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The "this valuation is crazy" and "this proves a bubble" comments are filling up my Twitter feed and HN, but I couldn't disagree more. Call me crazy, but I thin

The "this valuation is crazy" and "this proves a bubble" comments are filling up my Twitter feed and HN, but I couldn't disagree more. Call me crazy, but I think this valuation is completely fair. For a few reasons: Uber has serious revenue. They do more trips in San Francisco than taxis do. This isn't a pie-in-the-sky "there will be money there, I'm sure of it" thing. They bring in billions, and they're starting to win entire markets. The on-demand-transportation market is enormous. I can literally see a future in which the majority of the taxi industry is now called "Uber." That's a big freaking deal. What Uber can do doesn't even stop at "transportation." How many "Uber for X" startups have you seen? Uber could be all of them, and do all of that. They've nailed the difficult math behind the logistics issues - basically a scaled version of the traveling salesman problem. They do real math, and solve real problems. I imagine a world where you can get anything on demand in minutes, and in that scenario Uber is the taxi, UPS, FedEx, etc. at the same time. In a few years when self-driving cars become the norm (crossing my fingers), Uber will be even more valuable. I may be dreaming, but empty cars you can grab any time and take anywhere or request anything... it really is a beautiful thing.

Instacartlove 12y ago
"They've nailed the difficult math behind the logistics issues - basically a scaled version of the traveling salesman problem." This is so much bullshit it makes my eyes hurt. They "talk" about this a lot but it's not even related dude! Read some books.
- jcliff 12y ago
  so hostile. even if it's not a general solution, it's working. perhaps it's time for you to put down the books and build something.
- encoderer 12y ago
  It's not strictly "traveling salesman" but it is a real and challenging logistical problem. I've chatted w/ some Uber engineers about this and the story I was told is that originally they were using Google Maps estimates. But the data is really important to capacity planning and giving travel time estimates within their app. And it was often very wrong. They even had a number -- something like "if you multiply google maps estimates by 1.5 they will actually be more accurate". So building a better version of this in-house, based on the millions of miles previously driven, was a very important and challenging problem.
  - phil21 12y ago
    Has anyone ever actually used the travel time estimates in their app? I've taken hundreds of rides, and I don't think I've even once looked. I find it to be a completely pointless part of the whole product - I already know roughly how far away something is, and how bad traffic may be. When I call an Uber, I simply look at the surrounding map and see where the cars are to get a decent estimate. The one they give is usually off by quite a bit, depending on who accepts the hail.
    - encoderer 12y ago
      Yes, every time I open the app and it tells me how long it will take an Uber to arrive at my location.
TheSageMage 12y ago
Exactly, this valuation doesn't sound insane. They actually have a revenue model, where they are generating cash, and it's not based on some wishy-washy "we plan on doing ads" plan in the future.
opendais 12y ago
http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/06/05/virginia-officials-order-uber-lyft-to-stop-operating-in-the-state/ http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/06/0... Given they are getting banned in entire markets, I think this evaluation is crazy. UPS, Fedex, etc already have software just as advanced for planning their routes. Uber isn't going to magically beat them somehow. Heck, part of why they lean on the USPS is there is some economics in delivery outside of big cities that create a situation where it makes no sense for more than 1 delivery company to deliver for the entire area (and even then the USPS loses money on rural deliveries in some areas!). EDIT: To be clear, I'm not saying this proves a bubble...I'm just saying Uber is overvalued given the fact they are going to get hit with regulations eventually that will squeeze their margins or be forced to retreat from numerous markets.
- ivanca 12y ago
  They are expanding pretty fast; have you heard of a (not so) far away country called Colombia? Well, they are already here; as they will be in all the nations that allow them to. Getting banned hurts them, but there is no universal ban in sight.
  - deleted 12y ago
    [deleted]
  - opendais 12y ago
    They are expanding on regulation arbitrage. Being able to bend and/or break the rules by using contractors. http://bits.blogs.nytimes.com/2014/04/17/uber-faces-rebukes-in-europe/?_php=true&_type=blogs&_r=0 http://bits.blogs.nytimes.com/2014/04/17/uber-faces-rebukes-... "Oh lets operate in Paris and not pay the licensing fee for a taxi service." Etc. They've been completely and/or partially banned by more markets, larger markets than the entire country of Colombia at this point. It is the same thing as AirBNB. You build the software service and then hire out contractors who don't comply with local laws and rake in the money. I don't see that as a good, sustainable service at an evaluation larger than the entire US taxi market in the US. http://www.ibisworld.com/industry/default.aspx?indid=1951 http://www.ibisworld.com/industry/default.aspx?indid=1951 They are going to hit like AirBNB was and have to play by the same rules as everyone else which will squeeze their margins. :/ Maybe this speaks to my bias against people who bend reasonable rules for profit. Also, many of the people who were looking into investing agreed with that: "The bidding for Uber was so heated that some venture capital and private equity investors bailed out after the valuation soared beyond $10 billion, according to people familiar with the situation, who asked not to be identified because the talks weren’t public."
untog 12y ago
They will be successful in San Francisco, of that I have no doubt. From what I understand the taxi market there is horribly broken, Uber saw a gap in the market and leapt at it. The mistake, IMO, is assuming that they will be able to replicate that in other cities. In NYC you can get a taxi 90% of the time by holding your hand up in a street corner. At peak times that's more difficult, but that's also when Uber has surge pricing. They will hold their own and take over the premium market from various non-descript livery car companies - but only the premium market. They won't take over the taxi market as a whole. Much the same applies to London. Also, much of their current success is based upon how heavily regulated and backwards taxi authorities are. For example, in NYC taxi drivers are not able to use phones or navigation aids, and hailing by smartphone is in its infancy. But that won't be the case forever. So yes, they deserve a good valuation. But, to me, there are still a lot of questions about whether they will expand to fit this valuation.
- theIV 12y ago
  You can get a cab in Manhattan, and maybe Brooklyn, 90% of the time. But, if you head to the Bronx (where I live), it's considerably more difficult. I can't really speak for Queens or Staten Island. Up until the beginning of the year, 90% of the time you'll be hailing a gypsy cab. The only time you'd get a yellow when leaving the BX was at shift change which is around 5pm/5am for a lot of them. Not that there's anything wrong with a gypsy cab, but you're not supposed to hail them, which ties into a lot of the problems Uber appears to be facing in NYC. I will say a lot has changed with the introduction of the Boro cabs (green cabs). I don't remember exactly when they were introduced, but getting a cab is considerably easier now. So, while I agree with what you are saying, I think it's a little Manhattan-centric.
  - untog 12y ago
    Up until the beginning of the year, 90% of the time you'll be hailing a gypsy cab. [...] I will say a lot has changed with the introduction of the Boro cabs (green cabs). Agreed - and that was sort of my point about Uber taking advantage of regulation, though I didn't phrase it well. The artificial scarcity of taxi medallions meant that demand outstripped supply outside of Manhattan. Now they're finally, slowly, fixing that.
MarkPNeyer 12y ago
i'm betting in a few years they'll have an API for motion. i have this stuff here. it weighs this much, here's the shape. i want it over there by this time bound. whether that motion is carried out by drivers in cars, drones, autonomous shipping vessels, nanobots, whatever. it's going to be huge.
muhfuhkuh 12y ago
>I imagine a world where you can get anything on demand in minutes, and in that scenario Uber is the taxi, UPS, FedEx, etc. at the same time. And, with that, the feeling that Amazon.com will snap this company up for cash and stock is almost palpable. Forget drones, that's PR stuff for now. Uber is the real PTTH (product to the home) service.
- opendais 12y ago
  Amazon already has a PTTH service in progress and I'm pretty sure they can produce something that matches Uber for this purpose.
- milesskorpen 12y ago
  Given that Google has a huge stake in Uber, I think an Amazon acquisition is unlikely. I see Uber as Google's go-to-market plan for driverless cars (along with the trucking industry) ... if they can pull that off, something like this valuation is justified.
  - ghaff 12y ago
    >Google's go-to-market plan for driverless cars Robo-Uber as I like to call it is all very exciting and transformative. And I have little doubt that it will happen someday. But we're talking decades according to many people who really know the topic. For example, John Leonard who was on the MIT DARPA Challenge team has said "I don’t expect to have truly driverless taxis in Manhattan in my lifetime." http://digitalcommunity.mit.edu/community/featured_content/blog/2013/09/27/john-leonard-autonomous-vehicles-have-a-long-road-ahead http://digitalcommunity.mit.edu/community/featured_content/b... Next time you drive in a city, think about all the little decisions that you're making constantly. I'd love to have a service like this but it's not going to happen within a time horizon relevant to any current financial investments.
    - ef4 12y ago
      Google has done an end-run around the challenges that make something like the DARPA Challenge difficult. Driving an autonomous vehicle in an unknown environment is still hard. But that's not the problem Google is tackling. They're solving autonomous vehicles for known environments that are mapped down to extremely high resolution. Once you have that solid ground truth, adapting to changing conditions on top of it is far easier. Which is why they've already logged 1.1 million kilometers of autonomous driving, including city streets with high complexity. What the more traditional autonomous vehicle researchers didn't/don't appreciate is that it turns out to be easier to make the whole world[1] into a well-known environment than make a car than can handle unknown environments. [1] more precisely, the parts of it that the average person would actually drive on, which is much smaller and simpler.
fblp 12y ago
Uber was doing $213mil revenue late last year before they dropped their pricing/commission to dramatically increase both supply and demand. They've since increased their commission back to 20%, added a $1 surcharge, integrated with google maps, and they've probably validated the same day package delivery business model in NY. Valuation probably reflects crazy revenue growth they have in so many markets + future opportunities to dominate other verticals. http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-weve-confirmed-point-to-over-1b-gross-revenue-213m-revenue/ http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-w... [dec 2013] <--note week-on-week increases too! and
deleted 12y ago
[deleted]
Pxtl 12y ago
The problem, though, is that much of Uber's success comes not from massive innovation, but just doing an end-run-around the regulatory capture of the taxi industry. In places where the taxi market is more competitive, Uber doesn't offer as much value or find as much success. Uber has made some impressive achievements, but ultimately their big success was in figuring out how to run a taxi-like service without paying for taxi medallions.
tootie 12y ago
"The on-demand-transportation market is enormous" Yeah, but it's such an easy problem to solve. I already had a few car services on speed dial so this wasn't really a big problem to begin with. All they did was centralize and market it. I live in NYC which is probably the #1 taxi market in the world and have rarely heard someone having trouble calling for a cab.
- phil21 12y ago
  You live in NYC. That's just not indicative of the market as a whole though. I live in Minneapolis, where calling a cab is pretty much a worthless exercise. Uber has revolutionized the way I both commute to the airport (I can actually rely on it showing up within 30 minutes, a called cab may or may not show up at all) and how I can go out on the town at night. Previously my options were driving, or possibly a pre-arranged (as in 24 hours notice) black car. I also spend a lot of time in Chicago, and there I do agree - the cab infrastructure works pretty well. I still use Uber, as it's far more convenient and reliable than calling a random cab company and waiting around for it to possibly show up (or waiting outside in the cold spending 30 seconds to 10 minutes flagging one down). Even in Chicago you get a 30% failure rate on radio dispatches. It might be an easy problem to solve, but Uber is the first to realistically turn it into a useful service in many markets.
larrydag 12y ago
My only question is if they have serious revenue then why do they need to a valuation? Is it the expenses or the expansion that is driving the value? I'm definitely interested to see how it proves out because I agree with you that there is several different economies of scale and growth to Uber.
foobarqux 12y ago
You haven't argued that $17B is a reasonable valuation just that the value is not zero.
blazespin 12y ago
Unless Uber plans on building self driving cars, why would you imagine that Google (or whoever) will hand that business over to them? Whoever owns the Self Driving Car tech will be the winner there. Not some company with a website.

Instacartlove 12y ago

"They've nailed the difficult math behind the logistics issues - basically a scaled version of the traveling salesman problem." This is so much bullshit it makes my eyes hurt. They "talk" about this a lot but it's not even related dude! Read some books.

jcliff 12y ago
so hostile. even if it's not a general solution, it's working. perhaps it's time for you to put down the books and build something.
encoderer 12y ago
It's not strictly "traveling salesman" but it is a real and challenging logistical problem. I've chatted w/ some Uber engineers about this and the story I was told is that originally they were using Google Maps estimates. But the data is really important to capacity planning and giving travel time estimates within their app. And it was often very wrong. They even had a number -- something like "if you multiply google maps estimates by 1.5 they will actually be more accurate". So building a better version of this in-house, based on the millions of miles previously driven, was a very important and challenging problem.
- phil21 12y ago
  Has anyone ever actually used the travel time estimates in their app? I've taken hundreds of rides, and I don't think I've even once looked. I find it to be a completely pointless part of the whole product - I already know roughly how far away something is, and how bad traffic may be. When I call an Uber, I simply look at the surrounding map and see where the cars are to get a decent estimate. The one they give is usually off by quite a bit, depending on who accepts the hail.
  - encoderer 12y ago
    Yes, every time I open the app and it tells me how long it will take an Uber to arrive at my location.

TheSageMage 12y ago

Exactly, this valuation doesn't sound insane. They actually have a revenue model, where they are generating cash, and it's not based on some wishy-washy "we plan on doing ads" plan in the future.

opendais 12y ago

http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/06/05/virginia-officials-order-uber-lyft-to-stop-operating-in-the-state/ http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/06/0... Given they are getting banned in entire markets, I think this evaluation is crazy. UPS, Fedex, etc already have software just as advanced for planning their routes. Uber isn't going to magically beat them somehow. Heck, part of why they lean on the USPS is there is some economics in delivery outside of big cities that create a situation where it makes no sense for more than 1 delivery company to deliver for the entire area (and even then the USPS loses money on rural deliveries in some areas!). EDIT: To be clear, I'm not saying this proves a bubble...I'm just saying Uber is overvalued given the fact they are going to get hit with regulations eventually that will squeeze their margins or be forced to retreat from numerous markets.

ivanca 12y ago
They are expanding pretty fast; have you heard of a (not so) far away country called Colombia? Well, they are already here; as they will be in all the nations that allow them to. Getting banned hurts them, but there is no universal ban in sight.
- deleted 12y ago
  [deleted]
- opendais 12y ago
  They are expanding on regulation arbitrage. Being able to bend and/or break the rules by using contractors. http://bits.blogs.nytimes.com/2014/04/17/uber-faces-rebukes-in-europe/?_php=true&_type=blogs&_r=0 http://bits.blogs.nytimes.com/2014/04/17/uber-faces-rebukes-... "Oh lets operate in Paris and not pay the licensing fee for a taxi service." Etc. They've been completely and/or partially banned by more markets, larger markets than the entire country of Colombia at this point. It is the same thing as AirBNB. You build the software service and then hire out contractors who don't comply with local laws and rake in the money. I don't see that as a good, sustainable service at an evaluation larger than the entire US taxi market in the US. http://www.ibisworld.com/industry/default.aspx?indid=1951 http://www.ibisworld.com/industry/default.aspx?indid=1951 They are going to hit like AirBNB was and have to play by the same rules as everyone else which will squeeze their margins. :/ Maybe this speaks to my bias against people who bend reasonable rules for profit. Also, many of the people who were looking into investing agreed with that: "The bidding for Uber was so heated that some venture capital and private equity investors bailed out after the valuation soared beyond $10 billion, according to people familiar with the situation, who asked not to be identified because the talks weren’t public."

untog 12y ago

They will be successful in San Francisco, of that I have no doubt. From what I understand the taxi market there is horribly broken, Uber saw a gap in the market and leapt at it. The mistake, IMO, is assuming that they will be able to replicate that in other cities. In NYC you can get a taxi 90% of the time by holding your hand up in a street corner. At peak times that's more difficult, but that's also when Uber has surge pricing. They will hold their own and take over the premium market from various non-descript livery car companies - but only the premium market. They won't take over the taxi market as a whole. Much the same applies to London. Also, much of their current success is based upon how heavily regulated and backwards taxi authorities are. For example, in NYC taxi drivers are not able to use phones or navigation aids, and hailing by smartphone is in its infancy. But that won't be the case forever. So yes, they deserve a good valuation. But, to me, there are still a lot of questions about whether they will expand to fit this valuation.

theIV 12y ago
You can get a cab in Manhattan, and maybe Brooklyn, 90% of the time. But, if you head to the Bronx (where I live), it's considerably more difficult. I can't really speak for Queens or Staten Island. Up until the beginning of the year, 90% of the time you'll be hailing a gypsy cab. The only time you'd get a yellow when leaving the BX was at shift change which is around 5pm/5am for a lot of them. Not that there's anything wrong with a gypsy cab, but you're not supposed to hail them, which ties into a lot of the problems Uber appears to be facing in NYC. I will say a lot has changed with the introduction of the Boro cabs (green cabs). I don't remember exactly when they were introduced, but getting a cab is considerably easier now. So, while I agree with what you are saying, I think it's a little Manhattan-centric.
- untog 12y ago
  Up until the beginning of the year, 90% of the time you'll be hailing a gypsy cab. [...] I will say a lot has changed with the introduction of the Boro cabs (green cabs). Agreed - and that was sort of my point about Uber taking advantage of regulation, though I didn't phrase it well. The artificial scarcity of taxi medallions meant that demand outstripped supply outside of Manhattan. Now they're finally, slowly, fixing that.

MarkPNeyer 12y ago

i'm betting in a few years they'll have an API for motion. i have this stuff here. it weighs this much, here's the shape. i want it over there by this time bound. whether that motion is carried out by drivers in cars, drones, autonomous shipping vessels, nanobots, whatever. it's going to be huge.

muhfuhkuh 12y ago

>I imagine a world where you can get anything on demand in minutes, and in that scenario Uber is the taxi, UPS, FedEx, etc. at the same time. And, with that, the feeling that Amazon.com will snap this company up for cash and stock is almost palpable. Forget drones, that's PR stuff for now. Uber is the real PTTH (product to the home) service.

opendais 12y ago
Amazon already has a PTTH service in progress and I'm pretty sure they can produce something that matches Uber for this purpose.
milesskorpen 12y ago
Given that Google has a huge stake in Uber, I think an Amazon acquisition is unlikely. I see Uber as Google's go-to-market plan for driverless cars (along with the trucking industry) ... if they can pull that off, something like this valuation is justified.
- ghaff 12y ago
  >Google's go-to-market plan for driverless cars Robo-Uber as I like to call it is all very exciting and transformative. And I have little doubt that it will happen someday. But we're talking decades according to many people who really know the topic. For example, John Leonard who was on the MIT DARPA Challenge team has said "I don’t expect to have truly driverless taxis in Manhattan in my lifetime." http://digitalcommunity.mit.edu/community/featured_content/blog/2013/09/27/john-leonard-autonomous-vehicles-have-a-long-road-ahead http://digitalcommunity.mit.edu/community/featured_content/b... Next time you drive in a city, think about all the little decisions that you're making constantly. I'd love to have a service like this but it's not going to happen within a time horizon relevant to any current financial investments.
  - ef4 12y ago
    Google has done an end-run around the challenges that make something like the DARPA Challenge difficult. Driving an autonomous vehicle in an unknown environment is still hard. But that's not the problem Google is tackling. They're solving autonomous vehicles for known environments that are mapped down to extremely high resolution. Once you have that solid ground truth, adapting to changing conditions on top of it is far easier. Which is why they've already logged 1.1 million kilometers of autonomous driving, including city streets with high complexity. What the more traditional autonomous vehicle researchers didn't/don't appreciate is that it turns out to be easier to make the whole world[1] into a well-known environment than make a car than can handle unknown environments. [1] more precisely, the parts of it that the average person would actually drive on, which is much smaller and simpler.

fblp 12y ago

Uber was doing $213mil revenue late last year before they dropped their pricing/commission to dramatically increase both supply and demand. They've since increased their commission back to 20%, added a $1 surcharge, integrated with google maps, and they've probably validated the same day package delivery business model in NY. Valuation probably reflects crazy revenue growth they have in so many markets + future opportunities to dominate other verticals. http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-weve-confirmed-point-to-over-1b-gross-revenue-213m-revenue/ http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-w... [dec 2013] <--note week-on-week increases too! and

deleted 12y ago

[deleted]

Pxtl 12y ago

The problem, though, is that much of Uber's success comes not from massive innovation, but just doing an end-run-around the regulatory capture of the taxi industry. In places where the taxi market is more competitive, Uber doesn't offer as much value or find as much success. Uber has made some impressive achievements, but ultimately their big success was in figuring out how to run a taxi-like service without paying for taxi medallions.

tootie 12y ago

"The on-demand-transportation market is enormous" Yeah, but it's such an easy problem to solve. I already had a few car services on speed dial so this wasn't really a big problem to begin with. All they did was centralize and market it. I live in NYC which is probably the #1 taxi market in the world and have rarely heard someone having trouble calling for a cab.

phil21 12y ago
You live in NYC. That's just not indicative of the market as a whole though. I live in Minneapolis, where calling a cab is pretty much a worthless exercise. Uber has revolutionized the way I both commute to the airport (I can actually rely on it showing up within 30 minutes, a called cab may or may not show up at all) and how I can go out on the town at night. Previously my options were driving, or possibly a pre-arranged (as in 24 hours notice) black car. I also spend a lot of time in Chicago, and there I do agree - the cab infrastructure works pretty well. I still use Uber, as it's far more convenient and reliable than calling a random cab company and waiting around for it to possibly show up (or waiting outside in the cold spending 30 seconds to 10 minutes flagging one down). Even in Chicago you get a 30% failure rate on radio dispatches. It might be an easy problem to solve, but Uber is the first to realistically turn it into a useful service in many markets.

larrydag 12y ago

My only question is if they have serious revenue then why do they need to a valuation? Is it the expenses or the expansion that is driving the value? I'm definitely interested to see how it proves out because I agree with you that there is several different economies of scale and growth to Uber.

foobarqux 12y ago

You haven't argued that $17B is a reasonable valuation just that the value is not zero.

blazespin 12y ago

Unless Uber plans on building self driving cars, why would you imagine that Google (or whoever) will hand that business over to them? Whoever owns the Self Driving Car tech will be the winner there. Not some company with a website.