Why Uber Keeps Raising Billions
June 22, 2016 2 Comments
This is interesting, and a chase of pace. Apparently Uber is sitting on a pile of cash and borrowing more. I don’t know enough here to even have an opinion, but it tends to fascinate me. Here, read the whole thing.™:
It feels like almost every other week there is a new headline about Uber raising more money. “Uber Closes $1.6 Billion in Financing.’’ “Uber Turns to Saudi Arabia for $3.5 Billion Cash Infusion.’’ Last week, we got this one: “Uber to Raise Up to $2 Billion in Leveraged-Loan Market.’’
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.
Consider this: When Amazon went public in 1997, it raised $54 million and was valued at $438 million.
So what exactly is Uber doing with all that money? And what does it say about Uber — and the financial markets — that the company has turned most recently to selling the equivalent of junk bonds?
Yes, Uber has to finance an all-out war to gain market share in China and India. But there is more to it than that: Uber’s money-grab is seemingly part of an unspoken strategy to mark its territory.
Every time Uber raises another $1 billion, venture capital investors and others may find it less attractive to back one of Uber’s many rivals: Didi Chuxing, Lyft, Gett, Halo, Juno. In other words, Uber’s fund-raising efforts have seemingly become part of the contest: It’s not just a rivalry over customers and drivers; it’s a war of attrition, a mad scramble to starve the competition of cash.
At the moment, Uber’s success has had the opposite effect: It has spawned a long list of rivals, big and little guys who say, “We can do it too.” But over time, as the smaller competitors run out of cash — after heavily subsidizing riders in an effort to steal business from Uber — venture capitalists should be less inclined to put up even more cash to go up against Fortress Uber.
Like I said could be. But at the very end, the author makes a silly mistake. He forgets, if he ever knew, that there are no monopolies in nature (or free markets), somebody will always compete, usually better. The only way a monopoly exists is when it enforced by strong arm tactics, either of the players or the government.
Just ask the US carmakers, back in the 50s and 60s they could sell us any piece of overpriced junk they wanted to, no matter how shoddily manufactured. What happened? Volkswagen and Toyota. The Brits were at least as bad, so we’ll finish with Jeremy Clarkson on how they killed their auto industry.
We got a little luckier, we made it worthwhile for foreign makers to build plants here, and they did, in states that had never (for the most part) built cars or been unionized, and that’s why so many cars with funny names actually are American made, sometimes with American parts. And those workers have gained a reputation as the best in the world. Something that no one who ever dealt with the UAW ever said.