
Uber Sets Valuation Record of $17B in New Funding - antr
http://www.bloomberg.com/news/2014-06-06/uber-sets-valuation-record-of-17-billion-in-new-funding.html
======
austenallred
The "this valuation is crazy" and "this proves a bubble" comments are filling
up my Twitter feed and HN, but I couldn't disagree more. Call me crazy, but I
think this valuation is completely fair. For a few reasons:

Uber has _serious_ revenue. They do more trips in San Francisco than taxis do.
This isn't a pie-in-the-sky "there will be money there, I'm sure of it" thing.
They bring in billions, and they're starting to win entire markets.

The on-demand-transportation market is _enormous_. I can literally see a
future in which the majority of the taxi industry is now called "Uber." That's
a big freaking deal.

What Uber can do doesn't even stop at "transportation." How many "Uber for X"
startups have you seen? Uber could be all of them, and do all of that. They've
nailed the difficult math behind the logistics issues - basically a scaled
version of the traveling salesman problem. They do real math, and solve real
problems.

I imagine a world where you can get anything on demand in minutes, and in that
scenario Uber is the taxi, UPS, FedEx, etc. at the same time.

In a few years when self-driving cars become the norm (crossing my fingers),
Uber will be even more valuable. I may be dreaming, but empty cars you can
grab any time and take anywhere or request anything... it really is a
beautiful thing.

~~~
untog
They will be successful in San Francisco, of that I have no doubt. From what I
understand the taxi market there is horribly broken, Uber saw a gap in the
market and leapt at it.

The mistake, IMO, is assuming that they will be able to replicate that in
other cities. In NYC you can get a taxi 90% of the time by holding your hand
up in a street corner. At peak times that's more difficult, but that's also
when Uber has surge pricing. They will hold their own and take over the
premium market from various non-descript livery car companies - but only the
premium market. They won't take over the taxi market as a whole. Much the same
applies to London.

Also, much of their current success is based upon how heavily regulated and
backwards taxi authorities are. For example, in NYC taxi drivers are not able
to use phones or navigation aids, and hailing by smartphone is in its infancy.
But that won't be the case forever.

So yes, they deserve a good valuation. But, to me, there are still a _lot_ of
questions about whether they will expand to fit this valuation.

~~~
tomblomfield
Uber is 30-40% cheaper than London cabs. Uber has rattled the cab-drivers so
much that they're staging a protest next week to try to pressure cab
regulators into blocking Uber's expansion.

[http://www.theguardian.com/uk-news/2014/may/30/will-uber-
kil...](http://www.theguardian.com/uk-news/2014/may/30/will-uber-kill-the-
traditional-black-cab)

~~~
DanBC
The London black cab has a meter that prices the journey. Other taxis in
London do not have a price meter.

Uber needs to obey the regulatory rules of the industry. Either they don't
have a pricing meter (and thus journey price is agreed before hand) or they do
have a price meter and all Uber drivers are regulated like any other black cab
driver.

They can't ignore laws just because those laws are inconvenient to them.

~~~
JonFish85
_" They can't ignore laws just because those laws are inconvenient to them."_

I completely agree with you, but at the same time, for whatever reason
companies (Uber / Airbnb) have been able to completely ignore rules & laws to
the tune of tens of billions of dollars (in valuations).

It's almost "might makes right": ignore rules and grow as fast as possible,
with the hope that you'll grow faster than the legal system can take you down.
By the time the legal system could do anything, you're big enough to change
the rules.

~~~
vehementi
Big enough to change the rules, or big enough to absorb whatever fine they
wreck you with. $1 billion in fines for making $10 billion you shouldn't've
been able to make in the first place? Good deal!

------
quaunaut
Prepending Edit: If you're reading this and have a lot more familiarity in how
investments of this kind are made, and what kinds of things these investors
are thinking, I really am making this post looking for education. I didn't
finish college, and don't know a lot, but I'm trying. If you'd rather not stir
the pot by talking here, my e-mail is in my profile.

The one thing that makes me skeptical about this, is historical data. From
what I'm seeing, the _entire_ US Taxi/Limo market is $11bn in value. So for
them to achieve this, they'd need ~80%+ market share in the US, plus a high
market share in both Europe and Asia. This is a valuation that smells similar
to the WhatsApp deal, where the timeline to succeeding this valuation is 15-20
years out.

Is there some data I'm missing here that implies my data(from [1] for example)
is flawed? Or that maybe this isn't such an out-there valuation, by way of
possible growth from ridesharing, or other avenues Uber could explore without
straying too far from their primary purpose?

[http://www.ibisworld.com/industry/default.aspx?indid=1951](http://www.ibisworld.com/industry/default.aspx?indid=1951)

~~~
fnbr
Assuming your figures are correct, $11bn in annual revenue allows for a much
higher valuation than $17bn. One of the main methods of valuing a company is
the "multiples" approach [1], which values the company at a multiple of it's
annual revenue, with the multiple typically falling between 5-15.

A commonly used multiple is the price to earnings multiple of the entire
industry, which is absurdly high for major tech companies- Google, for
example, has a P/E ratio of ~30 [2], and Facebook has a P/E ratio of ~80 [3].
For non-tech companies, the average ratio is roughly 15.

So if we want to use the average P/E ratio, we can say that a very very very
rough price for the entire Taxi/Limo market is $150bn.

[1]
[http://en.wikipedia.org/wiki/Valuation_using_multiples](http://en.wikipedia.org/wiki/Valuation_using_multiples)
[2]
[http://ycharts.com/companies/GOOG/pe_ratio](http://ycharts.com/companies/GOOG/pe_ratio)
[3]
[http://ycharts.com/companies/FB/pe_ratio](http://ycharts.com/companies/FB/pe_ratio)

~~~
runeks
> Assuming your figures are correct, $11bn in annual revenue allows for a much
> higher valuation than $17bn.

[...]

> So if we want to use the average P/E ratio, we can say that a very very very
> rough price for the entire Taxi/Limo market is $150bn.

P/E is price/earnings ratio, it's not calculated using revenue. Earnings is
revenue less expenses.

So if the taxi industry in general is operating at a 10% profit margin, that
would mean they're earning $1.1bn per year, and with a P/E of 15, that would
be a $16.5bn market cap.

~~~
fnbr
Ah, you're absolutely right. My mistake.

------
ChuckMcM
This is an interesting valuation[1]. It shows that a workable replacement for
an established service business (one suffering from large regulatory capture)
is considered so significant from the perspective of these bankers. It also
suggests that AirBnB could do really well if they went back to the well (not
that I recommend it, money drags you down).

But more importantly this looks like an investment in a public company not a
startup, or put another way, the difference between preferred and common stock
has no doubt reached near parity. If the bankers believe the company will come
out into the public markets at 34 - 50B then that puts them in some really
rarified territory. Would the wider market share their enthusiasm? Or would
this be like Facebook's debut, zero to down change for the first 6 - 12 months
of existence.

The good news is it gives them a chunk of cash for the big fights they are
fighting. Of course I'm curious if the management took any money off the table
or if this is all earmarked for lawyers and expansion.

[1] I also agree the bubble hysteria is nonsense, whose money is at risk here?
the .01% so don't sweat it.

~~~
conistonwater
You are being very optimistic. For example, as the article says:

> Kalanick added that Uber would continue to experiment “aggressively” with
> lowering prices, in an attempt to boost demand and increase the number of
> trips drivers can make each hour.

Valuing the company at 80 times the 2013 revenues
([http://techcrunch.com/2013/12/04/leaked-uber-numbers-
which-w...](http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-weve-
confirmed-point-to-over-1b-gross-revenue-213m-revenue/)) is a little bit mad.

> I also agree the bubble hysteria is nonsense, whose money is at risk here?
> the .01% so don't sweat it.

Markets exist to allocate capital efficiently. Even if the capital belongs to
people you don't like, you can still argue that misallocating it is bad.

~~~
ChuckMcM
I don't disagree that the valuation stretches credulity, perhaps past the
breaking point. The narrative of the 'old bubble' was hyperinvestment by
retail investors and mutual funds in unsustainable technology visions. The
only thing 'wrong' about that old bubble, was that people who didn't know any
better lost their money. Sometimes because their cousin or grandchild said
they should put their savings bonds into tech stocks, sometimes because an
aggressive fund manager put in more risk than they bargained for. Either way,
people who didn't know better got hurt. In this hypervaluation the people at
risk are investment bankers that _do_ know better, and if they lose all their
money, then fine. That was the bet they made. To use a gambling colloquialism,
"Nobody cries for the roulette player that puts it all on 13 black."

I don't necessarily agree that markets "exist" to allocate capital
efficiently, I would agree they exist so that capital can be allocated. When
the market is fair, capital is pretty efficient allocated, but the private
financing market is not fair on at least two axes, there are artificially high
barriers to creating new goods (startups in this case), and information is not
evenly distributed amongst all parties. That does put a crimp on the
efficiency of their operation.

------
candybar
This is another way to think about Uber's valuation - the license to operate a
yellow cab in NYC is a tradeable asset whose value can be observed. The value
of all licenses in aggregate, comes to about 13 billion, give or take a few.
And that's just one city.

[http://www.slate.com/articles/business/moneybox/2012/06/taxi...](http://www.slate.com/articles/business/moneybox/2012/06/taxi_medallions_how_new_york_s_terrible_taxi_system_makes_fares_higher_and_drivers_poorer_.html)

[http://blogs.reuters.com/felix-salmon/2011/10/21/why-taxi-
me...](http://blogs.reuters.com/felix-salmon/2011/10/21/why-taxi-medallions-
cost-1-million/)

[http://nypost.com/2014/02/26/taxi-medallion-auctioned-for-
re...](http://nypost.com/2014/02/26/taxi-medallion-auctioned-for-record-
setting-965000/)

[http://www.nytimes.com/2013/11/15/nyregion/1-million-
medalli...](http://www.nytimes.com/2013/11/15/nyregion/1-million-medallions-
stifling-the-dreams-of-cabdrivers.html)

You can make an argument in both directions. On one hand, clearly the taxi
industry is large enough to justify this kind of valuation or even much more.
On the other hand, Uber currently benefits greatly from this legally enforced
supply restriction that chokes off their competition while not yet applying to
them. Most large cities can dramatically lower the cost of and increase the
availability of street-hail cabs by issuing more permits, which can cut into
Uber's revenue. Cities can also decide to apply more regulation to car service
businesses or even Uber-style businesses more specifically to even the playing
field.

------
6cxs2hd6
Although I like using Uber as a customer:

> "Uber is creating 20,000 jobs per month, the company said in a blog post."

Really? "Jobs" as in W-2 forms and health benefits? Or independent
contractors?

Not that the latter are necessarily bad, but they're fundamentally different.
It is misleading to call them "jobs" in their blog headline, then switch to
"partners" and "small business entrepreneurs" in the text.[1]

I understand that traditional taxi drivers don't have "jobs", either, and Uber
might be a better client for a contractor than traditional taxi companies. But
that's beside the point I'm talking about, which is unwelcome and deceptive PR
spin.

[1]: [http://blog.uber.com/uberimpact](http://blog.uber.com/uberimpact)

~~~
conistonwater
The whole "creating jobs" narrative is a bit odd. It's not like the people
working for Uber would have just sat on their hands otherwise. They would have
found something else to do.

~~~
_delirium
Some of them would've even been doing a pretty similar thing. To the extent
that part of Uber's growth is through taking market share from competitors in
the car-driving-for-money sector, they're shifting jobs between companies, not
creating new ones. Some may also come from expanding the size of the whole
market, but you can't just count the total number of employees and use _that_
number as the net-jobs-created.

------
adventured
By comparison, the taxi & limo industry does $11 billion in sales across the
entire US market.

For Uber to ever justify just this funding round, they'll probably need to
become _roughly_ the size of 1/3 the entire taxi business in terms of sales
(assuming $3.x billion in sales and $600x million in profit off that base, and
assuming a reasonable 20 to 30 pe ratio over time).

I'm guessing Uber is betting on selling customers a lot more than their
current service offerings. There's no other way they can justify this type of
valuation.

As of 2013, Uber was only generating $200 million in revenue for the entire
year (according to the leaked numbers). Uber could grow crazy fast and still
not justify this valuation for six or seven years. That's quite the long term
bet being placed here.

[http://www.ibisworld.com/industry/default.aspx?indid=1951](http://www.ibisworld.com/industry/default.aspx?indid=1951)

~~~
jessriedel
According to this

[http://www.quora.com/Uber-1/How-is-Uber-doing-these-days-
in-...](http://www.quora.com/Uber-1/How-is-Uber-doing-these-days-in-terms-of-
weekly-revenue-growth-and-other-metrics)

and this

[http://techcrunch.com/2013/12/18/uber-
lyft/](http://techcrunch.com/2013/12/18/uber-lyft/)

Uber could be growing at 20% per month, or 9x per year, even as recently as
December. That suggests they could reach the revenue target you mention in
less than two years. Obviously, growth becomes dramatically harder once you
become a fraction of order unity of the market, but I don't think this bet is
necessarily 7 years long.

------
jasonbarone
Here is some fun Uber-related stuff from Baltimore, MD:

UberX is cheaper than taxis for the short trips in/around the South Baltimore
downtown area (by the sports stadiums). These are the quick trips jumping
around the bar/restaurant areas.

An UberX is only $30-$40 from the Inner Harbor area to most metropolitan areas
20-25 minutes outside of Baltimore, which is a crazy good deal, especially if
you split fares.

I've yet to see purge pricing or a lack of available cars on weekends in the
major going out areas like Fells Point, Federal Hill and Canton.

I've seen "normal" people with Uber on their home screen.

I've heard quotes like this: "I spend so much money on Uber it's absurd." "I
sold my car and use Uber." And "It's so convenient you can't NOT use it."

So in regards to Baltimore, MD, I agree with the top commenter. This a real
business doing really well here from a user's perspective.

~~~
ssully
To give a perspective from Chicago:

About a month ago my girlfriend told me how she was late for work on morning
and wouldn't make it on time if she took her usual public transportation
route, so she took Uber.

I was surprised because I never talked to her about Uber and I usually
introduce her to things like this. Turns out its fairly popular at her school
and other downtown Chicago campuses. Students just like it better then cabs
and find it easier to get a good rate and nearly any time in the day.

I still have yet to use it myself, but I feel they are making huge in roads to
being a common place name and that alone seems to justify this valuation. This
isn't theoretical growth. They are getting huge, and its not just in the tech
bubble.

------
selectout
Congrats to Uber, as someone that moved to the Bay Area a little over a year
ago, this company has been one of the most reliable and helpful services I've
used. It's amazing the growth they've had.

------
fblp
Uber was doing $213mil revenue late last year before they dropped their
pricing/commission to dramatically increase both supply and demand.

They've since increased their commission back to 20%, added a $1 surcharge,
integrated with google maps, and they've probably validated the same day
package delivery business model in NY. Valuation probably reflects crazy
revenue growth they have in so many markets + future opportunities to dominate
other verticals.

[http://techcrunch.com/2013/12/04/leaked-uber-numbers-
which-w...](http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-w..).
[dec 2013] <\--note week-on-week increases too!

------
gtirloni
From Uber website: "Get a ride that matches your style and budget"

In the low budget/style area, they are competing with the public
transportation system? Do they have all this financial/momentum muscle?

And in the high budget/style, they are competing with rich people who can own
their own BMW/Ferrari with a private driver?

Who "needs a ride" and chooses an expensive "SUV". How could this thing make a
difference in anyone's life? "Oh sure, today I want to go to work in a fancy
car, wheew!". Perhaps Barney Stinson?

It seems there is a lot of opportunity in NOT solving the real problem (public
transportation). Good for Uber.

~~~
rxaxm
there are a lot of rich people without cars (a lot of manhattan). i know tons
of people who hate cabs and can't really justify a full-time driver--these
people take a lot of ubers. also, cabs can only take 4 people at a time. the
ability to call a large car when going out has a made a huge difference.

~~~
xbeta
I would like to know how 'many' people are in this pool, and $ per user for
Uber.

~~~
badusername
I know several people in the SF Area that take Uber almost everyday, multiple
trips. It's not unreasonable to think that $/user in such cases is a few
thousands.

------
andywood
My friends find it super convenient in their lives. That's what providing
value is.

------
kiyoto
I love the contrast between the 1st and 2nd link on HN right now (2014/06/06
10:49AM)

[http://gyazo.com/b5fb5ded81f2aab53cd4185c65158afa](http://gyazo.com/b5fb5ded81f2aab53cd4185c65158afa)

------
xbeta
Who really uses cab/taxi services? I grew up in Toronto, Canada (not a big
city compare to NYC, but still pretty big) and now lives in SF Bay Area. I
took public transportation (sure, they sucks sometimes) , riding bikes, and I
own a very basic car (Toyota), I have never really have a need to use a taxi
service in probably 17+ yrs of my life so far. I really not sure how this is
improving people's life because I don't see a problem with the way I lived
now.

What are some advantages that I really need a taxi service? Sorry, I don't
drink, so no need to worry about drink-and-drive.

I would like to see someone here can enlightening me.

------
skeper
Serious question to those who have used uber: how safe is it? what makes it
better than getting a ride off of craigslist?

~~~
dmerrick
It's pretty safe, although their insurance policies are smaller than that of
licenses cabs (think $10k vs $100k). Drivers undergo background checks and are
rated after every ride. Uber does not tolerate drivers who get less than 4
stars.

What makes it better than Craigslist is the convenience. Take out your
smartphone, drop a pin on your location, and get a ride within minutes. Plus,
you don't need to worry about payment, it all happens behind the scenes via
your Uber account.

------
richcollins
I wonder if a decentralized version of Uber could outcompete it.

~~~
thibautx
What do you mean by decentralized? Something more along the lines of Lyft?

~~~
richcollins
No I meant that there would be no central system connecting drivers and
riders. They would connect directly, as if all buyers and sellers met at a
predetermined location to match each other.

------
j_s
I hope their long-term plan accounts for driverless vehicles!

------
ausjke
how many people use taxi these days? and how often? $17B, it got to be crazy.

~~~
ChrisBland
Hi - I'm one of the people that uses Uber and loves it. I live in a big city,
Chicago, and guessing from your statement you don't live in a taxi city. Let
me tell you why I love uber and hate taxis (or why I only take Uber Taxi). 1)
I used to travel for work, and for me that meant getting a 5:45am cab ride
from downtown Chicago to the airport. Now, I'm sure you're aware that Chicago
is freezing during the winter months, so standing out in the snow at 5:45am on
a monday is not something I want to do. What were my options before Uber? 1)
Wait outside and try to hail a cab. 2) Call dispatch and be told that a cab
may or may not be on its way. This is the real pain that Uber solved for me. I
cant tell you how many times I called and was told a cab would be there in 5
minutes, then 15 minutes later, no cab had showed up. So now, its 5:55am on a
Monday in the cold Chicago winter, I'm stressing about missing my flight, all
because a cab couldn't show up when I ordered it. Uber solved this exacty pain
point that I felt. On another note of why I hate taxis and only take uber
taxi. A few years ago when Chicago was going after the olympics, they required
all taxis to accept credit cards. Now, try to pay for a fare in Chicago with a
cab, 50% of the time 'The machine is broken', but when you have no cash, it
magically starts working again. I get that these guys do not want to pay the
5% charge to process it (another issue is cab companies upcharging to process
cc, but not for this discussion). With uber, I never have to worry about the
driver not able to make change for me and just expects hes getting a bigger
tip, I never have to worry about only having a CC on me and the driver
bitching and complaining about accepting it. Uber solved this problem. Now,
they haven't just solved my problem, they've also solved their drivers
problem. Talk to a cab driver, ask them how they get paid for their credit
card receipts. I'll be willing to bet that they have to go to a special
office, receipts in hand, wait a few hours in line, all to get paid. That is
ridiculous! Uber direct deposits the money in the drivers bank account, no
time wasted by waiting in line, no worry about lost receipts. Now for my last
point, imagine you left your phone/wallet/camera/foobar in a taxi in Chicago
and you paid in cash. Try calling our 311 number and reporting it, you have
about as good of a chance of finding it as comcast does at providing great
customer support. With uber, you know your driver, you can simply contact uber
and or the taxi company to give specifics on what you lost and where you lost
it.

tldr: I <3 uber and Uber > taxis

~~~
phil21
Also use Uber in Chicago (and now many other cities during travel, woo!) and I
don't really have much else to add.

I can't stress how important the airport thing is. Radio dispatch by cab is
the most unreliable horrible mechanism ever. It almost may as well not exist,
because a cab might show up in 5 minutes, it might show up in 15, or it might
show up never. Impossible to rely on. Due to Uber being reliable I've taken
more car rides than usual to O'hare on days when I'm running late, or
otherwise don't want to deal with the Blue Line or waiting outside for a cab.

Basically, cab companies did this to themselves by being horrible at customer
service and not giving a shit. They are up there with Comcast in the "giving a
fuck" department. Ever call to complain that your cab didn't show up? Ha!

And if you think this is great for a well-served city like Chicago, it's
utterly game changing for under-served cities like Minneapolis. I now can
actually take a ride to the airport instead of driving and spending $250
parking my car for a week. Why? Because I can depend on the Uber showing up
when they say it's going to. Cabs, I'd have to give at least a 2 hour buffer
in case the first 2 I call never show up.

Basically if this puts the cab companies out of business, it couldn't have
happened to better people and I won't shed a single tear. Good riddance.

------
gtremper
A series D? Crazy

------
syntheticlife
Irrational exuberance?

~~~
dctoedt
(Clever) pun intended, I assume? ("Irrational exUBERance")

