It's only Fat city if there's an exit at that valuation. We're talking Theranos style valuations here that can disappear at any time. They better find an exit scenario before the music stops or it's a world of hurt, especially for the later stage investors.
The only thing that can ''take out'' Uber is widespread adoption of autonomous vehicles, whereupon ride sharing becomes a physical-capital intensive business (cars) rather than the current human-capital intensive business (drivers/their driver network). Autonomous vehicles (and the infrastructure to support them) significantly reduce the amazing network efforts that Uber has enjoyed to date. An investment into Uber at these valuations is a bet that this future adoption (to the point where it would disrupt the massive revenue Uber realizes from places like LA, NYC, and SF) is decades further out than some futurists predict. Even transitioning into this brave new world Uber still has a lot of brand value, although there will be a ton of competition (all auto makers such as Tesla, GM, Ford, and new entrants such as Apple, Google, and Amazon), ultimately benefiting consumers: enjoy your $12.50 ride (est. 35% of which will be local and state taxes) from SFO to 3rd and Market.
>The only thing that can ''take out'' Uber is widespread adoption of autonomous vehicles
Or their customers losing interest as driver/fare subsidies are slowly dialed back. I've already begun planning on Uber with hesitation as I have now twice been left "stranded" for ~30 minutes without an active driver available in my city.
I'm fine with the surge pricing which comes along with that but Uber is becoming increasingly unattractive to drivers and that's a real problem alongside increasing fares. Most of the casual drivers who fuelled Uber's early explosive growth are long gone now that the true costs of using your personal vehicle as a taxi became clear. Even the dedicated drivers are staying in on weekdays because Uber oversaturated the driver pool in small markets while cutting back on payouts. There aren't enough riders on a Tuesday evening for more than 1-2 drivers to dedicate their time and when those 1-2 call it a night, there's no one willing to stay up for a single $7 fare.
What city do you live in? I've traveled all over the US in the past year and haven't experienced this. I can imagine in a relatively remote, low-density city with sub 50k population it could become an issue at the most off-peak hours.
> The only thing that can ''take out'' Uber is widespread adoption of autonomous vehicles
That's ridiculous. It's not even a little hard to imagine that they could be overtaken by a similar competitor such as Lyft given a plausible sequence of events. In fact it's basically a certainty that they would be if they ever abandoned competing based on price. Which defeats a hell of a lot of the point of paying to acquire a monopoly in the first place.
Agreed. They wouldn't even need to be overtaken. It seems that a lot of the valuation is based on the premise that this is a global winner takes all market. If it turns out that's not true and there is in fact space for multiple competitors then the valuation could turn out to be a lot less.
If Uber has a moat of any sort to protect itself from competition, I'm not seeing it.
Once Uber has executed a tactical blitzkreig in a new city and incited a pogrom against the cab drivers, and fought the legislative battles with resistant city councils; the door is open for any rideshare company to glide in on Uber's coatails and take advantage of all that costly trailblazing without paying a dime.
Cynically: that's why Uber doesn't want to win that kind of war.
They want to get in, and then work with the locals to establish some `sensible regulation'. Regulation that just happens to be cumbersome enough to deter new small-scale entrants.
This is not true in Austin. The city passed a fingerprint and registration requirement and uber and lyft both left the following weekend. Smaller competitors are growing fast. I miss the nice apps and cheap prices but the alternatives are ok.
I didn't mean to imply they had a Windows-like monopoly. I do think there are some real network efforts around driver and rider density (especially if pool takes off). I think they settle somewhere in the middle between monopoly and commodity, and the fact that the transportation market is so huge helps them carve out a nice valuation so long as they have only a handful of competitors. I spend around $100/week on Uber and I haven't switched to Lyft even though I heard it would be a bit cheaper. On the other hand if Tesla offered me 50% cheaper fares to ride in their autonomous vehicle fleet, even if it was just available in my city, I would do it in a heartbeat.
I agree but I think it's more along the lines of ''we will tax you'' than ''we will shut you down''. Once the Gov starts to make money from you then you've turned them into a business partner with a vested interest in keeping you alive (see Airbnb).
>> Autonomous vehicles (and the infrastructure to support them) significantly reduce the amazing network efforts that Uber has enjoyed to date.
Still there might be a political play(using million of drivers, etc) to delay the entrance of self-driving-cars until 2 competitors are about equal, and than it might be better for one company to cooperate with UBER and get some advantage than to try to go alone.
True, but those are the obvious risks you take as an investor. And late stage investors often negotiate downside protection in the form of liquidation multiples or ratchets.
You can ratchet your way all the way to 100% of zero, but getting a greater percentage of negative is not the way to positive. I think what we're all sensing here is there's a colossal infusion of cash that's not supported by the business model and at some point, there won't be any more cash available. They better find a business model that's not so negative quickly.
Yes precisely. But early stage investors almost never get those kind of protections. How can they possibly not be getting wiped out just a little more with every sky-high valuation round with a preference attached?
