
New Uber Funding Round Could Value the Company at $25B - prostoalex
http://recode.net/2014/11/07/new-uber-funding-round-could-value-the-company-at-25-billion/
======
johnloeber
It's not easy to correctly value Uber, because it's not so easy to value the
taxi industry, either. By some metrics, the global taxi industry is worth no
more than $25B.[0] This seems spurious, and Nate Silver, using a different
metric, values the taxi industry at about $100B.[1]

So it might seem as if Uber would have to seize a large fraction of the taxi
market in order to justify its valuation. Some (myself included) say this is
unrealistic, because Uber is unlikely to hold on to a monopoly or majority
share of the rideshare market.[2]

The important factor, however, is that Uber is rapidly expanding what
previously was the conceived size of this market. People who were not taking
taxis previously are now using Ubers. There was an article on here recently
about parents using Uber to ferry their children around. Some folks are
leaving their cars at home, and are using Uber instead, because it makes sense
financially (gas+car maintenance costs, in some cases, are higher than those
of taking an Uber).

Beyond this, I expect to eventually see the integration of the rideshare
market (Uber, Lyft, etc.) with other services, like delivery and last-mile
transportation. This is already being done by Uber Rush. I would not be
surprised to see Uber and its competitors greatly expand what we previously
thought of as the Taxi industry, such that even a small share of this very
large industry could be well worth the $25B valuation.

[0] [http://iterativepath.wordpress.com/2014/05/22/if-you-most-
ag...](http://iterativepath.wordpress.com/2014/05/22/if-you-most-aggressively-
value-uber-from-its-only-known-revenue-model/)

[1] [http://fivethirtyeight.com/features/uber-isnt-
worth-17-billi...](http://fivethirtyeight.com/features/uber-isnt-
worth-17-billion/)

[2] [http://johnloeber.com/w/uber.pdf](http://johnloeber.com/w/uber.pdf)
shameless plug

~~~
nrao123
The Uber article that you referred to as Nate Silver is not actually by him.
Its by Ashwath Damodaran (The NYU corp finance prof)

[http://fivethirtyeight.com/features/uber-isnt-
worth-17-billi...](http://fivethirtyeight.com/features/uber-isnt-
worth-17-billion/)

His basic assumption was to use the taxi market as the total addressable
market (TAM)

Bill Gurley, a VC from Benchmark and one of the investors in Uber, lays out
alternative scenarios for TAM including going after car ownership.
[http://abovethecrowd.com/2014/07/11/how-to-miss-by-a-mile-
an...](http://abovethecrowd.com/2014/07/11/how-to-miss-by-a-mile-an-
alternative-look-at-ubers-potential-market-size/)

Damodaran's response to Gurley concedes its probable/plausible/possible for
uber to get into non-Taxi and larger markets:
[http://aswathdamodaran.blogspot.in/2014/07/possible-
plausibl...](http://aswathdamodaran.blogspot.in/2014/07/possible-plausible-
and-probable-big.html)

Bottom line: the optionality of uber going into these larger markets is what
is driving these valuations

~~~
jboggan
Anecdotal support; Uber is keeping me from purchasing a car. I have an
inexpensive motorcycle that handles 95% of my rapid transportation needs, and
I try to live in areas where walking or mass transportation solve my "slow
transportation" needs. I use Uber for all the edge cases where walking or
motorcycling doesn't cut it, and I cannot see any scenario where I'd prefer to
own a car and drive myself compared to the ease and reliability I have
experienced with the service so far. Maybe Uber won't be the king of the hill
when the dust settles, but so-called "ride sharing" services absolutely are
taking dollars that would otherwise go into purchasing a vehicle, a much
larger market.

~~~
jusben1369
Important to note you haven't given up vehicle ownership though. You just
haven't switched types of ownership. Uber needs to be more than your 5% edge
cases if we're talking about disrupting ownership habits.

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dana0550
I'm a heavy Uber user and I even sold my car about a year ago because I no
longer needed. I use it exclusively for my trips around San Francisco and the
East Bay. I've noticed recently (past ~1-2 months) there is always surge
pricing. I wonder if this has to do with drivers not being paid enough or if
they internally redefined what surge means.

Either way I like Uber but I just don't understand how there is always surge
pricing. This is still has not deterred me from using it but still I wonder...

~~~
msoad
You don't have to be royal to Uber. Always check prices before ordering. Here
you can see prices from all major Uber-like companies:
[http://uphail.com/](http://uphail.com/)

~~~
prostoalex
Is it a real-time check, which would include surge pricing, or just a
calculation based on carriers' published rates?

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steven2012
Just out of curiosity, how do people who invest at $25B valuation expect to
make money? Are they okay with it going from $25B to $50B and getting 2x, or
are they also looking for 10x+ return?

~~~
prostoalex
Investors usually get preferred stock, which sometimes comes with

* liquidation preferences

* dividends payable upon liquidity events (with their own liquidation preferences)

* board seats

* pro rata rights with future rounds

Depending on specific type of investor, some of these things turn out to be
super-important compared to others.

A lot of late-stage also is facilitated by wealth management arms of large
investment banks, and is a way for their clients with net worth of $1m+ to get
in on the deal before the IPO, at which point even marginal returns are
acceptable. A Google query with terms "Facebook IPO", "date: 2012", "private
market", "regretted" sheds some light on that.

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swartkrans
I've never used uber or lyft, but I used sidecar yesterday for the first time,
and given this was my first experience with this kind of service I have to say
this is so much better than having to hail a taxi. It sucks that you have to
have a smartphone, (what do you when battery is out) but otherwise it's easy
to see how transformational this kind of new service is. You can pick your
driver, your driver can accept or reject based on your destination, you can
see how much they will charge up front, and you can tip right from your phone
making the thing entirely cashless. It's pretty amazing.

~~~
rayiner
Uber sucks. Have you ever taken a cab in a city with decent cab service? You
just hold up your hand and an experienced driver takes you where you're going.
With Uber, you futz with the app, then the driver circles the block trying to
figure out where you are, while three cabs pass by you, and if he doesn't
cancel the pick up after giving up, futzes with the GPS and takes you along an
inefficient route because he doesn't know better.

~~~
jusben1369
Man I've done a lot of both and feel that exact opposite. Cabs are the pain
and all the futzing to pay and tip squirming in back seat with bags etc.

~~~
harryh
I think it depends a lot on what city you're talking about. Cabs in NYC are
awesome. Cabs in SF are atrocious. There's lots of variance in between.

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georgeecollins
Uber said that the median driver salary was $90,766 for UberX drivers in New
York, but reporters can't find one driver who made that much (google the slate
article for details). I don't think that is really crucial to the success of
the company, but it is crucial to my trust of the companies estimates.

Groupon or Zynga should teach people that a business model can expand rapidly
and make money for a while, or attract enough invetment to appear viable. The
question is: will this still be making a lot of money in five years? When they
have to expand to less attractive markets? When they have to defend against
copy cats?

It's not that it isn't a good business, or a clever company. It's just that at
$25 bn it has to be a really profitable, really big company for a long time.
Maybe.

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bsimpson
In two weeks' time:

> People Who Cut You Off in Every Bike Lane Now Worth Infinity Dollars

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foobarqux
They are probably raising money to buy Lyft.

