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what the fuck is going on when a company can lose over $1 billion a quarter with no profit in sight and still receive further investment? Would they be hugely p

what the fuck is going on when a company can lose over $1 billion a quarter with no profit in sight and still receive further investment? Would they be hugely profitable if not for reinvestment in expansion and R&D?

beagle3 8y ago
I have a pet theory. These investors aren't investing their money, but someone else's money. If Uber folds now, these investors are to blame. But if Uber folds when the great crash (a-la 2001 and 2008), then, well, it's the entire economy - not the individual investor's fault. So they do whatever is needed to keep Uber with high book value until the big crash. What's $20B of other people's money to maintain your sterling reputation as a smart investor?
- tim333 8y ago
  Social Capital's Chamath Palihapitiya had an interesting theory of VC overvaluation in his recent letter: > [VCs] get paid to allocate other people’s (LPs) money, and they are smart enough to transfer the risk. For example, VCs habitually invest in one another’s companies during later rounds, bidding up rounds to valuations that allow for generous markups on their funds' performance. These markups, and the paper returns that they suggest, allow VCs to raise subsequent, larger funds, and to enjoy the management fees that those funds generate. And he has more such analysis. It's quite a good read if you are interested in that stuff https://s3-us-west-2.amazonaws.com/socialcapital-annual-letters/Social+Capital+Interim+Annual+Letter,+2018.pdf https://s3-us-west-2.amazonaws.com/socialcapital-annual-lett...
- kolbe 8y ago
  You'd like Nassim Taleb. Your pet theory is the exact thing he's been raging against for 30 years.
romed 8y ago
Simple answer: Japan is up to their necks in money. Anybody can take a few billion off SoftBank.
jacquesm 8y ago
Not specific to this case but there are forms of investment that are closer to money laundering than anything else.
maxxxxx 8y ago
I definitely wouldn't call this "business" anymore. It's something else.
ashelmire 8y ago
It's been a theory of mine for some time that the current pattern of VC investment in unprofitable startups is part of a clever scheme to turn illegal money into legal money - even at a loss.
malandrew 8y ago
How much do you think is being spent on Eats, Freight, Elevate and ATG? If that figure is more than $1 billion a quarter, the answer is yes. How much does Cruise or Waymo burn per quarter? That might give us an idea of the ATG part. How much does Convoy burn? That might give us the Freight parts. No clue how we might estimate Elevate and Eats. That said, it's worth looking at how Amazon is doing overseas these days: https://www.fool.com/investing/2018/03/19/why-amazon-is-still-losing-money-abroad.aspx https://www.fool.com/investing/2018/03/19/why-amazon-is-stil... This is why growth abroad matters: https://www.gapminder.org/fw/income-mountains/ https://www.gapminder.org/fw/income-mountains/ Everyone bloviating with their personal ridesharing anecdotes is missing the bigger picture.

beagle3 8y ago

I have a pet theory. These investors aren't investing their money, but someone else's money. If Uber folds now, these investors are to blame. But if Uber folds when the great crash (a-la 2001 and 2008), then, well, it's the entire economy - not the individual investor's fault. So they do whatever is needed to keep Uber with high book value until the big crash. What's $20B of other people's money to maintain your sterling reputation as a smart investor?

tim333 8y ago
Social Capital's Chamath Palihapitiya had an interesting theory of VC overvaluation in his recent letter: > [VCs] get paid to allocate other people’s (LPs) money, and they are smart enough to transfer the risk. For example, VCs habitually invest in one another’s companies during later rounds, bidding up rounds to valuations that allow for generous markups on their funds' performance. These markups, and the paper returns that they suggest, allow VCs to raise subsequent, larger funds, and to enjoy the management fees that those funds generate. And he has more such analysis. It's quite a good read if you are interested in that stuff https://s3-us-west-2.amazonaws.com/socialcapital-annual-letters/Social+Capital+Interim+Annual+Letter,+2018.pdf https://s3-us-west-2.amazonaws.com/socialcapital-annual-lett...
kolbe 8y ago
You'd like Nassim Taleb. Your pet theory is the exact thing he's been raging against for 30 years.

romed 8y ago

Simple answer: Japan is up to their necks in money. Anybody can take a few billion off SoftBank.

jacquesm 8y ago

Not specific to this case but there are forms of investment that are closer to money laundering than anything else.

maxxxxx 8y ago

I definitely wouldn't call this "business" anymore. It's something else.

ashelmire 8y ago

It's been a theory of mine for some time that the current pattern of VC investment in unprofitable startups is part of a clever scheme to turn illegal money into legal money - even at a loss.

malandrew 8y ago

How much do you think is being spent on Eats, Freight, Elevate and ATG? If that figure is more than $1 billion a quarter, the answer is yes. How much does Cruise or Waymo burn per quarter? That might give us an idea of the ATG part. How much does Convoy burn? That might give us the Freight parts. No clue how we might estimate Elevate and Eats. That said, it's worth looking at how Amazon is doing overseas these days: https://www.fool.com/investing/2018/03/19/why-amazon-is-still-losing-money-abroad.aspx https://www.fool.com/investing/2018/03/19/why-amazon-is-stil... This is why growth abroad matters: https://www.gapminder.org/fw/income-mountains/ https://www.gapminder.org/fw/income-mountains/ Everyone bloviating with their personal ridesharing anecdotes is missing the bigger picture.