Can we break down the numbers on how much they'd likely receive from an IPO vs their burn rate? It's hard to imagine that an IPO would deal with most of their problems.
This is wonderful news. This is how capitalism is supposed to work. I wonder if the recent uproar around uber could have mitigated by publicizing this earlier.
Capitalism is supposed to work this way? VCs investing billions of dollars in an unprofitable company which continues to be unprofitable for years after the fact. A company which has two real paths to profitability: (1) achieving autonomous vehicles and ending the jobs of tens of thousands of people or (2) obtaining enough market power to raise prices from their current, subsidized level. A company which only exists in the first place because they trampled all over local laws.
Disagreeing with capitalism is different from disagreeing about what it is.
If autonomous vehicles are within the realm of possibility, they are going to be enormously successful and beneficial to humanity. Well functioning capitalism is about giving everybody a chance to participate (or not) in a piece of the new pie.
No, actually some of the biggest free marketers possible don't agree that predatory pricing is possible under capitalism. Google predatory pricing friedman (you won't get a quote from friedman but his name gets all the good stuff) and you'll find lots of people arguing that predatory pricing is a myth. You can also google friedman monopoly and find huge proponents of capitalism arguing that monopolies are only possible through state intervention.
>Well functioning capitalism is about giving everybody a chance to participate (or not) in a piece of the new pie.
Maybe... but everyone disagrees on what well functioning actually means.
We are talking past each other. I think that autonomous cars are a great idea and would like to invest in autonomous car companies more directly than is currently possible. I gather from reading about predatory pricing and your prior comment that you think Ubers' business model is a dud and that automating these jobs is bad.
This variance is the essence of capitalism though. In a well functioning capitalist society I am free to make a stupid investment in Uber and you are free to wisely not. Its about having a degree of private wealth ownership and freedom and choice in your investments. This is what I meant by well functioning: the choice of investing directly in Waymo, Uber, etc is not really there yet for average citizens.
> Capitalism is supposed to work this way? VCs investing billions of dollars in an unprofitable company which continues to be unprofitable for years after the fact.
[...] (1) achieving autonomous vehicles and ending the jobs of tens of thousands of people [...] A company which only exists in the first place because they trampled all over local laws.
Yes the freedom to make dumb investments...yes replacing error prone human labor with safe, tireless machines using greed and ambition as motivation...yes the freedom to open a business without bribing government officials. Yes, these are all basic tenets of capitalism.
I'm going to re-post one of my previous comments on this topic because I think it's relevant:
"In my opinion, all they need is someone who is demonstrably competent and experienced to stabilize the ship and steer it towards an IPO.
There's no need for the candidate to be a visionary or meddle drastically with something that's already working extraordinarily well. That part is largely done - the Uber machine is mature and chugging along.
A seasoned operator needs to come in to provide PR cover, put in some basic organizational guardrails and rebuild the executive ranks to get the company IPO ready. Hiring a CFO is probably top priority as well as getting PR back on track.
Those two moves alone would suppress external distractions and start the IPO process by having someone working on it full-time (CFO)."
So I think this is pretty much par for course. Dara will likely be laser focused on removing distractions and kicking off the IPO process and shepherding it along. In fact, there's probably a clause in his employment contract that gives him some kind of large bonus for successfully delivering an IPO within XYZ timeframe.
Seems to me he was more focused on building and growing the business, while at the same time preventing existential long-term threats (although with hiccups along the way), than wasting time preparing for an IPO .
Uber is still at risk to lose their current monopolistic world market share, everybody knows it (Travis too), and they need to work and fight hard 24/7 to retain it. IPO is a distraction.
The problem is that Travis thinks it's still possible to defend their monopolistic market share but I'd bet (just personal opinion) that investors don't feel that way. Honestly, what could Uber do to ensure their monopolistic world market share would last? They want to IPO soon so they can get some return. Uber has had years and billions of dollars, I don't blame investors for wanting to push the bird out of the nest and see if it can really fly.
Of course Travis still thinks that, he is the founder. He cares about the long term survival of Uber, not about an exit event. Uber is in a complicated industry, in complicated times with very aggressive competitors. It just takes time, but somebody is unwilling to wait anymore.
The bird cannot fly, we already know that. They are crashing Uber against a wall and they just don't care. Do you know what's going to be the next word coming out of the new CEO? It's going to be "layoff". Whatever it takes to fix the books. And then what?
Then maybe Travis comes back to right the ship if it's not too late.
But that doesn't really answer my question, which is what can delaying IPO actually do for them? I agree that the bird can't fly but I don't see how it's going to fly in 18 months or 80 months and I don't see a way around that. Uber exists in a market with no barriers to entry (it destroyed them) and it can't run a profit. Kalanick himself has said Uber needs self-driving but I'm a skeptic on that as well. It's 20+ years before there's going to be real, safe cars without drivers. Kalanick is delaying the inevitable, investors are trying to cash out before the public realizes self-driving is vaporware.
At much as you may hate Uber it is an unstoppable juggernaut. Being profitable is not impossible and settling everything is just a question of money, and fairly small sums at that. It may not be worth $100B, but it is going to be worth a ton.
It's far from unstoppable. They might have market share in the US because of their first mover advantage, but they ceded to Didi in China and to Yandex in Russia.
Is that true though? They are still subsidizing 60% of the cost on all rides no? Eventually there will be a reckoning and will really determine if this is a viable company.
Their plan for profitability so far has been "invent a ground breaking technology that will change the world before we run out of money in a couple years". That sounds more like delusions of grandeur than unstoppable juggernaut. Hopefully that changes under Khosrowshahi.
Uber may well yet become an unstoppable juggernaut, but they could just as easily flame in spectacular fashion.
It's about time their investors get a massive liquidity event. I tend to think the lack of an near term exit strategy was one of many reasons Travis got the boot.
Right, so rosy language, but still $500 to $600 million of loss per quarter, presumably from subsidies. I guess you have to believe either in self driving cars happening somewhat soon, or cutting subsidies doesn't cut demand too much.
Guys this is somewhat fake news. The question was what his thoughts were on IPO. He basically said it's up to the board, but 18 to 36 months seemed reasonable. It wasn't like he's actually planning on IPOing in 18 months, it was an off-the-cuff response and gave a ballpark figure. That's all, don't read too much into it he hasn't even officially started yet.
The real news is this is precisely why TK was ousted. He was categorically opposed to taking Uber public, and that went against the wishes of big investors who want an IPO payday.
He wasn't opposed to taking Uber public, he wanted to delay IPO as long as possible because going public places restrictions on how the company is run. Dara said the same comment. But 18-36 months doesn't go against anything TK said.
Employee & investor liquidity, who are the majority stockholders of these kinds of companies. And the value of a stock does far better when something is profitable vs not. Past history shows it's usually a bad idea to be a public company and be in the red for many quarters.
If you're profitable you can disburse dividends to all of the non public shareholders on a regular or irregular basis.
Going public is a really expensive way to do that with a profitable company (why spotify is trying to do it in an irregular way)
> Past history shows it's usually a bad idea to be a public company and be in the red for many quarters.
Zuckerberg, Jeff Bezos, and Marc Benioff would strongly disagree.
Under this reasoning if you're profitable, you may not want to go public. Now you have to worry about public perception and hostile outlets affecting a major asset.
Most shareholders don't like dividends because of the tax treatment compared to stock buybacks. It's still less liquid than a public market.
As far as those other examples, I don't know their full histories. From my memory amazon has had a break-even policy on purpose which investors are ok with. FB was profitable for about a year before IPO and its stock went to half of IPO for a year because people were worried about it's numbers until they got a lot of a money through mobile.
It was known previously that elements on the board wanted IPO, and this is something you'd have to get ultra clear before you'd be given the job. I hope.
So while the timeline can't be precise, I'm guessing this isn't floating a trial balloon, this is whats happening.
There are a lot of people waiting for their liquidity.
probably most want the IPO, including, and maybe especially, employees. Shares in a public company are much more liquid.
Love or hate Benchmark, they bet on them and now they want to cash out. An IPO might make their stake worth 2X so can't blame them for advancing their interests. If someone offered then an out at $100B valuation they'd sell, I'm sure.
Personally I think that as a public company they will be under more scrutiny and cannot do "startup" things...like breaking taxi laws around the world.
Uber ICO? Please speculate on possibilities and help the press to collect data points so they can mash together 2 of their favorite narratives. Bonus points for looping in autonomous vehicles.
Do not invest in Uber. It would be downright stupid to do so. What is their product? Providing rides? No, that's what drivers do. Ubers product is running a bunch of servers, a mobile app, and bearing the first-mover disadvantage of fighting with all the regulators about ridesharing. The problem with this is that those servers and that app? The thing that collects the money for Uber? No one needs Uber for that. Tomorrow someone could launch a fully peer to peer version of the software that runs in distributed fashion across all devices it gets installed upon, cutting them completely out of the loop, making rides cheaper and making drivers more money.
And if Uber perfects self-driving cars if they are deluded enough to think they can replace their human drivers with a roving fleet of such... oh how childish and stupid that would be. I would give it 10 days before someone would introduce GUber which lets individuals with self-driving cars to time share them out when not in use via an app, destroying Uber swiftly and making every self-driving car they own (and maintain) a liability.
The only way I could see them remaining interesting for more than a couple more years would be if they developed an awesome self-driving car - and gave it away for free. With anyone who accepted one obligated to permit the thing to be time-shared out by Uber to provide rides when its not being used with X number of hours of availability given per month. That would be hard to compete with, whether through peer to peer or individuals renting their self-driving cars...
That's incredibly naive.
There's a lot of accumulation of design and technology knowhow in various capabilities like dispatch, operations etc.
"Tomorrow someone could launch a fully peer to peer version of the software that runs in distributed fashion across all devices it gets installed upon, cutting them completely out of the loop, making rides cheaper and making drivers more money."
Why haven't they if it is as easy as you make it sound?
It is definitely plausible that someone will do this but it is FAR from easy and won't happen 'tomorrow' as you put it.
If Uber loses it's ride providing capability, there is a TON of money in licensing the use of their software/infrastructure. They could layoff 80% of their staff and live off a pile of money they could bring in licensing software to other transportation related companies.
> Tomorrow someone could launch a fully peer to peer version of the software that runs in distributed fashion across all devices it gets installed upon
Yeah, that already exists. It's called the phone app. You use it call a cab company for a ride.
> cutting them completely out of the loop, making rides cheaper and making drivers more money.
Rides don't get cheaper without Uber, they'll get more expensive. Pricing has been artificially deflated using VC money. Without that you get back to cab prices again.
I thought that was always their long term strategy. They're taking a loss with human-driven cars. I thought their plan was to spend their way into market dominance, then cut out the drivers once their self-driving cars are ready to go and finally start turning a profit.
> Ubers product is running a bunch of servers, a mobile app, and bearing the first-mover disadvantage of fighting with all the regulators about ridesharing.
So if we /s/ridesharing/home renting/ then we shouldn't invest in AirBnB either?
You shouldn't invest in AirBNB because cities can't withstand inflated housing prices forever and will eventually crack down on "home sharing" aka real estate arbitrage in the short term rental market.
Their market position is worth something, if played correctly. When you go to Target now, the only cleanser option is Comet. 30 years ago, there were at least 4 choices. The ride share industry will undergo a similar consolidation.
Stores have limited shelf space - online stores do not have that limitation, so there won't come a time when you have one app per category in an app store.
There are hundreds of startups planning to IPO in 18 months. Many have held steady with this plan for 5 years or more. For as long as four years they've been saying, "but this time, really, 18 months"
When it comes to Uber's future, there's good news and bad news. The good news is that none of the "scandals" we've heard so much about matter. Not the culture, not the lawsuits, not even the firing of the CEO. None of those things would be able to sink the company, assuming that the company has a strong business model. And that's where we get to the bad news: Uber doesn't HAVE a business model.
Nothing about Uber makes hired car rides fundamentally cheaper than anything before it. Cars still cost the same amount of money to buy/rent and operate. That cost hasn't gone away, even in the iPhone era. If Uber is not paying those costs directly, then someone is. In the Uber model, it's just been transferred to the driver, for whom driving is as a result less profitable. So much for the car. The other component of a ride service is the driver himself. A driver's undivided time costs the same, whether he's driving for Uber or for an Uber clone or for a local taxi company. Human labor hasn't suddenly gotten cheaper just because you can hail them on your iPhone. And you don't even want the cheapest possible labor here, for the sake of your own safety.
Oh, but you say, if the drivers were to be entirely replaced with self-driving cars, then Uber's margins would be amazing right? Yes, they would be. But self-driving cars are not coming anytime soon. Just ask the people most invested in Uber: the investors. They want you to wait for self-driving cars to fix Uber's non-existent business model, while they themselves can't wait to cash out as soon as possible.
Even if it does happen many years from now, it doesn't put Uber in a good position. The self-driving car technology will be a commodity. There will be no barrier preventing anyone else from launching their own fleets. Uber's product also has no network effect and is not sticky. Its customers are not buying an experience, they are buying a utility (a ride from point A to point B at the lowest possible cost). As a result, customers have zero loyalty and are happy to switch to the lowest cost competitor.
Uber has hugely impressive numbers though right? Yes, tons of revenue and no profits. Because who would pass up a private car ride from San Francisco to Palo Alto for $45 when a taxi would cost $125? As long as VC's subsidize rides, customers will continue to buy them.
Uber (in the past) made hired car rides fundamentally cheaper than everything before it by bullying local monopolies into bankruptcy. I know your post is evaluating Uber's future, not past, but past successes may color our judgment of their future potential.
> who would pass up a private car ride from San Francisco to Palo Alto for $45 when a taxi would cost $125?
A SF taxi charges double the meter for a ride to Palo Alto because without a Palo Alto taxi permit they have to drive all the way back to SF (or at least SFO) without a paying passenger.
56 comments
[ 2.6 ms ] story [ 123 ms ] threadCan we break down the numbers on how much they'd likely receive from an IPO vs their burn rate? It's hard to imagine that an IPO would deal with most of their problems.
https://news.ycombinator.com/item?id=15116399 is a good analysis.
Also, non-paywalled article: http://archive.is/hOt4v (Thanks to philippnagel for pointing out this trick.)
This is a fun-house mirror version of capitalism.
If autonomous vehicles are within the realm of possibility, they are going to be enormously successful and beneficial to humanity. Well functioning capitalism is about giving everybody a chance to participate (or not) in a piece of the new pie.
>Well functioning capitalism is about giving everybody a chance to participate (or not) in a piece of the new pie.
Maybe... but everyone disagrees on what well functioning actually means.
This variance is the essence of capitalism though. In a well functioning capitalist society I am free to make a stupid investment in Uber and you are free to wisely not. Its about having a degree of private wealth ownership and freedom and choice in your investments. This is what I meant by well functioning: the choice of investing directly in Waymo, Uber, etc is not really there yet for average citizens.
> Capitalism is supposed to work this way? VCs investing billions of dollars in an unprofitable company which continues to be unprofitable for years after the fact. [...] (1) achieving autonomous vehicles and ending the jobs of tens of thousands of people [...] A company which only exists in the first place because they trampled all over local laws.
Yes the freedom to make dumb investments...yes replacing error prone human labor with safe, tireless machines using greed and ambition as motivation...yes the freedom to open a business without bribing government officials. Yes, these are all basic tenets of capitalism.
"In my opinion, all they need is someone who is demonstrably competent and experienced to stabilize the ship and steer it towards an IPO.
There's no need for the candidate to be a visionary or meddle drastically with something that's already working extraordinarily well. That part is largely done - the Uber machine is mature and chugging along.
A seasoned operator needs to come in to provide PR cover, put in some basic organizational guardrails and rebuild the executive ranks to get the company IPO ready. Hiring a CFO is probably top priority as well as getting PR back on track.
Those two moves alone would suppress external distractions and start the IPO process by having someone working on it full-time (CFO)."
Original comment here: https://news.ycombinator.com/item?id=15113953
----
So I think this is pretty much par for course. Dara will likely be laser focused on removing distractions and kicking off the IPO process and shepherding it along. In fact, there's probably a clause in his employment contract that gives him some kind of large bonus for successfully delivering an IPO within XYZ timeframe.
Uber is still at risk to lose their current monopolistic world market share, everybody knows it (Travis too), and they need to work and fight hard 24/7 to retain it. IPO is a distraction.
The bird cannot fly, we already know that. They are crashing Uber against a wall and they just don't care. Do you know what's going to be the next word coming out of the new CEO? It's going to be "layoff". Whatever it takes to fix the books. And then what?
Then maybe Travis comes back to right the ship if it's not too late.
Looking forward to seeing a prospectus with audited GAAP numbers.
Speaking from their current burn rate, lawsuit, potential new technology/driverless cars.
Uber may well yet become an unstoppable juggernaut, but they could just as easily flame in spectacular fashion.
I assume the current financials still show pretty big losses due to the subsidized pricing.
So they probably mean gross margin. They did reduce the losses as a qoq comparison. But, it's still $645M lost in a quarter.
Going public is a really expensive way to do that with a profitable company (why spotify is trying to do it in an irregular way)
> Past history shows it's usually a bad idea to be a public company and be in the red for many quarters.
Zuckerberg, Jeff Bezos, and Marc Benioff would strongly disagree.
Under this reasoning if you're profitable, you may not want to go public. Now you have to worry about public perception and hostile outlets affecting a major asset.
As far as those other examples, I don't know their full histories. From my memory amazon has had a break-even policy on purpose which investors are ok with. FB was profitable for about a year before IPO and its stock went to half of IPO for a year because people were worried about it's numbers until they got a lot of a money through mobile.
So while the timeline can't be precise, I'm guessing this isn't floating a trial balloon, this is whats happening.
There are a lot of people waiting for their liquidity.
Love or hate Benchmark, they bet on them and now they want to cash out. An IPO might make their stake worth 2X so can't blame them for advancing their interests. If someone offered then an out at $100B valuation they'd sell, I'm sure.
Personally I think that as a public company they will be under more scrutiny and cannot do "startup" things...like breaking taxi laws around the world.
And if Uber perfects self-driving cars if they are deluded enough to think they can replace their human drivers with a roving fleet of such... oh how childish and stupid that would be. I would give it 10 days before someone would introduce GUber which lets individuals with self-driving cars to time share them out when not in use via an app, destroying Uber swiftly and making every self-driving car they own (and maintain) a liability.
The only way I could see them remaining interesting for more than a couple more years would be if they developed an awesome self-driving car - and gave it away for free. With anyone who accepted one obligated to permit the thing to be time-shared out by Uber to provide rides when its not being used with X number of hours of availability given per month. That would be hard to compete with, whether through peer to peer or individuals renting their self-driving cars...
"Tomorrow someone could launch a fully peer to peer version of the software that runs in distributed fashion across all devices it gets installed upon, cutting them completely out of the loop, making rides cheaper and making drivers more money."
Why haven't they if it is as easy as you make it sound? It is definitely plausible that someone will do this but it is FAR from easy and won't happen 'tomorrow' as you put it.
> Tomorrow someone could launch a fully peer to peer version of the software that runs in distributed fashion across all devices it gets installed upon
Yeah, that already exists. It's called the phone app. You use it call a cab company for a ride.
> cutting them completely out of the loop, making rides cheaper and making drivers more money.
Rides don't get cheaper without Uber, they'll get more expensive. Pricing has been artificially deflated using VC money. Without that you get back to cab prices again.
So if we /s/ridesharing/home renting/ then we shouldn't invest in AirBnB either?
Stores have limited shelf space - online stores do not have that limitation, so there won't come a time when you have one app per category in an app store.
Nothing about Uber makes hired car rides fundamentally cheaper than anything before it. Cars still cost the same amount of money to buy/rent and operate. That cost hasn't gone away, even in the iPhone era. If Uber is not paying those costs directly, then someone is. In the Uber model, it's just been transferred to the driver, for whom driving is as a result less profitable. So much for the car. The other component of a ride service is the driver himself. A driver's undivided time costs the same, whether he's driving for Uber or for an Uber clone or for a local taxi company. Human labor hasn't suddenly gotten cheaper just because you can hail them on your iPhone. And you don't even want the cheapest possible labor here, for the sake of your own safety.
Oh, but you say, if the drivers were to be entirely replaced with self-driving cars, then Uber's margins would be amazing right? Yes, they would be. But self-driving cars are not coming anytime soon. Just ask the people most invested in Uber: the investors. They want you to wait for self-driving cars to fix Uber's non-existent business model, while they themselves can't wait to cash out as soon as possible.
Even if it does happen many years from now, it doesn't put Uber in a good position. The self-driving car technology will be a commodity. There will be no barrier preventing anyone else from launching their own fleets. Uber's product also has no network effect and is not sticky. Its customers are not buying an experience, they are buying a utility (a ride from point A to point B at the lowest possible cost). As a result, customers have zero loyalty and are happy to switch to the lowest cost competitor.
Uber has hugely impressive numbers though right? Yes, tons of revenue and no profits. Because who would pass up a private car ride from San Francisco to Palo Alto for $45 when a taxi would cost $125? As long as VC's subsidize rides, customers will continue to buy them.
https://www.cnbc.com/2017/07/15/uber-lyft-take-down-not-just...
A SF taxi charges double the meter for a ride to Palo Alto because without a Palo Alto taxi permit they have to drive all the way back to SF (or at least SFO) without a paying passenger.