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"Uber moved from $17 billion to $40 billion between the two funding rounds within six months" That's about as open and shut as it gets as to why we're in a bub

by Diamons 11y ago

"Uber moved from $17 billion to $40 billion between the two funding rounds within six months" That's about as open and shut as it gets as to why we're in a bubble.

venomsnake 11y ago
Valuation is meaningless right now. There were a couple of articles recently about how they are pumped, but that looking at the real terms of the investment - the VC value them order of magnitude less.
oldmanjay 11y ago
I take that to mean you are arguing that we are not in a bubble? your wording is ambiguous and your example is equally (not at all) compelling either way.
- deleted 11y ago
  [deleted]
testguy34 11y ago
Uber also doubled it revenue in that time.
- Diamons 11y ago
  But still can't make a profit ? At some point the numbers have to match how much assets and profit the company is actually generating. Uber's profit is nowhere even near 5% of its valuation.
  - shalmanese 11y ago
    This fundamentally misunderstands growth businesses. Companies in growth phase pump all of their resources into sustaining growth. Once your growth tops out, you flip the switch and turn on the money spigot. Remember, profit is basically returning money back to your shareholders. If you have an investment opportunity that's 10x better than public markets (100% growth vs 10% growth), why would you ever want to return money back?
    - greenyoda 11y ago
      "Remember, profit is basically returning money back to your shareholders." No, paying a dividend is returning money back to your shareholders. Profit (revenue in excess of expenses) can be re-invested back into the company, for example, to hire more people or finance the development of new products. That's how companies grow once they no longer have VC funding (or if they never had VC funding to begin with). For example, Google is a very profitable company, but none of that profit is being returned to their shareholders since they don't pay a dividend. It's all being reinvested into the company. (The only way a Google shareholder can benefit from Google's increased value is by selling their stock to somebody else.)
      - shalmanese 11y ago
        I should have clarified that over a long enough timescale, profit has to go somewhere and the only place it can go is shareholders. Right now, Google's profit is sitting as massive cash hoards. Profit that gets reinvested back into the company isn't profit anymore. It's just spending. Of course, even the word profit itself is ambiguous because it's potentially referring to multiple different concepts. The aim, for this was to illustrate at a high level why investors generally don't want a company to be profitable until they want it to be very profitable.

by Diamons 11y ago

"Uber moved from $17 billion to $40 billion between the two funding rounds within six months" That's about as open and shut as it gets as to why we're in a bubble.

venomsnake 11y ago

Valuation is meaningless right now. There were a couple of articles recently about how they are pumped, but that looking at the real terms of the investment - the VC value them order of magnitude less.

oldmanjay 11y ago

I take that to mean you are arguing that we are not in a bubble? your wording is ambiguous and your example is equally (not at all) compelling either way.

deleted 11y ago
[deleted]

testguy34 11y ago

Uber also doubled it revenue in that time.

Diamons 11y ago
But still can't make a profit ? At some point the numbers have to match how much assets and profit the company is actually generating. Uber's profit is nowhere even near 5% of its valuation.
- shalmanese 11y ago
  This fundamentally misunderstands growth businesses. Companies in growth phase pump all of their resources into sustaining growth. Once your growth tops out, you flip the switch and turn on the money spigot. Remember, profit is basically returning money back to your shareholders. If you have an investment opportunity that's 10x better than public markets (100% growth vs 10% growth), why would you ever want to return money back?
  - greenyoda 11y ago
    "Remember, profit is basically returning money back to your shareholders." No, paying a dividend is returning money back to your shareholders. Profit (revenue in excess of expenses) can be re-invested back into the company, for example, to hire more people or finance the development of new products. That's how companies grow once they no longer have VC funding (or if they never had VC funding to begin with). For example, Google is a very profitable company, but none of that profit is being returned to their shareholders since they don't pay a dividend. It's all being reinvested into the company. (The only way a Google shareholder can benefit from Google's increased value is by selling their stock to somebody else.)
    - shalmanese 11y ago
      I should have clarified that over a long enough timescale, profit has to go somewhere and the only place it can go is shareholders. Right now, Google's profit is sitting as massive cash hoards. Profit that gets reinvested back into the company isn't profit anymore. It's just spending. Of course, even the word profit itself is ambiguous because it's potentially referring to multiple different concepts. The aim, for this was to illustrate at a high level why investors generally don't want a company to be profitable until they want it to be very profitable.