So Saudi Arabia has invested $3.5bn in Uber, the ride-hailing app, making it the largest single investment ever made in a private company.
Talk of war chests and global expansion abounds. But perhaps what the above really implies is that Uber’s famous capital-light model is about to get much more capital intensive — especially as it moves towards rolling out the much hyped self-driving fleet. If that’s the case, investors need to pay attention. Along with capital intensity come limitations to the exponential growth rates investors have come to expect. Read more
Mike Hearn, a key developer in the bitcoin eco-circus, quit bitcoin on Thursday. He did so with much fanfare.
As is the norm these days, he shared his reasoning, angst and rage in a Medium blog post, saying that he quit due to a schism in the community about how to scale bitcoin.
FT Alphaville met Hearn last year in an off-the-record encounter with a bunch of hedgies, who were sounding him out on whether or not bitcoin had legs as an investment. Hearn himself struck us as very reasonable. He was down to earth, pragmatic and totally open about the challenges bitcoin was facing. He was, nevertheless, still optimistic.
Seemingly, that is no longer the case. Read more
A nice scoop for Bloomberg on Uber’s potential private market valuation, as per documents provided to potential wealthy investors in the ride-hailing business by Morgan Stanley and Bank of America. Of note:
“Given the Company’s sustainable competitive advantages, large market opportunity, and growth prospects of the Company, the Investment Team believes that the pre-money equity valuation for the Company of $62.5 billion or $48.772228 per share is reasonable,” the offering says.
No concrete financials per se, but there are a number of perturbing risk factors presented for the yet-to-be profitable business. Read more
What makes Uber such a disruptive force in the taxi market?
Is it its app technology?
Or is it the fact that its business model transfers the ball and chain costs of capital, vehicle rental and maintenance, risk, tax and insurance costs over to taxi drivers, who often don’t appreciate the all-in operating costs until they’re far too invested in the scheme?
Perhaps, alternatively, it’s because the notoriously “asset light” taxi company pays scant attention to local licensing rules or regulations and sometimes even likes to spy on where its customers are going.
Or maybe it’s because Uber disregards the laws of supply and demand by having an entirely open-ended policy with regards to the size of its driver network.
Or perhaps still… it’s because the app removes awkward cash transactions from the process and in the same instant removes the potential for a tip or a “keep the change” additional earnings opportunity for the driver. Read more
Financial blogger Frances Coppola runs through how and why the “sharing economy” is grossly mis-representing itself to consumers by daring to suggest it’s anything but a traditional for-profit — or more pertinently rentier — enterprise.
Indeed the whole idea of the “sharing economy” seems to be based not on the idea of working together to produce something for mutual benefit (the cooperative principle) but on millions of people scraping a living by selling services and renting assets to each other. How does this add value to the economy over the longer term? There is no production. It is entirely consumption. Recycling is all very well – and we do need secondary markets – but we cannot build an economy solely on sweating existing assets. An economy that exists solely on consumption has no long-term future.
Charted, courtesy of Credit Suisse:
The conviction from early stage investors in the growth potential for the sharing related companies is also clear. The number of “sharing Unicorns” reached 44 in July this year with a combined implied valuation of cUS$220bn. Seven companies currently have a perceived valuation of more than US$10bn, of which Uber and Airbnb are by far the largest with US$51bn and US$25bn, respectively.
Here’s a paper from Dan Bogart at the University of Irvine about the East Indian Monopoly and why it was deemed justifiable to the British sovereign to grant all this power to a private company.
As the following extracts from the paper note, the rationale was largely as follows (emphasis ours): Read more
A Monday story from Reuters catches the eye. Investors don’t think a California ruling which classed a former Uber contractor as an employee will affect valuations, either for the taxi supplying start-up or others operating in the so-called “sharing economy”.
There are a couple of ways those optimistic investors might be right, but the sentiment suggests more about the nature of hope and dream-based valuations than any real consideration of business prospects.
We’ll get the obvious argument out the way first: the ruling was a one-off, which Uber will appeal, so lets assume companies which connect consumers with contractors who want to share their labour for a price can continue to treat those contractors as independent mini-corporations, not people. Read more
In Paris this week, at the Ouishare Fest, the great and the good from Europe’s sharing economy have been delving deep into what it means to be running a collaborative business model within a capitalist framework. Are the two even compatible? Or is there a fundamental conflict at the heart of an industry that preaches collaboration but, due to being radically commercialised by venture capital money from Silicon Valley, also needs to profiteer from the goodwill of others if it’s to remain viable?
For the most part it’s a hypocrisy the community is trying to address. The $1bn elephant in the room — the fact some aspects of the sharing economy are becoming the very thing they set out not to be — has basically become too enormous to ignore. Read more
“Reserve” is the new app that Silicon Valley — specifically Uber’s Garrett Camp and Foursquare’s Naveen Selvadurai — insists we will all be going mad about this year.
What is it? Another crypto-currency system? A payments ledger to rival the mighty Special Drawing Right? Perhaps it’s an app that allows you to re-serve your uneaten food?
You know… like a Grindr for leftovers? Read more
The following arrived in our inbox this Tuesday from Hailo, the cabby app which allows you to hail a cab using a mobile:
As of 5pm today you’ll find a free £10 credit applied to your Hailo account which expires at midnight tonight.* Make the most of your evening, stay out late or swap your normal commute with a safe, comfortable and cool cab home. Or why not try our new luxury HailoExec service? Just hit Pick Me Up Here and swipe across to select it. It’s a little post Bank Holiday gift from us to help you enjoy a hassle-free summer with Hailo.
An online service that matches buyers and sellers you say? Worth $18bn? Well, there are a lot of taxis in the world.
We have seen this one before though, so $18bn is entirely possible, if not necessarily sensible.
Consider this chart of the original dot com network effect superstar, eBay. Read more
There have been protests. There has been legal risk. There has been disruption. And there have even been questions about whether breaking all the rules is really all that innovative.
But Uber, the taxi app formed by Garrett Camp and Travis Kalanick in 2009, is heading for a funding round anyway, and it’s doing so at a proposed market value of $10bn. (Note to FT Alphaville selves — we must really get round to launching that Shut App!* idea we’ve had.)
Is that sort of valuation justified? Who knows. Read more