
Uber Confirms New $1.2B Funding Round, Looks to Asia for Expansion - chuhnk
http://techcrunch.com/2014/12/04/uber-confirms-new-1-2b-funding-round-looks-to-asia-for-expansion/
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austenallred
Wow. $40 Billion valuation, hiring 1 million people in the coming year,
opening new sites at the rate of almost 1/day.

Neither Travis Kalanick or any current senior execs sold _any_ stock in the
current round.

Uber will either be the biggest boom or bust story there's been in quite some
time. This will be fun to watch.

~~~
toomuchtodo
Have any of the released Uber decks show when profitability is expected and
what their run rate is? Curious how long VC money can fund cheap rides for.

~~~
dr_
The rides are not really cheap. At best, in nyc, uber x is advertised to be
cheaper than a taxi but that is really not always the case.

~~~
toomuchtodo
Forgive my terribly silly question then. If Uber is skirting the regulatory
cost of a medallion for each vehicle in service, why is the cost the same as a
taxi paying that expense?

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ProAm
> why is the cost the same as a taxi paying that expense

Uber is trying to maximize their revenue

~~~
maxmcd
Why would they do that? They have competition, even if it doesn't seem so
obvious right now, and a larger percentage of nyc's cab market share seems
much more valuable. Especially if it's so easy for them to raise money.

~~~
jobposter1234
Can you really not think of reasons why they'd want to maximize revenue? Here
are a few thoughts, off the top of my head: * room to drop prices at the right
moment, when it would most affect competitors * more money in the bank means
less pressure to raise money (before today; I'd guess this is the last big
round they do). Less pressure means they can wait until they get a better deal
for current stakeholders * they don't think price is the determining factor
for market share. I'm seeing Uber and Lyft mutually differentiate corporate
personality to avoid being commoditized for each other * people tend to judge
safety / quality by price -- if they were 50% cheaper, people might be
sketched out * maximizing revenue also maximizes money in their driver's
pockets -- they need high quality, reliable drivers, and thus need to pay them
decent wages.

Those are just a few reasons why they would maximize revenue pre-VC money.

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untog
Investment rounds like this worry me - Uber is already doing fine, and making
money. An injection of cash like this will help them expand to new markets
(fine) and also absolutely flatten competition in existing markets (bad).

They could drop the price of Uber X (again) but absorb the cost to drivers,
edging Lyft out of the market. As long as they beat Lyft before the investment
cash runs out, they win the market and are free to raise prices again. I don't
want Uber to become the new taxi monopoly off the back of VC cash.

~~~
jcampbell1
This business is a natural monopoly, which is exactly what the VCs understand.
There won't be competition, because whoever has the most customers can offer
the best prices to customers, and the most earnings to drivers. The winner can
suffocate the competition.

It's basic game theory, if I run an operation that does 10,000 rides a day,
and my competitor does 5000 rides per day, I can tweak prices and wait times
such that the competing service is strictly inferior for both drivers and
passengers.

~~~
icebraining
By that logic, all businesses with economies of scale are "natural
monopolies". That's nonsense, because it assumes that everything else
(particularly income per ride and cost per ride) are the same, or at least
that they can be the same at a whim.

And in practice, we see smaller companies competing successfully with larger
ones all the time.

~~~
erispoe
Indeed, a lot of businesses with economies of scale and network effects can
become monopolies. If we want to experience the benefits of free-market and
competition, from a consumer point of view, we need to implement it through
regulations. Peter Thiel explains it quite well, businesses want monopolies
because they can reap a higher share of the value. Competition redistributes
value to the customers. Once we recognize this, we can ask where, as a
society, it makes sense to foster competition.

~~~
icebraining
Which businesses have become monopolies through economies of scale? Can you
give me some examples?

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DigitalSea
Umbrellas at the ready, the mess is going to be big when this bubble
eventually bursts. Sure, I see the value of services like Uber, but there are
so many ridesharing services in the market offering a decent product, Lyft
arguably has a better app. While I don't doubt its usefulness, I don't think
Uber is worth $40b. Especially considering it was only valued at roughly $17b
in the summer which was what, like 6 months ago? A $23b jump in value in six
months, seems kind of unrealistic to me, but that's how it works in tech.

I don't want to see Uber fail, because I hate catching taxis, but I think
there needs to be a serious reality check here. The business model that Uber
runs upon is still relatively unregulated & fragile, and as shown in
Vancouver, cities and Governments have the power to easily drive out services
like Uber. Not to mention the pressure from taxi lobbyists.

I don't want to see Uber become a monopoly, but this cash injection can only
mean that Uber will aggressively attempt to drive out its competitors
therefore becoming a monopoly and in the process, a splitting image of the
broken taxi industry they are trying to disrupt. As history has shown, when
you have next to no competition, you stop innovating. Lets just see how this
plays out.

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morganvachon
> I don't want to see Uber fail, because I hate catching taxis

I want to see Uber _in particular_ fail because of their horrible treatment of
drivers, spying on (and publicly shaming the habits of) their riders,
threatening journalists over negative press, and because of their shady
business practices in general.

I want to see ridesharing as a service succeed, as I think it is the future of
taxi service. But I want Uber to either go away completely, or else reorganize
as a positive, beneficial company instead of a cancer with douchebags at the
helm.

~~~
mliker
Those are pretty strong words, "a cancer with douchebags at the helm." Any
personal experiences that motivated these words other than joining in the
hatred hive mind fostered by the media?

~~~
morganvachon
> Those are pretty strong words > joining in the hatred hive mind fostered by
> the media?

Pretty strong words on your part as well, but whatever, I'll answer. No, I
decided a while back that if I ever need a ride, it won't be in an Uber car.
This decision was based not only on what's in the regular media, but from
reading personal experiences of riders and drivers in forums like this and
larger media like Facebook and Twitter. I've read a few good, positive things
about Uber in the past few years, but as a whole I consider them to be hostile
and extremely slimy.

Simply put, I formed an opinion, as is my right, and it's a strong opinion so
I use strong words to convey it.

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big_astrocyte
This figure might be wrong but the entire US taxi industry makes a revenue of
$11 billion per year. Since US forms about 20% of the world's economy, we can
assume the global taxi revenue to be $50 billion. Even if Uber takes in 20%
from every ride, I can't imagine them possibly having more than $10 billion in
revenue. Assuming Uber forms a 60% monopoly, they won't be making more than $6
billion in revenue. Kindly correct me if I'm completely off here.

One way for Uber to overcome this is to bet on the growth of the taxi industry
in Asia. But, even in Asia, governments are pouring in massive investments
into public infrastructure. When I visit New Delhi, I rarely end up in a cab
because the public infrastructure isn't all that bad. Public transportation
projects are coming up in even the smallest of Asian cities. If things go
well, people won't need an Uber for most occasions because you'll have to wait
5 minutes for a bus/tube/{new disrupter}!

This is what _might_ happen. Uber is going to have a massive IPO with a highly
overvalued P/E (this is what the VCs are betting on). Then, after a few years,
the market will realize that this world is finite, unlike their greed (have
twitter's investors started realizing that?). What happens next is that
everyone looses.

Uber deserves credit, just not this much!! There are other big problems the
world must focus on. The short nearsightedness of humans is the biggest
obstacle to our own growth.

~~~
raldi
How big would the ridesharing market be if it became cheaper than car
ownership?

~~~
big_astrocyte
We already have a ridesharing system which is much cheaper than car ownership
and that system is called Public transport. I'm not entirely sure how Uber
could turn into a system cheaper than London's tube or Delhi's metro. Plus,
these systems are raising far bigger rounds than the $1.2 billion Uber just
raised.

Was Uber designed to be the cheapest form of transport? I doubt it. You have
pure convenience on one end (car ownership) and pure cost saving on the other
(public transport) on the other. The taxi system lies in the middle, so does
Uber. Taxis will have a space in the transportation market, just not the
biggest space. I might be wrong here!!

~~~
raldi
Ridesharing has the potential to be cheaper than car ownership _while still
being as fast and convenient_ \-- or even _more_ fast and convenient.

The same can't be said for public transit, except for trips that happen to
follow a major train line.

~~~
big_astrocyte
Major public transport lines are decided based on how people travel. It would
be safe to say that a well designed system would cater to 80% of the distance
I travel on any given day. That leaves 20% for ride sharing if I don't feel
like walking for 15 minutes.

So I purchased a nice toyota for about $15,000 about 4 years back. 600 miles
per month, 25 mpg, about $100 on gas every month, about $1200 every year.
Assuming that I use this car for another year, I paid out $3000 for every year
+ $1200 on gas=$4200 /year (I'm sure my car will last far more than 5 years).
Uber is about a dollar per mile. So every month I would have to pay $600,
every year about $7200. You could try and hook me up with another person
traveling the exact same route, but that is going to be a very uncertain thing
even if you have the relevant technology. Even a small degree of uncertainty
will lead me to buy a car.

Now if I used public transport, I would pay less than $1000/year. Plus, there
wouldn't be much uncertainty. I think the world would be a much more efficient
place if we tried to make the $1000 ride more convenient/efficient, than if we
tried to bring down the cost of a $7200 ride (although I hope they can do it,
would love to see how they do it).

I never said ride sharing is all doom and gloom, I'm just saying it will have
a smaller space in terms of number of people traveling.

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soneca
Honest question: what is the return multiple that an investor expect when
he/she invests in a $40bi valuation?

If Angels & Seed expect 100x; VC expect 10x; I imagine these investors expect
as much as a common stock exchange investor: 1.2x a year?

~~~
JonFish85
My guess would be a $100b market-cap IPO in the next 12-18 months is what
they're hoping for. Long enough to grow more, but quickly enough to get out
before the regulatory hammer starts to fall.

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applecore
It's crazy to think a certain venture capital firm could have invested around
$50 million in late 2011 for just over 12% of the company—a stake that'd be
valued at around $5 billion now—but quibbling over the valuation killed the
deal.

[http://www.vanityfair.com/business/2014/12/uber-travis-
kalan...](http://www.vanityfair.com/business/2014/12/uber-travis-kalanick-
controversy)

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berberous
How much does Uber spend? How could they possibly need to raise that much?

~~~
jld
Uber spends a lot to acquire new drivers. They hire staff to recruit them,
give them a new phone, and give the driver a signing bonus.

~~~
erichurkman
The drivers pay for the phones now, by the way, at $10/week deducted
automatically from their fares. They also recently released the driver app for
iOS and Android for personal phones, too, so they (and the drivers) can forgo
some of that cost.

They've also changed their take rate on drivers. New drivers IIRC are at 25%,
older partners are at 20%, but maybe this varies on city.

~~~
fernandotakai
> The drivers pay for the phones now

depends on the market. here in são paulo, drivers told me that they gave them
phones + gave them a "working rate" (as in, as long as you are online and
working you will get a per-hour-rate even if you don't get any passengers).

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Rainymood
Scaling done right. It's kind of awesome seeing such a company blow up like
this.

I think that a lot more competitors in the near future will enter the market
(as Uber pretty much validated the market for them) but Uber will remain the
biggest and baddest. Uber will probably become very big, then diversify in
some way (just like Google did) and then Uber will be established. Maybe
'Ubering' will even become a word just like 'googling'... heh, funny. But hey,
it's all speculation from this point imo.

Time will tell.

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applecore
It's a popular meme in tech journalism that Uber is "under attack" for its
nefarious business practices, but how much has this sense pervaded outside the
tech bubble?

~~~
ryanhuff
Its bubbled up to the New York Times. Otherwise, if fails my "mom test", so
its still a niche service IMO.

~~~
smeyer
What's your "mom test"? My (mid-60s) mother uses Uber, as do some of my
middle-aged friends, even if it's far less popular there than it is among my
friends in their 20s.

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ryanhuff
My mom doesn't really know what it is. Mind you, she lives in suburbia and has
her own car.

~~~
smeyer
Yeah, as does mine. I agree that it's likely the case that most middle aged
mothers living in suburbia aren't too familiar with it.

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free2rhyme214
It must be hard for Travis to manage all this growth. I always wondered what
the next Google was and I never expected it would be a taxi ride sharing
company.

~~~
nostrademons
Uber seems a lot more like the next Netscape. Super-fast growth, media
darling, natural monopoly, took lots of capital, ultra-hyped valuation,
arrogant, and threatening to a lot of powerful people.

Google, if you remember its growth period, basically came out of nowhere. It
was beloved by users and adoption grew rapidly, but they didn't start getting
serious publicity (nor did they seek it) until around 2004. They, AFAICT, took
only one round of funding, $25M in 2000, before attaining profitability
sometime in 2002. And they worked very hard to seem non-threatening until they
were big enough to actually be a threat: remember "we do only one thing and
one thing well - Search", "Don't be evil", their cordial relationship with
Apple, the explicit decision _not_ to challenge Microsoft, and how they only
took advantage of companies that were going out of business anyway?

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venomsnake
That's almost 3 whatsapps.

Congratulations to the team. Although lately I feel like Dr. Evil and his 1
million ransom when I see that kind of valuations thrown around.

~~~
sz4kerto
Well, not exactly. Whatsapp has been sold for $19B, this is a _valuation_ of
$40B. I think selling something for $19B is bigger than being valued at $40B
and getting $1.2B in funding.

Huge numbers though, I can't realistically appreciate these amounts.

~~~
pbreit
With $2b in revenues vs ~$0, I'd put the Uber valuation in the bigger
category.

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ChuckMcM
The more interesting bit for me is that a lot of smaller players are also
getting traction (GrabTaxi, Lyft, etc) so what that says to me is that folks
have decided that this will be the new way rides are done and are trying to
get in on that shift. It seems that a lot of the existing cab companies are
private so there isn't an easy way to short their stock to double down on the
bet.

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bhewes
Ah, I have thought of Uber as UPS for people. Door to door routing, with out
me having to think of all the logistics would be a thing of beauty.

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nwjose
Numbers like these (also for Whatsapp) only show that the US$ is way overrated
and a massive crash is probably due in a couple years.

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ingenieros
Didn't PG say that mean people fail?

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kunle
The power of product market fit.

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NTDF9
Surge pricing for investors?

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billconan
good luck in China where carpooling was considered as illegal.

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higherpurpose
Under the same leadership?

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jliwjoi3wqd
Hey look, the cancer is spreading.

Though, I'm sure that the people here will justify Uber's merely superficial
bad behavior. After all, silicon valley can do no evil, and accumulating
profit at all costs is the best way to advance human society, right? Stay
classy HN.

~~~
SyncTheory13
I will never use an Uber car due to the activities they have been caught
participating in. Everybody around me knows that I have intense dislike for
them and recommend Lyft instead.

However, I feel like your comment is unfair in attacking HN - Most of what
I've read against Uber has come from this site.

Either way, I was very disappointed to see today's news.

