A Super-Sized Startup

Uber’s latest funding round broke Facebook’s record:

Start Up Finding

Will Oremus comments:

[N]o one has the foggiest idea how much Uber will be worth once it matures. Anyone who tells you that he does is not to be trusted. Investors are looking at a company whose possible outcomes range from “the Amazon of the transportation industry” to “the Webvan of the 2010s.” (Amazon, in case you were wondering, has a market cap of about $150 billion.) They’re taking semieducated guesses that attempt to capture both the sky-high upside and the steep downside of its prospects. Less than a year ago, the guess was around $3.5 billion. Today it’s $17 billion. Welcome to Silicon Valley circa 2014.

Mark DeCambre’s take:

Bloomberg notes that, at $17 billion, Uber rivals the valuation of well-established, publicly traded companies such as car rental firm Hertz Global and retailer Best Buy. Critics aren’t necessarily buying Uber’s valuation. “Uber’s uber-valuation is a stretch given Uber’s numerous legal and regulatory challenges not fully discounted in Uber’s $17 billion valuation,” said PrivCo president Sam Hamadeh via email. Maybe Hamadeh has a point: Uber is said to be battling more than a dozen lawsuitsstemming state and local agencies aiming to limit the company’s car-sharing business. However, that hasn’t driven investors away.

Yglesias ponders Uber’s worth:

Right now, Uber is in a fight with Florida regulators and taxi incumbents. If Uber wins, it will poach market share from existing Miami-area cab companies. But it will do more than that. It will significantly increase the number of taxi rides that people in the Miami area take.

And that is the fundamental Uber value proposition. That by making it much easier to drive a cab to make money on the side (you just need a decent car and time on your hands) and much more convenient to hail a cab, you can greatly increase the size of the paid rides market.

Mark Rogowsky makes similar points:

So long as you look at Uber as a taxi replacement, you’ll see it as something less than it’s already becoming in its early markets: A transportation app. In San Francisco, for years the taxi commission didn’t want to issue more medallions for additional cabs because there was ostensibly no real demand for them (As of last year, the city had 1,600 taxi medallions). Yet just 4 years after Uber’s launch, there are often well over 1,000 rideshare vehicles on the road during peak times.

Wait, what? Surely all those additional cars aren’t making any money, right? Actually, they are. In fact, demand is so strong Uber is guaranteeing drivers $40 an hour in gross fares throughout the summer during prime time (the company takes a 20% commission and $1 per ride for insurance, so drivers make less than the nominal amount — but typically far more than they would driving a taxi).