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Why Uber Keeps Raising Billions

Stashed in: Network Effects, Uber, Uber

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"If you add up all the money Uber has raised since it started in 2009 — the idea was born when its founders became annoyed that they could not get a cab in Paris — the ride-hailing app company is on its way to amassing a colossal $15 billion. That’s real cash, not some funny-money, paper-based valuation. (That figure is $68 billion.) It has done all this while still managing to remain a private company, and its chief executive, Travis Kalanick, has insisted that a public offering is not coming soon. “I’m going to make sure it happens as late as possible,” he has repeatedly said."

$15 billion?! Geez that's a lot of money. 

"The ride-sharing industry has long been seen as a zero-sum game because of the “network effect”: The more customers sign up for Uber, the more drivers sign up, making it tougher for rivals to mount competition. There will most likely be only one or two significant players in any given market. (More on that in a moment, because there might be some cracks emerging in that point of view.)

The question is whether the financing game is zero-sum too. And the even larger question is whether Uber’s eye-popping capital investments could ultimately act as a deterrent to investors who might consider supporting Uber’s competitors: Will they look at Uber’s balance sheet — it has some $6 billion in cash just sitting there — and throw up a white flag?"


Simplicity as the key revenue driver: Uber generates $1.5 billion in revenue from a total of roughly three taps that you and I make on our mobile devices. $1.5 billion!

Essential learning: How can you also learn to shield your customer from extremely complex backend technology with the simplest, utilitarian user experience that takes your customer from consideration to purchase to advocacy at a ridiculously fast pace?

Shareholder and fiduciary appetite: Uber says that it is now profitable in developed markets, but back in January of 2016, Business Insider reported that “Uber lost close to $1 billion in the first half of 2015, up from $671.4 million the year before, according to The Information’s report. Even with increasing losses, its (net) revenue was on pace to triple to more than $1.5 billion.” The cost of reformatting an incumbent industry can mean a very ugly balance sheet for a long time.

Essential learnings: Would Wall Street swallow the growth vitamin or spew the loss venom if you had similar financials? Can your current leadership learn to adapt to such an aggressive growth trajectory and absorb the investor heartburn that comes with it?


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