7 ms·

Neither, and New: Lessons from Uber and Vision Fund

106 points by sidhanthp 7y ago

luckydata 7y ago
The whole beginning of the article is based on the assumption that Uber's story is played out. I don't think we can call that one yet, IMHO the market hasn't discovered what is Uber WORTH just yet.
- deleted 7y ago
  [deleted]
- onlyrealcuzzo 7y ago
  When does the market discover what something is worth? I only know of two main lines of thinking: 1) that the market is more or less a random walk, and prices are approximately random. 2) that the market is efficient and the price at all times accurately reflects all available information. So Uber is either priced accurately (forever) or randomly (forever). I'm not familiar with a third line of thinking that it's random for a period of time and then accurate. Or approximate for a period of time and then accurate.
  - tmh79 7y ago
    The idea is that ridesharing is still early on in the monetization/profitability/growth curve. Right now, its possible to value online advertising companies (google, fb, linkedin before acquisition etc) based on some multiples of revenue and growth. What those multiples are fairly well agreed upon and relatively static. The argument above is that the multiples are not well defined in the rideshare sector, and its hard to find a stable valuation for these companies based on that. As uber and lyft turn profitable-ish in the next 6 - 8 quarters and focus on revenue growth as opposed to purely gross bookings growth as well as stemming losses, the multiples these companies are valued on are going to change a lot.
  - azylman 7y ago
    The third line of thinking is a combination of the two: "In the short term, the market is a voting machine. In the long term, the market is a weighing machine". This is a popular quote from Benjamin Graham (https://en.wikipedia.org/wiki/Benjamin_Graham https://en.wikipedia.org/wiki/Benjamin_Graham), who taught Warren Buffett. It's basically the whole principle behind value investing.
- jpalomaki 7y ago
  Looking at just ride sharing is too narrow. Some companies are already talking about ”mobility as a service”. I need to get from A to B. The best way can be a combination of transport methods. Like sometimes it would make more sense to start with electric scooter, then jump to Uber. Or maybe take Uber, then train and Uber again. Or train one way, car share vehicle back. I assume in future I will have an app that handles all this, without me making the separate bookings or checking time tables. I’d likely pay extra for the convenience of doing everything through one company. Or maybe their monthly subscription plan is just too attractive.
- rossdavidh 7y ago
  I was thinking something similar, and it occurred to me, "what if the actual long-term value of Uber is less than $0?" If it's true that Softbank is still underwater on their Uber investment, then they have a big problem. If Uber (or a company like it) were trying to IPO in a post-WeWork environment, they would do considerably worse than they did, I think.
tosh 7y ago
> I am not saying that the category isn’t viable, and technology truly makes these companies different than the incumbents in their space, but they are not necessarily tech companies either. > Neither, and new.
rdlecler1 7y ago
He’s forgetting that Uber’s goal is to be a driverless platform in which case they’d capture significant portions of the drivers margin. Now a software company. On Vision Fund, he seems to think that there is only one viable VC model. I happen to disagree. Warren Buffet made a lot of money investing in boring companies, and now technology is spilling into ancient markets to transform them. Seems like those companies could be just as big if not sufficiently bigger than the incumbent.
- deleted 7y ago
  [deleted]
- Barrin92 7y ago
  there's no particular reason to believe why Uber should 1. survive the years (more likely decades) until autonomous driving is actually ready and more importantly, why Uber would be in a great position to capitalise on this, given that they don't actually own any cars. Any large car manufacturer would be perfectly well positioned to partner up with an app startup to deliver autonomous sharing services themselves, given that they already have control over the distribution of the vehicles. Or one might even imagine that blockchain technology eventually lives up to its hype and some distributed solution makes the need for an intermediary unnecessary altogether.
  - everythingswan 7y ago
    I think the value of a brand is under-estimated by HN in general. Brands make people do irrational things and brands do form moats. So while the hardware might be owned by someone else, is it hard to imagine that Uber might be the first association that 1bn people make with "needing a ride"? My answer is no, it's not hard to get there given what I know. No doubt that car manufacturers will partner with a non-Uber software company. And Uber will partner with someone for hardware. I feel like we could look at how industries consolidate and have an educated guess about how it will play out: some car manufacturers combine to gain more leverage, some create their own proprietary software, some try opening up their cars to multiple software options, one manufacturer exclusively partners with Uber, etc. Phones and computers come to mind as probably sharing _some_ parallels. So I think the question in our simple discussion is whether the value of the brand and internal knowledge of the software side (data, et al) outweighs the value of having the hardware figured out. And maybe given that this is complicated, it's less about who is in a stronger position and more about who executes better while pursuing that strategy.
yuy910616 7y ago
This is a great article but I doubt many people will actually make it to the second half...where everything is tied together.
- human20190310 7y ago
  I found it incomprehensible from the start. EDIT: The first five sentences invoke Uber, the author's previous article, the Wall Street Journal, Gurley, Damodaran, and two different dubious valuations.
- zby 7y ago
  https://stratechery.com/2019/what-is-a-tech-company/ https://stratechery.com/2019/what-is-a-tech-company/ - should really be read first
  - davidivadavid 7y ago
    I read that article when it came out, and I still don't really understand the obsession with putting a "tech" or "non-tech" label on companies. Besides that, there are companies that do not satisfy the author's definition that are pretty clear "technology" companies (e.g. Intel). What explanatory power does the label have?
    - zby 7y ago
      It means different business strategy. Tech companies can have massive revenues without having many employees. They write software, this is the initial big fixed cost, then making a copy of the software or servicing another customer in a SaaS is extremely cheap. This has not started with software - a factory has the same characteristics in comparison with manufacture: https://medium.com/hackernoon/aggregators-bffd36063a72 https://medium.com/hackernoon/aggregators-bffd36063a72 - but with sofware it goes on another level. The Stratchery article is great in analysing all the angles of this.
      - davidivadavid 7y ago
perseusprime11 7y ago
Uber is a taxi company until it can show meaningful revenue from other business models on its platform.
- twic 7y ago
  Addison Lee is a taxi company. They operate in London and some other UK cities. They have a website and an app where you can book taxis: https://www.addisonlee.com/apps/ https://www.addisonlee.com/apps/ Having booked, a taxi comes and takes you somewhere, then your card gets charged. The service is substantially identical to Uber's. If Addison Lee is a taxi company, Uber is a taxi company. For extra resemblance, Addison Lee's drivers are notionally self-employed, but they've recently been put through the same "actually they're employees" wringer as Uber: https://www.crosslandsolicitors.com/site/cases/Addison-Lee-v-Lange-workers-gig-economy https://www.crosslandsolicitors.com/site/cases/Addison-Lee-v...
amelius 7y ago
What happens if people start ordering taxis from within Google Maps? And what if Google Maps adds more taxi services? What if Android starts integrating the function of ordering taxis that way? What would happen to Uber's value then? You can't "own" a market unless you also entirely own the way people access that market.
- zwieback 7y ago
  Since I already use Maps for so many things I would definitely use it for taxis if the rates were comparable. As long as Uber is somewhat cheaper it's not that hard to open their app.
- thrav 7y ago
  Have to transition taxis from meter to set-pricing first. The uncertainty of getting into a cab and agreeing to pay an unknown price is a big part of why I avoid them. I’ve been hit with a ridiculous price at the end of a ride enough to distrust the whole concept of giving them a blank check.
  - sp332 7y ago
    Some cities are better at this. https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_passenger_information.html https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_pa...
    - jccooper 7y ago
      That's a pretty standard taxi price structure. Open, but not clear. I have no idea based on that how much a trip will cost, even if somehow I managed to keep that whole table memorized.
      - sp332 7y ago
        It seems like it could easily be combined with or even integrated into a maps API like Google Maps. Plot the route and plug the length into the formula. I guarantee it's simpler than Uber's formula.
zwieback 7y ago
When I was in Singapore I used the "grab" app, which is super popular and has both regular taxis and uber-like drivers (and food and other stuff). What's different about Singapore and grab? Seems like a good model to me but it must involve heavy regulation to work.
- JetSpiegel 7y ago
  Isn't Grab government-owned?
  - intev 7y ago
    No it isnt: https://www.crunchbase.com/organization/grabtaxi#section-investors https://www.crunchbase.com/organization/grabtaxi#section-inv...
duxup 7y ago
This seems to address the larger "what is a tech company" question. Laying tech over the top of what are traditional businesses doesn't seem to result in what we might expect as a tech company.
tempsy 7y ago
I think Uber missed the opportunity to be a more full fledged wallet (which is what Grab started a few years ago). They have a "cash" product now where you can load money, but it's too little too late IMO, and the incentive to load money vs use your cc is small (e.g. tiny discount). Starbucks is the obvious model here...IIRC they have one of the most success mobile payment apps in the country, even competing with Apple Pay despite being relevant to them alone. They have something like $1.6 billion in balances, which they can monetize (free loan + interest).
- novok 7y ago
  Don't wallet plays make more sense in places without strong CC usage already? Uber is strongest in developed countries, which have a strong CC culture already.
  - tempsy 7y ago
    How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.
    - novok 7y ago
      But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.
      - rossdavidh 7y ago
        Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.
jonnydubowsky 7y ago
Another great post. Does anyone know what software this blog is published with that creates the hypertext bubble where the content can be extended in a little pop up?
- dvdhsu 7y ago
  I wondered as well, since I've seen it on Instapaper and marco.org, and always wanted something similar! If you inspect the element, you'll see some classnames that give it away: http://www.bigfootjs.com http://www.bigfootjs.com
  - jonnydubowsky 7y ago
    Instead of giving me a fish you taught me how to fish in this case thanks. I know how the answer and picked up what is now an obvious method for figuring it out myself next time. Much obliged

106 points by sidhanthp 7y ago

The whole beginning of the article is based on the assumption that Uber's story is played out. I don't think we can call that one yet, IMHO the market hasn't discovered what is Uber WORTH just yet.

deleted 7y ago
[deleted]
onlyrealcuzzo 7y ago
When does the market discover what something is worth? I only know of two main lines of thinking: 1) that the market is more or less a random walk, and prices are approximately random. 2) that the market is efficient and the price at all times accurately reflects all available information. So Uber is either priced accurately (forever) or randomly (forever). I'm not familiar with a third line of thinking that it's random for a period of time and then accurate. Or approximate for a period of time and then accurate.
- tmh79 7y ago
  The idea is that ridesharing is still early on in the monetization/profitability/growth curve. Right now, its possible to value online advertising companies (google, fb, linkedin before acquisition etc) based on some multiples of revenue and growth. What those multiples are fairly well agreed upon and relatively static. The argument above is that the multiples are not well defined in the rideshare sector, and its hard to find a stable valuation for these companies based on that. As uber and lyft turn profitable-ish in the next 6 - 8 quarters and focus on revenue growth as opposed to purely gross bookings growth as well as stemming losses, the multiples these companies are valued on are going to change a lot.
- azylman 7y ago
  The third line of thinking is a combination of the two: "In the short term, the market is a voting machine. In the long term, the market is a weighing machine". This is a popular quote from Benjamin Graham (https://en.wikipedia.org/wiki/Benjamin_Graham https://en.wikipedia.org/wiki/Benjamin_Graham), who taught Warren Buffett. It's basically the whole principle behind value investing.
jpalomaki 7y ago
Looking at just ride sharing is too narrow. Some companies are already talking about ”mobility as a service”. I need to get from A to B. The best way can be a combination of transport methods. Like sometimes it would make more sense to start with electric scooter, then jump to Uber. Or maybe take Uber, then train and Uber again. Or train one way, car share vehicle back. I assume in future I will have an app that handles all this, without me making the separate bookings or checking time tables. I’d likely pay extra for the convenience of doing everything through one company. Or maybe their monthly subscription plan is just too attractive.
rossdavidh 7y ago
I was thinking something similar, and it occurred to me, "what if the actual long-term value of Uber is less than $0?" If it's true that Softbank is still underwater on their Uber investment, then they have a big problem. If Uber (or a company like it) were trying to IPO in a post-WeWork environment, they would do considerably worse than they did, I think.

tosh 7y ago

> I am not saying that the category isn’t viable, and technology truly makes these companies different than the incumbents in their space, but they are not necessarily tech companies either. > Neither, and new.

rdlecler1 7y ago

He’s forgetting that Uber’s goal is to be a driverless platform in which case they’d capture significant portions of the drivers margin. Now a software company. On Vision Fund, he seems to think that there is only one viable VC model. I happen to disagree. Warren Buffet made a lot of money investing in boring companies, and now technology is spilling into ancient markets to transform them. Seems like those companies could be just as big if not sufficiently bigger than the incumbent.

deleted 7y ago
[deleted]
Barrin92 7y ago
there's no particular reason to believe why Uber should 1. survive the years (more likely decades) until autonomous driving is actually ready and more importantly, why Uber would be in a great position to capitalise on this, given that they don't actually own any cars. Any large car manufacturer would be perfectly well positioned to partner up with an app startup to deliver autonomous sharing services themselves, given that they already have control over the distribution of the vehicles. Or one might even imagine that blockchain technology eventually lives up to its hype and some distributed solution makes the need for an intermediary unnecessary altogether.
- everythingswan 7y ago
  I think the value of a brand is under-estimated by HN in general. Brands make people do irrational things and brands do form moats. So while the hardware might be owned by someone else, is it hard to imagine that Uber might be the first association that 1bn people make with "needing a ride"? My answer is no, it's not hard to get there given what I know. No doubt that car manufacturers will partner with a non-Uber software company. And Uber will partner with someone for hardware. I feel like we could look at how industries consolidate and have an educated guess about how it will play out: some car manufacturers combine to gain more leverage, some create their own proprietary software, some try opening up their cars to multiple software options, one manufacturer exclusively partners with Uber, etc. Phones and computers come to mind as probably sharing _some_ parallels. So I think the question in our simple discussion is whether the value of the brand and internal knowledge of the software side (data, et al) outweighs the value of having the hardware figured out. And maybe given that this is complicated, it's less about who is in a stronger position and more about who executes better while pursuing that strategy.

yuy910616 7y ago

This is a great article but I doubt many people will actually make it to the second half...where everything is tied together.

human20190310 7y ago
I found it incomprehensible from the start. EDIT: The first five sentences invoke Uber, the author's previous article, the Wall Street Journal, Gurley, Damodaran, and two different dubious valuations.
zby 7y ago
https://stratechery.com/2019/what-is-a-tech-company/ https://stratechery.com/2019/what-is-a-tech-company/ - should really be read first
- davidivadavid 7y ago
  I read that article when it came out, and I still don't really understand the obsession with putting a "tech" or "non-tech" label on companies. Besides that, there are companies that do not satisfy the author's definition that are pretty clear "technology" companies (e.g. Intel). What explanatory power does the label have?
  - zby 7y ago
    It means different business strategy. Tech companies can have massive revenues without having many employees. They write software, this is the initial big fixed cost, then making a copy of the software or servicing another customer in a SaaS is extremely cheap. This has not started with software - a factory has the same characteristics in comparison with manufacture: https://medium.com/hackernoon/aggregators-bffd36063a72 https://medium.com/hackernoon/aggregators-bffd36063a72 - but with sofware it goes on another level. The Stratchery article is great in analysing all the angles of this.
    - davidivadavid 7y ago

perseusprime11 7y ago

Uber is a taxi company until it can show meaningful revenue from other business models on its platform.

twic 7y ago
Addison Lee is a taxi company. They operate in London and some other UK cities. They have a website and an app where you can book taxis: https://www.addisonlee.com/apps/ https://www.addisonlee.com/apps/ Having booked, a taxi comes and takes you somewhere, then your card gets charged. The service is substantially identical to Uber's. If Addison Lee is a taxi company, Uber is a taxi company. For extra resemblance, Addison Lee's drivers are notionally self-employed, but they've recently been put through the same "actually they're employees" wringer as Uber: https://www.crosslandsolicitors.com/site/cases/Addison-Lee-v-Lange-workers-gig-economy https://www.crosslandsolicitors.com/site/cases/Addison-Lee-v...

amelius 7y ago

What happens if people start ordering taxis from within Google Maps? And what if Google Maps adds more taxi services? What if Android starts integrating the function of ordering taxis that way? What would happen to Uber's value then? You can't "own" a market unless you also entirely own the way people access that market.

zwieback 7y ago
Since I already use Maps for so many things I would definitely use it for taxis if the rates were comparable. As long as Uber is somewhat cheaper it's not that hard to open their app.
thrav 7y ago
Have to transition taxis from meter to set-pricing first. The uncertainty of getting into a cab and agreeing to pay an unknown price is a big part of why I avoid them. I’ve been hit with a ridiculous price at the end of a ride enough to distrust the whole concept of giving them a blank check.
- sp332 7y ago
  Some cities are better at this. https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_passenger_information.html https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_pa...
  - jccooper 7y ago
    That's a pretty standard taxi price structure. Open, but not clear. I have no idea based on that how much a trip will cost, even if somehow I managed to keep that whole table memorized.
    - sp332 7y ago
      It seems like it could easily be combined with or even integrated into a maps API like Google Maps. Plot the route and plug the length into the formula. I guarantee it's simpler than Uber's formula.

zwieback 7y ago

When I was in Singapore I used the "grab" app, which is super popular and has both regular taxis and uber-like drivers (and food and other stuff). What's different about Singapore and grab? Seems like a good model to me but it must involve heavy regulation to work.

JetSpiegel 7y ago
Isn't Grab government-owned?
- intev 7y ago
  No it isnt: https://www.crunchbase.com/organization/grabtaxi#section-investors https://www.crunchbase.com/organization/grabtaxi#section-inv...

duxup 7y ago

This seems to address the larger "what is a tech company" question. Laying tech over the top of what are traditional businesses doesn't seem to result in what we might expect as a tech company.

tempsy 7y ago

I think Uber missed the opportunity to be a more full fledged wallet (which is what Grab started a few years ago). They have a "cash" product now where you can load money, but it's too little too late IMO, and the incentive to load money vs use your cc is small (e.g. tiny discount). Starbucks is the obvious model here...IIRC they have one of the most success mobile payment apps in the country, even competing with Apple Pay despite being relevant to them alone. They have something like $1.6 billion in balances, which they can monetize (free loan + interest).

novok 7y ago
Don't wallet plays make more sense in places without strong CC usage already? Uber is strongest in developed countries, which have a strong CC culture already.
- tempsy 7y ago
  How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.
  - novok 7y ago
    But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.
    - rossdavidh 7y ago
      Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.

jonnydubowsky 7y ago

Another great post. Does anyone know what software this blog is published with that creates the hypertext bubble where the content can be extended in a little pop up?

dvdhsu 7y ago
I wondered as well, since I've seen it on Instapaper and marco.org, and always wanted something similar! If you inspect the element, you'll see some classnames that give it away: http://www.bigfootjs.com http://www.bigfootjs.com
- jonnydubowsky 7y ago
  Instead of giving me a fish you taught me how to fish in this case thanks. I know how the answer and picked up what is now an obvious method for figuring it out myself next time. Much obliged