Uber Plans to Go Public in 18-24 Months, According to Leaked Presentation(techcrunch.com)
techcrunch.com
Uber Plans to Go Public in 18-24 Months, According to Leaked Presentation
http://techcrunch.com/2015/08/21/uber-plans-to-go-public-in-12-18-months-according-to-leaked-presentation/
60 comments
It's hard to say.
Google Ventures actually invests through various funds organized as limited partnerships. These are separate entities and Google, Inc. would only receive a return from this investment to the extent that it was a partner in the fund that invested in Uber or if it had a side agreement with that fund to give it a share of the return.
You can tell from various GV SEC filings that Google, Inc. may have the right to vote shares held by the GV funds, but the filings don't disclose Google's share of the proceeds of a sale of the shares.
Google Ventures actually invests through various funds organized as limited partnerships. These are separate entities and Google, Inc. would only receive a return from this investment to the extent that it was a partner in the fund that invested in Uber or if it had a side agreement with that fund to give it a share of the return.
You can tell from various GV SEC filings that Google, Inc. may have the right to vote shares held by the GV funds, but the filings don't disclose Google's share of the proceeds of a sale of the shares.
Yes, though Google's own performance is a big 'noise' factor which would make Google stock a poor proxy for Uber's performance. Yahoo and Alibaba were in a similar but more exacerbated situation last year.
Yes.
Source: I used to work for Google Ventures.
Source: I used to work for Google Ventures.
That would be a very complex equation, some variables would be:
- Google Ventures operates independently of Google.
- How much of the ~1.5 billion fund under management has Google money invested in it.
- In the round they lead for Uber, what percentage of it was GV, and out of that, what percentage was directly funded by stakeholders that identify as part of Google. And what percentage of those stakeholders is owned directly by Google.
These all vectors multiply. It ultimately has to be seen how much Alphabet gets for every dollar that Uber makes in profit. But I'm sure there is a percentage.
- Google Ventures operates independently of Google.
- How much of the ~1.5 billion fund under management has Google money invested in it.
- In the round they lead for Uber, what percentage of it was GV, and out of that, what percentage was directly funded by stakeholders that identify as part of Google. And what percentage of those stakeholders is owned directly by Google.
These all vectors multiply. It ultimately has to be seen how much Alphabet gets for every dollar that Uber makes in profit. But I'm sure there is a percentage.
Yes, but you should not count on performance of Google stock as a proxy of Uber.
It's not so uncommon to see something like that.
Although somewhat different, Berkshire Hathaway has its own stock and holdings in other companies such as Kraft or Coca-Cola.
Although somewhat different, Berkshire Hathaway has its own stock and holdings in other companies such as Kraft or Coca-Cola.
Considering their track record, I wouldn't be surprised if they have no intention whatsoever of going public. Uber has to convince investors they will be able to exit their investment and the total pool of investors willing to try their luck in the secondary market is likely much smaller than those looking for traditional IPO or trade sale liquidity events. Not that they would have difficulty raising money, but they are certainly pushing the limits of the terms they can receive. Someone else pointed out this would also be a useful tactic in recruiting pitches.
Is it really worth it to go public? The reporting burdens for public companies are well documented. But also this management team has used some pretty shady tactics in the past. I can't imagine they love the idea of the scrutiny that comes with being public. You can always sell your share of the company in one of these financing rounds if you wanted to diversify your wealth.
Is it really worth it to go public? The reporting burdens for public companies are well documented. But also this management team has used some pretty shady tactics in the past. I can't imagine they love the idea of the scrutiny that comes with being public. You can always sell your share of the company in one of these financing rounds if you wanted to diversify your wealth.
> This year, the firm expects to clock $10.84 billion in revenue which — calculating the 20 percent commission that it takes — should bring in around $2 billion in revenue for the year. Its projection for next year comes in at $26.12 billion, which could generate over $5 billion in take-home money.
So, is it eleven or is two billions in revenue... Techcrunch...
So, is it eleven or is two billions in revenue... Techcrunch...
$2 billion. Uber is never entitled to the full 100% they collect from passengers, so under Generally Accepted Accounting Principles (GAAP), it is inappropriate for them to record the full $10.84b as revenue.
From a GAAP perspective, pretty much every financial term is used incorrectly in the TC article, though presumably under Unicorn Accounting they make sense as used. Uber's gross revenue under GAAP is roughly $2 billion; net revenue is gross revenue less the costs directly associated with earning that revenue (generally meaning costs that can be determined on a per unit basis). Net profit is net revenue less non-directly-allocated expenses (like marketing, legal, rent, etc.). Based on previous leaks this summer, Uber is not currently profitable on either a GAAP or Unicorn Accounting basis.
Companies publicly traded in the US are required to use GAAP for their financial statements. Companies that are not publicly traded are free to use Unicorn Accounting, on the presumption that investors in privately held companies should know to perform their own due diligence.
From a GAAP perspective, pretty much every financial term is used incorrectly in the TC article, though presumably under Unicorn Accounting they make sense as used. Uber's gross revenue under GAAP is roughly $2 billion; net revenue is gross revenue less the costs directly associated with earning that revenue (generally meaning costs that can be determined on a per unit basis). Net profit is net revenue less non-directly-allocated expenses (like marketing, legal, rent, etc.). Based on previous leaks this summer, Uber is not currently profitable on either a GAAP or Unicorn Accounting basis.
Companies publicly traded in the US are required to use GAAP for their financial statements. Companies that are not publicly traded are free to use Unicorn Accounting, on the presumption that investors in privately held companies should know to perform their own due diligence.
In general net revenue means revenue net of discounts or credits, but not net of cost of production. The proceeds net of direct costs of producing the revenue is gross profit. Operating profit deducts selling, general and administrative costs. Net profit further deducts interest, tax, and miscellaneous expenses (one-time gain or loss on selling a piece of equipment previously used in production, for example).
Where are the Unicorn Accounting Principles (UAP) documented?
In the souls of eager entrepreneurs who are still children at heart... in the wind wafting through the foggy streets of San Francisco... pounded into the soul of the ground and streets around San Jose... in the clickety-clack of ping-pong games played just down the hall from the accounting office... when you have Employee Incentive Stock Options from a Unicorn, then you, too, will know the Accounting Principles, you will celebrate the Accounting Principles, you will be one with the Accounting Principles, and you will know they are Good, and you will laugh with elvish glee long into the night, singing praises to the mighty accountants who with ever-careful attention to the Unicorn Accounting Principles bring wealth and happiness to all.
(And darken not their spirits with tales of the Coming of the Second Great Pop.)
(And darken not their spirits with tales of the Coming of the Second Great Pop.)
I prefer 10x accounting principles.
It's $2 billion. Groupon tried this during its IPO preparation and the SEC smacked them down and made them use net rather than gross for their gaap revenue. (Note that the SEC actually made Groupon change a bunch of stuff)
Good timing: http://blog.samaltman.com/financial-misstatements
Yeah but the media isn't held to that.
They're talking about 11B in pass-through revenue and 2B in revenue to Uber.
The 11B is the value of transactions they're facilitating through bookings that customers make, which pass through Uber and end up with the drivers, less the commission, which is the 2B in Uber revenue.
The 11B is the value of transactions they're facilitating through bookings that customers make, which pass through Uber and end up with the drivers, less the commission, which is the 2B in Uber revenue.
This tripped me up too, but I would guess the author meant to say $10.84B gross revenue and $2B net revenue.
http://www.investopedia.com/ask/answers/102714/what-are-diff...
http://www.investopedia.com/ask/answers/102714/what-are-diff...
It's $10.84b in total bookings (or taxi rental fees, whatever you want to call it), of which they keep 20%, so $2x billion in revenue for Uber.
Next year bookings are projected at $26 billion and they'll keep $5.x billion of that as revenue for Uber Corp.
Next year bookings are projected at $26 billion and they'll keep $5.x billion of that as revenue for Uber Corp.
It seems like they should really call that top-line, $10 bn, number 'bookings' and the second, $2 bn, number 'revenue'.
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I'm guessing those are "Gross" vs "Net", or "Revenue" vs "Profit", depending on how you define your terms.
Definitely not $2B "Profit" since they would have to subtract all other overhead costs like salaries etc.
I think the article mentions that actual profit might be negative.
I think the article mentions that actual profit might be negative.
A business can report one business unit (The bit that hires drivers and sends them out) is 'profitable', and also have an overall in-the-red because other business units aren't. I've not read the presentation, but it may be that Uber is trying to show their engineering costs and operations costs as two business units to better represent how the business scales (Engineering costs go up only logarithmically, while operations go 1:1 with revenue).
If Uber normalized its growth investing, it would continue to grow and be radically profitable.
So do I, but this is extremely sloppy writing. Profit is talked about a bit later in the article, there is likely none.
I find it all very ironic with "financial mistatement" being on the front page.
I find it all very ironic with "financial mistatement" being on the front page.
I'm pretty sure that's money paid by users (i.e., 80% which goes to drivers) then 20% to uber
Claims of a plan to go public are very often more of an employee retention tactic than an actual concrete plan coming from the CFO.
Don't be surprised if they reuse these slides in three years to a largely fresh-faced crew of engineers with stars in their eyes about their stock options.
Don't be surprised if they reuse these slides in three years to a largely fresh-faced crew of engineers with stars in their eyes about their stock options.
One data point in support of this actually happening vs being a retention/recruiting tactic:
A financial analyst friend of mine was hired at Uber ~6M ago as part of a team to help with the accounting/etc. for Uber to go public.
A financial analyst friend of mine was hired at Uber ~6M ago as part of a team to help with the accounting/etc. for Uber to go public.
You may want to be careful pointing that out. Uber is big, but it's possible that description only matches one person, and you've just implied that person did something they definitely shouldn't have by telling you Uber was going to go public soon.
Good point, but I've changed enough of the specifics that I don't think he/she will be outed.
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Uber's valuation is now starting to makes sense if this is true. Marginal cost of revenue for uber is very very low. You can argue that gross margins can run as high as 60-70% of revenue. Giving uber gross profit of over 3B for 2016. Given how aggressive uber is in driving growth premium on valuation is making sense.
Side note: I was in Chicago last week - and I am noticing almost every cab driver now has uber app open. There are 13k uber drivers in chicago alone. Anecdotal evidence suggests Uber is winning.
Side note: I was in Chicago last week - and I am noticing almost every cab driver now has uber app open. There are 13k uber drivers in chicago alone. Anecdotal evidence suggests Uber is winning.
Uber is winning in Chicago because the taxi service is so aweful. I dread riding in the city taxis. On more than one occasion a taxi driver become nasty after I asked them to take a back road to save money. Each time I called for a city taxi I crossed my fingers that it would show up in a timely manner.
Bookings are 10B, not revenue -- that's what the passengers pay; stated revenue from the doc was 2B, which is what Uber keeps (rest goes to drivers). But your larger point is well-taken, even at that number, the valuation of Uber is not that surprising.
The issue is whether any of that will matter if self-driving cars come into the picture sooner rather than later. Uber's key advantage is that there's a huge network effect that's hard to overcome with humans. Drivers want to use the app that riders are using. Riders want to use the app that drivers are using.
If a company could go out and finance a few hundred self-driving vehicles, it would be easy to build up market share for competing services with lower margins. Where I am, Uber has far better coverage than competing services. But if it were easy for alternatives to cover equally and with lower margins, riders would easily check the cheaper services.
While Uber is certainly employing robotics engineers, so are the auto manufacturers, Google, and possibly others. I think people use Uber for the same reason that people use Facebook - it's hard to get all the other humans to use other services when the value of those other services is how many people are using it. But when self-driving cars allow anyone with enough money to finance enough vehicles that they're offering comparable wait times, Uber's network effect disappears. Sure, it will still have brand recognition and some amount of loyalty. But it won't have the kind of barrier to entry that it has today.
Uber is winning, but it's also subject to a huge disruption by self-driving cars. If one can purchase and operate a self-driving car for $500/mo., you only need to do $17 worth of rides per day for that to pay you back. If Uber tries to keep its margins up, there's no reason someone isn't going to come into the market with some VC and drive those margins down quite a bit. Lyft, Sidecar, Split, and others all face a huge challenge of getting drivers to work for their service before they have riders and getting riders for their service before they have drivers. If they could just grab some VC to pay the finance charges on the vehicles until ridership picks up, that's a game changer.
Uber goes from Facebook with a wonderful network-effect moat to Amazon who has to make sure that margins stay razor thin to maintain a quarter of the market. I'm not saying that Amazon can't do good things, just that Amazon doesn't get high margins and if it tried to up its margins 10%, many people would shop elsewhere. With self-driving cars, someone is going to have near-zero margins and if Uber is 20% above that, people will switch. In fact, if Uber had margins of 60-70%, why wouldn't Amazon (who has a reasonable amount of robotics expertise with Kiva and their drone research) step into the market at significantly cheaper prices?
Heck, Amazon could have an automated delivery fleet of cars with drones handling the car-to-door problem and then Amazon could use their "excess capacity" much like they did with EC2 to drive people Uber-style. During the 10-4 day (when there's less demand for vehicles), they could deliver Amazon packages. From 7:30-9:30am and 5-7pm they could do rush-hour and 7pm-4am do restaurant and bar patrons. That's probably a lot more use out of those vehicles than one could get simply from people wanting an Uber and that would lead to lower prices.
Sitting here in the cheap seats, I guess I wonder how Uber would fare against that business plan. Amazon accepts thin margins and has a giant use case for their vehicles for the hours that self-driving Ubers sit idle. I'm not saying that Uber isn't filled with smart people. The issue is simply that Uber's current success is probably mostly due to the network effect. They might still have future success, but it's going to be tempered by the fact that competition will be a lot easier.
If a company could go out and finance a few hundred self-driving vehicles, it would be easy to build up market share for competing services with lower margins. Where I am, Uber has far better coverage than competing services. But if it were easy for alternatives to cover equally and with lower margins, riders would easily check the cheaper services.
While Uber is certainly employing robotics engineers, so are the auto manufacturers, Google, and possibly others. I think people use Uber for the same reason that people use Facebook - it's hard to get all the other humans to use other services when the value of those other services is how many people are using it. But when self-driving cars allow anyone with enough money to finance enough vehicles that they're offering comparable wait times, Uber's network effect disappears. Sure, it will still have brand recognition and some amount of loyalty. But it won't have the kind of barrier to entry that it has today.
Uber is winning, but it's also subject to a huge disruption by self-driving cars. If one can purchase and operate a self-driving car for $500/mo., you only need to do $17 worth of rides per day for that to pay you back. If Uber tries to keep its margins up, there's no reason someone isn't going to come into the market with some VC and drive those margins down quite a bit. Lyft, Sidecar, Split, and others all face a huge challenge of getting drivers to work for their service before they have riders and getting riders for their service before they have drivers. If they could just grab some VC to pay the finance charges on the vehicles until ridership picks up, that's a game changer.
Uber goes from Facebook with a wonderful network-effect moat to Amazon who has to make sure that margins stay razor thin to maintain a quarter of the market. I'm not saying that Amazon can't do good things, just that Amazon doesn't get high margins and if it tried to up its margins 10%, many people would shop elsewhere. With self-driving cars, someone is going to have near-zero margins and if Uber is 20% above that, people will switch. In fact, if Uber had margins of 60-70%, why wouldn't Amazon (who has a reasonable amount of robotics expertise with Kiva and their drone research) step into the market at significantly cheaper prices?
Heck, Amazon could have an automated delivery fleet of cars with drones handling the car-to-door problem and then Amazon could use their "excess capacity" much like they did with EC2 to drive people Uber-style. During the 10-4 day (when there's less demand for vehicles), they could deliver Amazon packages. From 7:30-9:30am and 5-7pm they could do rush-hour and 7pm-4am do restaurant and bar patrons. That's probably a lot more use out of those vehicles than one could get simply from people wanting an Uber and that would lead to lower prices.
Sitting here in the cheap seats, I guess I wonder how Uber would fare against that business plan. Amazon accepts thin margins and has a giant use case for their vehicles for the hours that self-driving Ubers sit idle. I'm not saying that Uber isn't filled with smart people. The issue is simply that Uber's current success is probably mostly due to the network effect. They might still have future success, but it's going to be tempered by the fact that competition will be a lot easier.
You're forgetting ride sharing(i.e. uber's UberPool). by sharing rides , one can save 40% (or maybe more, inc case sharign with 3 passenger is available) of cost. And that creates a powerful network effect with the possibility of disrupting the private car.
Since this lower cost sharing dynamic might be appealing to passengers also in a world with self-driving cars, and such network effects would be a powerful effect against commodization for the self-driving car company - it's understandable why the SDC company might be willing to share profits with UBER , just to lock the market.
Of course that's one scenario, but in general, one would guess that UberPool will have some influence on the self driving car market.
Since this lower cost sharing dynamic might be appealing to passengers also in a world with self-driving cars, and such network effects would be a powerful effect against commodization for the self-driving car company - it's understandable why the SDC company might be willing to share profits with UBER , just to lock the market.
Of course that's one scenario, but in general, one would guess that UberPool will have some influence on the self driving car market.
That is one network effect that Uber will maintain but I wonder how cheap self driving car services can become - cheaper cars, cheaper energy, no human drivers - we are looking at an extreme amount of price deflation down to levels where the additional discount of pooling might not make sense for most people.
> a company could go out and finance a few hundred self-driving vehicles, it would be easy to build up market share for competing services with lower margins.
Especially if that company, was, say a mobile OS and mapping/navigation vendor with decent marketshare whose OS with included personal assistant and/or mapping/navigation software was already in lots of hands, such that it would be easy for them to integrate ride hailing into those existing products and thus have minimal onboarding cost for new users.
Especially if that company, was, say a mobile OS and mapping/navigation vendor with decent marketshare whose OS with included personal assistant and/or mapping/navigation software was already in lots of hands, such that it would be easy for them to integrate ride hailing into those existing products and thus have minimal onboarding cost for new users.
I wonder if 'leaked' could've been replaced by 'announced'
Well said. This has cleary been fed to Techcrunch by Uber itself.
Reuters, not Techcrunch.
And they're still losing an exceptional amount of money.
This will be interesting.
This will be interesting.
Think Twitter. Their stock performed (relatively) well until May 2015, for two and a half years (which could make some of the stock owners rich enough, think investors). Standing at some point at company valuation and actually earning money are like two different worlds.
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They launched 200+ cities in the past year right? I imagine those all take money to get started. I'd be interested to see the breakdown of their more mature cities.
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Pretty much all late-stage startups are planning to go public in "18-24 months". Most have expected an 18-24 month IPO for several years now. When they say it, they add, "but really for sure this time"
Planning to go public 18-24 months from now is like planning to get married before you've met your significant other.
The window for IPOs opens and shuts, and sometimes it stays shut for a long time. Especially for companies like Uber, which are new and unprofitable, albeit large and growing fast.
Rather than reading this plan as referring to actual events in the future, we should read it as Uber selling itself to bigger and bigger investors, since those investors are unlikely to see profit any other way.
The window for IPOs opens and shuts, and sometimes it stays shut for a long time. Especially for companies like Uber, which are new and unprofitable, albeit large and growing fast.
Rather than reading this plan as referring to actual events in the future, we should read it as Uber selling itself to bigger and bigger investors, since those investors are unlikely to see profit any other way.
Anyone reflecting over the high valuation of these startups which does not yet make money and that it could be a bubble?
Nobody considered the Tulips bulbs mania in Amsterdam a bubble until after it burst. https://en.wikipedia.org/wiki/Tulip_mania
Nobody considered the Tulips bulbs mania in Amsterdam a bubble until after it burst. https://en.wikipedia.org/wiki/Tulip_mania
Gotta get the next layer of the pyramid when you're losing that much money.
Uber is only losing money right now because it's in a land-grab situation [1]. Barring some cataclysm, someday Uber will be insanely profitable. Their investors understand this, and their valuation reflects it.
[1]: http://www.joelonsoftware.com/items/2010/02/14.html
[1]: http://www.joelonsoftware.com/items/2010/02/14.html
> Barring some cataclysm, someday Uber will be insanely profitable.
As long as their funding holds on long enough for the to possibly develop self-driving cars before Google or Tesla, and if transportation laws change in their favor.
Good luck disrupting when the roads vital to your survival aren't owned by you.
As long as their funding holds on long enough for the to possibly develop self-driving cars before Google or Tesla, and if transportation laws change in their favor.
Good luck disrupting when the roads vital to your survival aren't owned by you.
How can you grab land, when it takes very little effort for drivers and consumers to go to an alternative...
Just like Amazon. Right?
According to the leaked presentation, it could be next year. Or it could be in 2016.
Since Google Ventures invested in Uber, does that mean that owning Google stock indirectly translates to a [small] pre-IPO investment in Uber?
http://www.quora.com/What-percentage-of-Uber-does-Google-own
"Google Ventures invested $258M at $3.7B post-money valuation in 2013, so they bought 6.8% of the company. Depending on whether or not they have taken pro-rata investment rights in Uber's subsequent financings they either own the same percentage or a slightly diluted stake. Let's say somewhere between 6.0% and 6.8% as of Q1 2015."