Saudi Arabia, they go
broke in 2018.

[1] [https://www.crunchbase.com/organization/uber/funding-
rounds](https://www.crunchbase.com/organization/uber/funding-rounds) [2]
[https://techcrunch.com/2016/07/07/new-reports-
confirm-1-15b-...](https://techcrunch.com/2016/07/07/new-reports-
confirm-1-15b-leveraged-loan-raised-by-uber-at-5/)

~~~
ithinkinstereo
Well it's like that classic Getty quote: when you owe the bank $100, it's your
problem; when you owe the bank $100 million dollars it's their problem.

At this point, Uber's stakeholders - who are large, rich, and powerful - are
so vested in their success that I'm sure they'll be able to find another fool
to pass the bag to.

~~~
Animats
Where are they going to find a bigger sucker than the Kingdom of Saudi Arabia?

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madamelic
That seems a little pessimistic.

I think most people can realize Uber is an outlier in many aspects, most of
which, its inability to produce a profit.

It isn't even burning cash to continue growing, like Amazon, it is just
burning cash to exist. Amazon at least has proven it has a valuable model but
chooses to continue burning.

~~~
cocktailpeanuts
Do a bit more history study and you'll realize people used to say the same
thing about Amazon. It's only recently that people decided to acknowledge the
fact that Amazon's "burning money" is a feature not a bug. You said "Amazon at
least has proven it has a valuable model...". What you don't realize is it
took almost a decade.

This is actually why I have infinite respect for Jeff Bezos, he stuck around
through all the criticism (almost a decade of constantly hearing "it won't
work! they're not making any money" even though they have been clearly the
market leader for a long time and I'm sure he had clear vision all along) and
finally managed to get to a point where even the naysayers gave up.

~~~
ithinkinstereo
To be fair, Amazon was investing all of their money on creating moats to fend
off current/future competitors, like warehouses and packing/shipping
infrastructure.

Most of Uber's spend is on subsidizing the cost of the product. This is a
competitor moat in the sense that it outprices less-resourced competition, but
it's a moat that can only be maintained by continued subsidies. The moment
those subsidies end, so does the moat.

~~~
cocktailpeanuts
I know that, and I'm sure guys at Uber knows that too, and probably know much
more than all of us combined. They are not idiots and they think about these
things every single day. If people like us who only think about it once in a
while when a related article shows up on HN knows it, they do too.

Just to be clear, I also think what you say is a very possible scenario, but
the problem is this thesis is based on the current state of the world. Things
change all the time (For example who knows where Uber would have been if this
whole autonomous vehicle thing never became the reality, and there can be all
kinds of variables in the future that may work for or against them)

You really never know what will happen. It's easy to say the moat is not as
obvious as amazon's, but Amazon's moat was not as obvious as we think nowadays
back then. Not just Amazon, every single disruptive tech company went through
this, nowadays it's so obvious that you can make money with search ads but
when Google first came out people never understood how they were going to make
money by sending people away from their site as soon as they arrive. Obvious
things are only obvious in hindsight.

~~~
ithinkinstereo
It's not a matter of obviousness, though. The real question is: are they
spending their money on creating a real moat that will remain once the money
spigot is turned off or not?

Amazon purchased real things. Uber is spending their cash on subsidizing the
price. I guess you can make the argument that their moat is also their brand,
but I think its very apples to oranges to compare Uber's subsidies with
Amazon's infrastructure spend.

I also don't by the "they are not idiots" argument. Remember, there were
plenty of "geniuses" at Enron, at Bear Stearns, At Lehman, etc.

~~~
cocktailpeanuts
> I think its very apples to oranges to compare Uber's subsidies with Amazon's
> infrastructure spend.

Yet you are comparing them. My point was exactly that comparing these are
apples and oranges. And it _is_ a matter of obviousness because you seem to
think it's obvious that Amazon's "moat" was an obvious moat whereas Uber
doesn't have a moat at all.

I'm not even saying Uber has found their absolute moat either. I'm saying a
lot of analysis we take for granted was never obvious when the companies were
in their early days.

Youtube's model was never obvious either (and still not obvious in terms of
profitability) yet they managed to near monopolize the online video sector.
You could say the same thing about Youtube. They didn't know how to make
money, and they just kept bleeding money. So bad that they had to sell
themselves. Yet they have built something valuable, and someone wanted to buy
them to use as a very important strategic asset.

Who knows what will happen to uber but I don't think it's so bad that they
will obviously fail. It's more like 50/50\. They do provide great value to
people, and I am sure they are doing whatever they can to create what you call
a moat, just not visible to you. I still stand by the fact that Amazon's
"moat" was never obvious until recently.

If you really think it was as easy as "Amazon was spending money purchasing
real things so they were actually accumulating value, compared to Uber", you
should read this book [https://www.amazon.com/Everything-Store-Jeff-Bezos-
Amazon-eb...](https://www.amazon.com/Everything-Store-Jeff-Bezos-Amazon-
ebook/dp/B00BWQW73E/ref=pd_sim_351_1?_encoding=UTF8&psc=1&refRID=N701XJT8QX5WZAT0MGEX)

There were so many points in Amazon's history where everybody mocked them and
criticized them just like you're doing right now for Uber. For example at one
point everyone thought a decentralized marketplace (eBay) was the future and
Amazon will die off because eBay never kept inventory, which came with a lot
of benefits such as high margin and low operating cost, not to mention people
used to say "eBay is the true internet marketplace, Amazon is just a web1.0
company and won't survive in the world where every sale happens online peer to
peer".

So basically what you're referring to as a moat now was actually considered
the biggest weakness for Amazon at one point in history.

------
ianstormtaylor
Flagged.

This is obviously just poorly written clickbait to piss people off. Unicorns
shouldn't be worried about Uber's down round unless they have as many
skeletons in their closet as Uber does. Apples to oranges. I think Uber is a
horrible company, but I also don't think that random clickbait should be
getting up the ranks on HN.

~~~
cs702
I've flagged it too -- after unintentionally upvoting it!

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subpixel
This guy (whom I've never heard of) actually quotes himself on his own about
page.

"I am quoted as stating: ..."

That's some next-level self-promotional mojo.

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scandox
I never read an intro so well calculated to make me not give a shit about
startups.

~~~
crystalmeph
It's like a stream of consciousness piece that barely hangs on to the main
thread of what it's supposed to be about.

~~~
acchow
This article opens up with an analogy between nuclear war and an Uber down
round.

Why are people upvoting this?

    
    
      sudo sh -c 'echo "127.0.0.1 markstcyr.com" > /etc/hosts'

~~~
rhapsodic
_> sudo sh -c 'echo "127.0.0.1 markstcyr.com" > /etc/hosts'_

You just overwrote your hosts file.

~~~
acchow
LOL was a typo. I did do >> in my terminal

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jacquesm
I'm watching in amazement that they are still able to raise money at all.
Damaged brand, losing on every sale. There have been some examples of such
companies in the past (Airlines during the oil crisis for instance) but at
least those had competent management.

The drivers have long ago figured out that they shouldn't bet on a single
horse so even that advantage is eroding.

------
billsteigerwald
Amazon lost billions to create/invent/perfect the shop-online market and
dominate it; a decade-plus of losses and dire predictions later, it's
profitable.

Uber has lost billions to create the global smart-phone ride-sharing market,
vastly expanding the "pie" of consumer/users/riders in cities that had been
artificially restricted and ruined by the awful regulated no-competition
taxicab model for 80 years. Uber deserves a Nobel Prize of some kind for
destroying the old -- very bad -- order and has made riding around in first-
world cities affordable, safe and reliable -- all of which regulated taxis
were not. Millions of people happily/gratefully use Uber or its competitors
every day. If Uber wants to make a profit, all it has to do is raise its fares
10 or 15 percent and fend off competitors/upstarts. Why does everyone assume
Uber can't handle the competition in an ever-expanding market for its kind of
service; Uber is still an under-30 market. If Uber wants to make its whiniest
drivers happy and shut half of its moronic media critics up, all it has to do
is add the tip function to the app. If it wants to get the rest of the press
off its back, Uber has to learn how to do PR 101 -- which means it needs to
point out the benefits, enormous benefits, that its micro-transit has brought
to cities and the poorish people who until Uber/Lyft came along had to live
with lousy public transit systems and the thieves and idiots who run them. It
may be too late for adding tips to the app; Uber soon may be forced to add
tips by the moronic politicians who mis-run NY City -- the same morons who
artificially held down the number of taxi licenses for 85 years until the
price for a medallion hit 1 million bucks (before Uber came along). In any
case, it doesn't matter to non-investors much if Uber survives; it's already
contributed greatly to urban society worldwide, in spite of the personal and
professional shortcomings of its execs and a creepy few of its 1 million
drivers. If Uber goes the way of the Sony Betamax, no biggie; we'll still be
able to push a button on our smart phones and get a ride.

------
hans
liked kara swisher's point on cnbc, that so much wealth + influence has bought
into uber that it is truly too big to fail. too many wealthy investors and
deep SV network will ensure that it not melt down (unlike ?).

~~~
acchow
This makes no sense.

Enormous enterprises with tons of buy-in that failed:

\- Bernard Madoff Investment Securities (yes, of Bernie Madoff fame)

\- Enron

\- Bear Stearns

\- Lehman Brothers

Too big to fail means the government will step in to prevent a failure. Only
the government has the backing of the entire economy.

~~~
hans
clearly this was not a literal statement ..] but the elbow grease of the
powerful will go a long way for the corp.

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drinkzima
"In my opinion: They are all teetering on the edge of extinction if (or when)
Uber has to do the near unconscionable act and hit the button and launch – a
down round." is everything wrong with the VC funding mentality.

Surely it would take the sheen off what has been a meteoric rise, but the hype
cycle will continue to turn. Hopefully they can figure out the multitude of
cultural problems if there is a harder reset.

~~~
celticninja
If the people with the money don't believe the hype it doesn't matter because
they won't pour good money after bad. These people did not become wealthy by
backing losers. What it means is they may be able to raise money in the short
term but with worse deals than they have been getting, and in the medium to
long term even that will start to dry up. How long can they burn cash to make
a market that they can exploit. They may put other ride sharing companies out
of business but small taxi firms will pop back up again so they will never be
able to monopolise the market such that they can start setting a price that
would result in a good return for investors.

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andy_ppp
Yes, Airbnb and Stripe are shitting themselves.

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camsan66
Big difference between Amazon and Uber: Amazon didn't rely on subprime loans

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abienyc
ARRO App or CURB app will get you a reliable taxi in NYC

Why even think about UBER?

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hammock
Some mod nuked/censored this off of the front page... cc @dang

~~~
grzm
Given the number of negative comments, I suspect many users have flagged the
story. It doesn't take a mod to cause a submission to drop in rankings.

