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Uber confirms SoftBank has agreed to invest (techcrunch.com)
180 points by heshamg on Nov 13, 2017 | hide | past | web | favorite | 101 comments



When I look at their runway and valuation going forward, IPO is the most probable path they will take. But it might imply some risks to the overall startup IPO scene in the future as well.

Apparently Uber is bleeding about $2 billion a year and have only $6.6 billion in cash reserve. If this deal adds $1 billion more cash, then that would only last 4 years.

Since full-scale self-driving cars launching across most major cities is unlikely to happen within 4 years, they will need to either:

1) Charge more and lose even more market share to Lyft. This is unlikely.

2) Raise more cash. IPO seems to be the easiest channel for them now. (Maybe SoftBank will provide it from their massive fund but they might also extract concessions from existing shareholders and buy at a very ‘attractive’ price (for SoftBank) but others will likely resist.)

IPO sounds like a good plan for Uber. But if the price drops precipitously at some point afterward because it is outcompeted by other self-driving companies (e.g. Waymo + Lyft expands self-driving fleets to highly profitable market while Uber’s tech is still not ready) it may result in a chilling effect on the overall startup IPO scene as they are the largest unicorn in existence, and there are many startups that sell themselves as Uber for X. (Public investors may not be as astute as VCs in discerning differences in business models of similar sounding startups.)


IPO is good for Uber - not for society though, who will be the ones to capture the losses.

Also, Tesla often is brought up in this competition - usually mentioned between Uber and Lyft and Chinese companies - however Tesla is positioned to dominate here. I wouldn't doubt that they're working on the apps internally to create the shared vehicle system that Elon speaks of. How many vehicles could Tesla create AT COST spending the $2B / year that Uber is burning? Where Tesla has a fleet of assets on the road ...


> How many vehicles could Tesla create AT COST spending the $2B / year that Uber is burning?

While I don't disagree, I think the major question here is "how many vehicles can Tesla create" given their difficulties in scaling Model 3 production.

Tesla could have the best self-driving tech, but if it is exclusive to their cars and they can't manufacture them fast enough, someone else will build their own fleet and win all the market share.

Unfortunately I see Tesla's hurdle being manufacturing volume, and that's a lot harder to solve quickly than fitting sensors to existing cars.


They're a new automotive manufacturing company - being a few months off estimated production for Model 3 isn't a big deal. It's surprisingly good in hindsight.

Their current capacity capability at the factory is 500,000 vehicles annually. I suspect once they launch the Semi and get 500k+ pre-orders of it, they'll be able to get a loan to build or acquire another factory.

As Elon has mentioned many times, designing the automation is magnitudes harder than designing the vehicle itself. They're on an exponential growth path and it's going to be amazing once they're pumping out millions of vehicles annually.


> IPO is good for Uber - not for society though, who will be the ones to capture the losses.

I agree with the sentiment, and it baffles me that public markets would consent to shouldering these losses, presumably by overpaying for Uber at and after IPO and riding it back down to sane levels.


It's the controllers of large pools of money who simply make money off of transactions and who are separated from accountability, responsibility, or even caring about incomes who are making the bad decisions.


> Tesla is positioned to dominate here. I wouldn't doubt that they're working on the apps internally to create the shared vehicle system that Elon speaks of.

Is Tesla Preparing to Roll Out its Ride Sharing Program With the Model 3?

http://www.thedrive.com/sheetmetal/13075/is-tesla-preparing-...


Of course they are preparing. Facial recognition, perhaps with voice confirmation - a good idea to have a built-in safety word or phrase so if stated then it silently triggers the authorities to intercept the vehicle - for beginning the vehicle/route to destination; the buttons in trunks should perhaps even notify authorities (?) if they are pressed while the vehicle is moving; it'd go badly for pranks amongst friends ... though hopefully the first occurrences of that will go into the news - would be good marketing anyway - might not be a good idea with further thought.

Edit re: safety word or phrase - It should also trigger recording of audio and video, perhaps they will record video and/or audio to make sure there's no shenanigans; as fun as it might be to have "fun" in a vehicle while getting driven somewhere autonomously, if it's shared then I think we as a society would opt to dissuade that behaviour...


Dara, the new CEO has said they are targeting a 2-3 year time frame for IPO.


If Uber was only a world wide Taxi company with virtually no capital costs, wouldn’t this be incredibly profitable alone?

I am not clear on the impetus everyone sees for Uber creating self driving cars. If developed by another company, can’t they just add them to the service? Do they really want to be responsible for that capital?


Uber is valuable only because it has solved a two party network problem at a city level. You need drivers and you need riders. If you don't have any drivers riders won't come and vice versa.

Two party networks are much more difficult to solve than one party network problems. Because with two party networks you have a chicken and egg problem.

Anyone who has solved self driving, has near unlimited scale on the driver side. Their cars can autonomously be present to respond to peak demand - e.g having thousands of cars at Burning Man.

In the autonomous car world, Uber has no place if it doesn't have that tech. There is almost no reason for the company which has self driving tech to license it to Uber, when they are easily run it themselves. The only value Uber has right now is because it has crossed the critical mass on the two party network. And some people thought they could solve self driving cars.

OTOH, a global two party network (e.g Airbnb) is exponentially tougher than a city level two party network. Which is why Airbnb has almost no competition (except some local players in China), while Uber has competition everywhere. In fact, Uber has already lost and conceded a few major markets (China, Russia).

Can Uber - even sustain what they already have. I have my doubts and theories, but that's for another day.


I think the crucial point here is really that uber's two-party networks are city-wide. Yet because Uber is operating globally, it's falsely being valued as an international two party network.


Bingo!

There is no future where Uber is profitable and there isn't someone with deep pockets who wants to undercut them starting with their most profitable markets.

Most riders don't have much customer loyalty, they just want the cheapest price. Drivers don't mind driving for multiple services.

When a deep pocketed competitor launches with zero market share, they can compete with lower prices. If Uber responds too early, Uber would need to cut down prices on their full market share. If Uber waits too long, the competitor gets more traction.

In the end it is a zero sum game for Uber, unless they could have used their money and focus to create Autonomous Driving Tech. Not sure if that is going to happen now! Their new CEO's mandate is to do the IPO and get investors their return ASAP.

My prediction:

In the next 2 years, Amazon will enter as an Uber competitor starting with Seattle and then slowly expand to Uber's most profitable markets.

Any bets :)


I would like to bet 4:1 against that. What is your preferred betting platform? Mail me.


Amazon Restaurants, UberEATS, haven't you essentially lost that bet already?


Amazon Flex has been around and growing. It's Uber but the drivers have packages instead of people. It will not be difficult for them launch Uber like services.


The rider network is somewhat global. In any larger city, Uber could probably sustain a minimum viable driver network just from international visitors. This does have value.

But this value is also impossible to defend against the combination of more local networks aggregated by some global directory specialist who follows a low cost/low commission/high volume strategy.


"Building out autonomous technology and having global network is a huge advantage. Because the issue with autonomy and any software, is that you've got these edge cases [...]. If you have a network live and you developing autonomy, it's not gonna go from 0 to 1, it's gonna be hybrid networks, you can answer certain calls with autonomy (the weather is good, the roads are main line, there is no traffic, no accidents, that can be served with autonomous vehicle), versus another ride that will have to be served by person."

https://youtu.be/Mo2-4sXYZxU?t=29m37s


So Uber's new CEO is talking about the transition time and Uber's value during that time. Makes sense!

The original comment was wondering why should Uber invest in building Autonomous Driving at all.

And I am suggesting that once we have true autonomous driving (all conditions), and if Uber doesn't have it - Uber has not reason to exist at all.


Autonomous cars also has a regional learning curve that benefits from having many human drivers on the road in many cities. For a purely autonomous company to enter a new market, they need to map it and there is a learning curve to building out maps sufficient to provide all the possible routes in a city. An autonomous network that can only do some routes and is useless for other routes, is going to have an expensive time scaling as they will have to put human drivers behind the wheel until they know they can operate safely in that new market.

A company with many existing human drivers can easily enlist those drivers with autonomous-car quality mapping kits. The drivers are all already driving all possible routes, so mapping a new market is much easier and cheaper. Furthermore, a mixture of autonomous cars for routes that autonomous cars can operate safely and human-driven cars for routes that are still being learned guarantees that the service is useful for any route a rideshare customer might want to take.

Lastly, you won't be able to operate a self-driving network without great ops. You need people to maintain the vehicles and provide customer service. Building out a great ops org is yet another massive learning curve for a purely autonomous company.


Wouldn’t Running your own cars would mean incredible capital costs and marketing costs to get people to switch from uber?

Additionally you need people maintaining them.


My understanding is that in a reasonably stable state, an autonomous car would run on battery, charge itself and cost 40k. If a car has a life time of 5 years and electricity costs 4k/yr + 2k maintenance (lower for electric cars), we are looking at operational cost of 14k/yr per vehicle.

Right now an Uber driver who is probably online 60 hours a week, needs to support a car priced around 25k (amortized over 5 years), gas (which is more expensive than electricity), maintenance and 50k-70k/yr driver income. Assuming lower end we are looking at 5k car + 10k fuel + 5k maintenance + 50k driver income. So cost to support a driving car is 70k/yr for lower hours of operation.

So we are looking at a 5x cost and lesser hours of operation with human driving vs autonomous driving.

These are off the napkin numbers so please don't take them literally. It is meant to highlight that driver income is the biggest factor.

Whoever has self driving tech, they can start undercutting Uber with the most profitable markets (NYC, SF, Boston, LA etc) and expand from there.

I feel that we are at least 5-8 years away from main stream self driving. But I could be wrong.


Great comment.

Let me take a stab at it as well, because I think it could be simpler.

Let's assume the driver drives the exact same model as the autonomous one, except he saves $10k upfront on the sensors. So his costs are 12k/year. A decent alternate job would pay $10/hour, and a person could probably work 9 hours a day * 6 days a week * 50 weeks, which comes to $27k. So for the taxi driving gig to be worthwhile, the driver needs to make somewhere in the region of $35-40k ($27k + $12k).

As mentioned earlier, the costs of the self-driving car is $14k/year. So that's a difference of 2.5x-3x. Still significant enough that the a taxi company that offers rides at 30-40% of the cost of its competitors will just win.


I have gone through a few different versions of these calculations and got similar results. Even if the driverless tech costs more it is still around half the costs of a human driven car.

On factor I have not seen fully addressed is the ability of driverless cars to run near 24/7. Given than demand is variable and human drivers could share cars like taxis what is the worth in practice?


I think having access to rides at all hours is helpful. You might not take many rides at 2am, but when you do, its something pretty important. Having a safe option that's available at any time of day or night will make self-driving equal to or better than actually owning a car and far superior to conventional taxi rides.


Couple of great comments in the thread. Thanks.


> Wouldn’t Running your own cars would mean incredible capital costs and marketing costs to get people to switch from uber? > Additionally you need people maintaining them.

This is why I think Tesla is a bigger threat to Uber in long term. If you are not sure then refer to Tesla's plan 2 but Uber also have a counter plan - UberAir

https://www.tesla.com/blog/master-plan-part-deux


I somehow feel that Autonomous drones would be easier to build than Autonomous cars.

Benefits of Autonomous drones:

1. Do not need to deal other non autonomous devices while in flight. Cars needs to deal with human, other cars driven by humans.

2. Do not need to follow existing road traffic rules.

3. Lot of paths available. Cars are limited to existing roads. Drones can have a lot of flight paths.

I understand that there are other challenges - more energy required, less safe in case of an accident, flight regulations.

But still. It seems like if the technology is there, it would be an easier transition with Drones vs Cars.


> Do not need to deal other non autonomous devices while in flight.

In a decent-sized city, there will be low-flying helicopters for police, fire and medical emergencies. Admittedly, this is much less common than for autonomous cars, but any slight problem could easily become catastrophic (no such thing as a fender bender in mid-air).

> Do not need to follow existing road traffic rules.

But do need to follow existing air traffic rules. New regulation would also certainly be drafted (one would hope anyway).

> Lot of paths available.

Maybe, again depends on regulation. Commercial airplanes do have certain "lanes" they are supposed to stay in, and are not allowed over certain areas.


> Do not need to deal other non autonomous devices while in flight. Cars needs to deal with human, other cars driven by humans.

Birds and power lines both come to mind as obvious things to deal with while flying in urban areas.


> Do not need to deal other non autonomous devices while in flight.

They may also have to deal with hobbyist drones.


Whoever solved self-driving cars could buy 10,000 cars per city. Let's say each car costs $100,000. That's $1B if paid upfront which is never the case, but let's assume.

Now, each of those 10,000 cars could work 24x7. Assuming each ride is $10, and you can do 50 rides in a day (2 trips per hour on average over the entire day), that's $500 per day less electricity and maintenance. That's $5M/day with no employee costs except for maintenance workers. You could scale up by simply buying more cars, and whichever cars aren't needed could roost at homebase, without people picketing or sending nasty tweets saying they don't have enough work.

I doubt you have to pay for marketing costs at this point, word of mouth would be strong enough, and you just develop an app.


While I'm bullish that self-driving will happen in our lifetimes, I think there are a lot of challenges that many are underestimating. This includes the actual technology—this is one of the most important and challenging technological breakthroughs of all time. It's going to take time and be very, very expensive to produce at scale (ie all-electric self-driving cars at $100K a piece).

Even putting that aside, I have questions about the business side of things. Demand for transportation has been pretty consistent with big lumps during the morning and evening commutes.

One of the beauties of Uber's existing business model is that it can theoretically spin up and down drivers as needed with Surge pricing. With a fleet of cars, it's not guaranteed that supply will perfectly match demand most of the time.

The counter to that, which I sort of buy, is that it will kind of be like broadband Internet. We don't even know what demand and opportunities self-driving cars will create. My hesitancy with fully embracing this is that broadband was an acceleration of something new whereas self-driving is a leap to an existing quantity of transportation. It will still change lots of things but it will take longer for things like where you choose to live to change.

Finally, my main hesitancy is the human aspect. For self-driving to make the impact that many want/believe, there's going to have to be a hard line in the regulatory sand where human-controlled cars are outlawed or limited. I don't see that happening in the United States for a long, long time.


Great points. The other thing I might add, which your points support, is that the longer the roll-out of self-driving cars takes, the less likely it is to be disruptive to TNCs.


I agree. The user behavior has already been developed. And Uber doesn't have any special user loyalty. There is no reason for users to not try another app.

If the tech is indeed safer vs human, it would also have an added benefit of not having safety risks similar to Uber where some Uber drivers have assaulted their riders.


In the case of Tesla it is the customers that pay for the cars.


Marketing would be negligible because Uber has already created that market: "that other app where there is no driver begging for tips like on Uber" would not need much help selling itself (assuming uber would be phasing out drivers incrementally, while a robotic competitor would start 100% driverless).

As for capital costs: I would expect competitors to have a much easier time raising capital for their fleet than Uber, where all new investors have to to share their stake with several billions (!) of pre-selfdriving investment. Not every competitor will be drowned in investment, (there is an infinite number of ways to share off investors) but one or two will be enough to cause serious trouble for uber.


The credit line needed for such a venture would be quite large, I doubt Uber could get such a credit line any time soon.


Surely you're not serious. Uber is seemingly unstoppable at raising funds.


Franchise!

Let some guy buy a couple of cars, clean them at the end of shift, etc.


> e.g having thousands of cars at Burning Man.

Sounds like a great way to piss off the organizers of Burning Man and get a bunch of damaged vehicles. The desert itself is very damaging to car paint, nevermind how Uber operating there would be the antithesis of the purpose of Burning Man.


That was just an example. Don't take it literally :)


China and Russia are poor examples.

Google lost both of them as well, not because they were out-competed by superior products. Amazon also 'lost' China, it also had nothing to do with being out-competed.

What matters for Uber are the hundred other important markets globally. China was never on the table as a possibility, it's a small miracle they got out of it what they got (a big chunk of Didi).


meh. it just means their "drivers" will be car brokers and not much will change for uber. Other than they might experience the other side of the stick on their price shenanigans used to kill competitors.


But in fact UBer has cleared the way for any other taxi company. Uber's drivers can all (within one single day) download the app of any new company, and switch to driving for them without a hiccup. Uber's riders can all (within one single day) download the app of of any new company, and switch to hailing them without a hiccup.

There's no barrier to entry at all.


Also Careem are strong competitors in South Asia and the Gulf


So how is Uber's runway looking now? This article [1] from August suggests they had just over three years of runway at the end of June ($6.6b burning at about $2b/yr). So this extends the runway by only six months? Are they going to survive long enough to see autonomous drivers? How will this deal affect future funding?

[1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cas...


They did just sign a contract with NASA to help fly taxi aeroplanes [1]

[1] https://www.reuters.com/article/us-portugal-websummit-uber/u...


Whoa that's pretty crazy. 200 mph flying cars in LA in 3 years? Interesting that it's a NASA project. Hopefully that means we'll get the see how the system works even if it doesn't doesn't pan out.


They might spin off the autonomous program into another company to raise fund, prior to IPO, perhaps, just a thought. I think that's a better option financially.


If the autonomous stuff works (HUGE if) it would completely change the core business. I can't see why they'd spin it off. Why sell your future unless you think it won't work out.


I am not really good at this stuff, but I see separating focus. Call it UberAuto, Uber would become UberAuto's parent company. UberAuto could receive new VC rounds and a new CEO appointed, focus on the autonomous development, while the parent company focuses on its core business and get ready for IPO.

Waymo is a spinoff from Google (and Alphabet is Google's parent company). Ebay, HP all have its own spinoffs.

Edit: In fact the new Uber CEO Khosrowshahi guided Expedia spinoff. See [3]. So a spinoff isn't unlikely. The spin-off could be just a research entity, but license to parent company later.

[1]: https://www.nytimes.com/2016/12/13/technology/google-parent-...

[2]: https://dealbook.nytimes.com/2014/10/15/companies-seeing-the...

[3]: https://qz.com/1063313/new-uber-ceo-expedias-dara-khosrowsha...


In business, spinoff typically refers to creating a new company with separate ownership. E.g., PayPal is a spinoff of Ebay and Agilent is a spinoff of HP but Waymo is not a spinoff from Google, because they share the same ownership.


There is no future for Uber without automated cars. Think of it this way: as soon as someone else has an automated fleet, Uber is finished unless it has its own. This is an existential requirement.


You are missing the point. If spinoff, Uber is the parent company. Spinoff is not to remove the new company entirely, just financially and operationally. It's only telling the world "our main company - the one in IPO, will strengthen core business so we burn less money, while our research team is working in the new spinoff company." That's how I would run my company. YMMV. When UberAuto is ready, Uber can merge or have Auto license back. This should be seen as a wise move for the new Uber, given it is burning so much money in the core business already.


They can still live for 20+yrs very profitably on other markets.

Even US and high tech markets like japan and korea will take several years to transition to self-drive cars. Specially because this will start either with trucks or very high cost cars so they can offset support and iron out bugs.

And that's my guess assuming self-driving cars are ready tomorrow.


Self driving cars would be such a dramatic improvement to the public, it would be adopted much sooner than 20 years after being implemented. Cars that require a human driver would depreciate so quickly and the safety benefit would be so clear, people would upgrade incredibly fast.


We don't really know that though, do we? I mean, I can see this being true eventually but I'm still very perplex that we'll see cars able to drive autonomously in all conditions any time soon.

It's one thing to drive on the wide streets of american cities literally built around cars. It's an other to navigate the narrow, crowded streets of many european cities, with scooters and bikes zooming left and right, people parking anywhere they can, passing where they shouldn't be etc... Let's not even talk about some places in Africa and Asia where it seems that driving is more art than science.

I'm expecting self driving cars to start on friendlier turf (large avenues, highways connecting cities etc...) and then expand iteratively to "wilder" areas. I'm sure it'll take a while to completely take over though.


> Think of it this way: as soon as someone else has an automated fleet, Uber is finished unless it has its own. This is an existential requirement.

But the converse is not true, i.e. even if Uber is the first large scale company operating autonomous cars, this is by no means a guarantee for success. This is where the whole "betting on Uber" investment scheme kind of falls flat in my opinion: even if all goes according to plan, Uber does not have anything special (since by that time, autonomous driving will be open to its competitors, too). They probably bet on "hacking" the regulatory process to allow only their cars for a certain period, but this merely delays the issue of competition a bit.


Saudi Arabia owns half of Softbank's Vision Fund and they already put $3.5 billion in Uber (5.6%), why would they want to double down?

https://www.nytimes.com/2016/06/02/technology/uber-investmen...

http://money.cnn.com/2017/09/20/technology/softbank-vision-f...


It's likely part of the exit strategy. They are confident they can get a maybe even a small return on billions of dollars, and Uber likely is hoping it looks like such a big 'positive signal' is a sign that Uber is a solid company to invest in..


It's interesting to note that just recently we had an article about taking money from the countries with abysmal human rights record, especially when you don't really need that money to survive.

Softbank is 50 % saudi arabia public funds money.


In this case, it probably doesn't matter.

Saudi Arabia is trying to buy all these assets to secure their future. Returns will likely be reinvested or stashed abroad!

However with the dismal future of oil based economies and the unstable situation in Middle East - only scenario their would be able to retain these assets would be if they are somehow able to transition into a functioning (hopefully democratic), educated and productive society - which would be awesome! It's better for them and the world. I would love it if they are able to use this money to achieve that!

If not they would descend into chaos and all assets would likely be seized by whichever country hosts them. E.g. Gaddafi!

[1] https://www.theguardian.com/world/2011/feb/28/us-treasury-bl...

[2] https://www.theguardian.com/world/2012/mar/28/gaddafi-assets...

[3] https://www.theguardian.com/world/2011/feb/27/gaddafi-family...


That's interesting. SoftBank invested a similar amount into their rivals Grab to head up against Uber.

https://techcrunch.com/2017/07/23/grab-raises-2b-from-didi-c...


Also in Brazil's "99", Uber's biggest competitor over here.


Can anyone explain why $1B is being invested at a $70B valuation, while existing share holdings are being purchased at a lower/to be determined valuation?


The $1B that is being invested at the $70B valuation is direct from the company and Softbank will be purchasing preferred shares like any other VC. These preferred shares have extra rights, things like liquidation preference, board seats, voting rights, etc.

What specifically they will receive is unknown, but at the very least they will have a 1x liquidation preference on that $1B invested, which means if the company sells for the total amount of money raised (well below $70B), the investors get all of their money back.

So think of preferred shares like "insured" shares, which is why investors are willing to pay more, because the likelihood of entirely losing their investment is lowered significantly.

However, Uber may not want to raise more capital, take on extra dilution, etc, so they are selling only $1B that will flow to their balance sheet.

The other $9B will be purchased from common shares, or employee shares. These shares do not have these preferred rights and most significant they do not carry a liquidation preference. Which means if the company sells for the amount raised, or below that, you lose the entire $9B.

Since there is no downside protection and there is no liquid market, this is usually used to negotiate a lower price than that of preferred shares.

If there had been considerable time between when the last priced round happened and when secondary shares are purchased then the investor may have to buy them above the last round price because the company has made significant traction and the perceived value of the company is now higher.

But since the last two priced rounds are at the $70B mark and these shares are unsecured, they will usually be bought at a discount.

How much varies but you can expect a 10-30% lower price.

However, since this is sponsored by the company early employees will most likely be allowed to sell shares at a very large valuation compared to what their strike price is.


Preference terms explain some, but a minority, of the pricing gap. It’s mostly so existing investors can keep marking their holdings at $70bn [1]. (It also maximises Uber’s cash extraction from Softbank so the latter doesn’t go and hand that money to Uber’s competitors.)

[1] https://www.bloomberg.com/view/articles/2017-09-15/icos-vcs-...


Thanks for the detailed explanation. I am wondering if its ever possible to board to later approve that those newly bought "common" stocks get converted to "preferred" i.e., have the same liquidation preference?


It is of course possible and just requires a board vote, but since the company doesn't receive the funds and have them, it wouldn't be a good idea.

So it's possible of course, but isn't done 99.99999% of the time.

Now if they were purchasing $1B in preferred and another $100MM in secondary maybe, but certainly not when the common shares amount is $9B would put the other existing investors in jeopardy for their own preferred shares providing their invested capital back should things go south.


No sane board would ever convert common to preferred because a venture-backed Board represents the preferred shareholders. Before an IPO the preferred converts to common, but not the other way.


In many ways nostromo95 is correct, however that $1B is probably sitting at the top of the liquidation preference stack. The rest of the money would probably be buying earlier preferred stock or common shares which would be riskier especially if the company can't maintain the $70B valuation.

As a side note, if you were to try and double $100B, I think Softbank's approach is pretty good. You'd aim to invest large amounts of capital into late stage companies and negotiate to be the most senior liquidation preference. This strategy would give you growth potential as well as plenty of downside protection. One downside is that companies that take Softbank's money may struggle to raise additional private rounds. As a result, I think Softbank will be the last round of private capital that many of these companies will raise before IPO or some kind of M&A.


Preferred shares can have a combination of

* liquidation preferences

* various wratchet provisions in case of a liquidity event yielding a lower ROI than anticipated

* pro rata rights

* dividend accrual

* board seats

Common shares have none of that.


I imagine it’s literally as arbitrary/inane as you’d guess — they want to keep their official private valuation propped up.


Guess again


The secondary markets have Uber shares at an ~$50 billion valuation. So that speaks somewhat to what the lower valuation is going to be for the tender offer.


Couple of queries if anyone happens to know:

- Would existing employees with stock options be allowed to sell or the ones with RSU's are also eligible?

- Would ex employees be eligible too?


employees with options can sell, employees with RSUs cannot


Makes sense, Thanks.


Is the share auction first come first serve? Or how is that done?


It's an internally sponsored secondary which means that the buyer has already been determined which in this case is Softbank and Uber will put together some requirements around which share holders can sell and what amount of their stake.

Something typical is if you have been at the company for X number of years, you can sell X% of your vested equity.

They will have a large bank or some other third party as the underwriter for the deal to figure out the correct pricing and then offer it to the employees that are eligible to sell shares until they reach the buyer's total requested amount, which in this case is $9B.


> They will have a large bank or some other third party as the underwriter for the deal

Secondaries aren’t underwritten; they’re brokered. Underwriters purchase the shares for their own account and then resell them. In a secondary, the buyer and seller negotiate directly.


So it sounds like the deal was to get Travis Kalanick back onboard/Benchmark an exit?


Kalanick has always been on the board. He never left, but he has struggled to appoint two new board members, which results in Benchmark suing Kalanick. It is specualted SoftBank's investment is to reduce Kalanick's power on the board. Also, I don't think anyone in their right mind would want Kalanick back as CEO; perhaps in the future like Steve Jobs. But Kalanick has much to learn, despite I do feel bad for him for losing his beloved mother while he was ousted as the CEO, regardless of how he ran his company. He basically lost two things he has loved a lot, accordingly to him, which I can understand from my own experience.

In anyway, SoftBank is known for very acute investment, so with SoftBank stepping in, the board won't allow any more fuck-ups. Though I am very surprised SB didn't invest in Uber early on...


Investors have lost the plot.

Uber is nothing more than a taxi company using VC capital to undercut competitors. There are no self driving cars. That’s just a story to get money and make the brand bigger than its product. Come back to reality.

There is no futuristic mars colony with Uber robots driving everyone around. It’s just a bunch of taxi drivers with dispatch replaced by an app.


There are no self driving cars - yet. The time scale to realization is measured in decades - longer than is currently promised but the tech companies involved wont tell you that....

I agree with all you on all the other points.


Fools and their money are soon parted.

But then again, the market can stay irrational longer than any individual can stay solvent.

Ah, screw it; things just happen, what the hell.


[flagged]


Its fair to question just how far AI driving can possibly go at the moment. Most of the AI we have today is being used for classification and recommendation in fairly low-stakes environments (advertising, (search, social)). It _is_ a big jump from that to powering large metal boxes that move at high speed around built up areas. Yes, of course AI driving is coming, but in the next 3 years? Almost certainly not. And then there's the question of where the next advances in AI are likely to emerge from- Google and Amazon? MIT, Oxford or Stanford? A well capitalised startup?


“SoftBank has been working with Morrison Foerster, known as MoFo.”


No one wants the FOMO.


https://www.urbandictionary.com/define.php?term=mofo

> A person who thinks they are the shit, dressed down with sagging pants, a high need for a belt, too much gold to make the national reserve jealous, and an attitude that stems from not having parents who knew how to refrain from the use of crack cocaine.

Don't sue me for libel, I'm quoting "deez nutz"!


Awesome, this startup is capable of anything!


Tunnels are more important than Uber or self driving cars

“Without tunnels we’ll be in traffic hell forever” -Elon Musk


> Tunnels are more important than Uber or self driving cars

> “Without tunnels we’ll be in traffic hell forever” -Elon Musk

Public transport solves all the problems tunnels solve as well. Tunnels don’t change the fact that cars (self-driving or not) are still an incredibly inefficient use of space when they’re all going in the same direction to the same place.


The Boring Company agrees with you. Tunnels are not just for cars. They will be 200kph subways where you never need to change trains:

https://static1.squarespace.com/static/5915617137c58104451ac...

(Image of shared/public transport tunnel vehicle)


Self-driving cars don't solve the traffic problem, but they do solve the "hell" problem.


There's a word for a properly-networked ensemble of self-driving cars: "Train."

People around here like trains, I've noticed.


I love trains. As long as I don't have to get on one.

Car trains is an idea I could buy.


Recall, Apple is also principle investor in Softbank Vision Fund. As Google recently made its own $1B deal with Lyft. Feels like lines already drawn in the sand, are turning into trenches.

Google’s Waymo passes milestone in driverless car race

https://www.ft.com/content/dc281ed2-c425-11e7-b2bb-322b2cb39...


I somewhat disagree with your take on the "lines already drawn in the sand". The world is bigger than google and apple, lyft and uber. The ridesharing space in particular is fraught with seemingly strange investment partners. Here is a bloomberg article a week ago with more info:

https://www.bloomberg.com/gadfly/articles/2016-08-16/ride-ha....


Apple's contribution to the Vision Fund is only 1% of the total Vision Fund's raise [1].

[1] https://techcrunch.com/2017/01/04/apple-joins-softbanks-visi...




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