Uber Turns to Saudi Arabia for $3.5B Cash Infusion • Hacker News Board

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#21

Post by supster » Wed, Jun 01, 2016, 9:16 PM UTC

rexreed wrote: post #16

paulsutter wrote: post #12

Earlier quoted context omitted.

Uber has apparently raised $12.5 billion[1] and is valued at over $60 bilion. So seed investors are in fat city as long as the valuation holds. If the valuation goes down, it all depends on the preference multiples (which are likely greater than 1), and how low the value goes. Uber has very significant revenue and growth (see the new Mary Meeker presentation), so they are a very valuable company. It may not be wise t…

It's only Fat city if there's an exit at that valuation. We're talking Theranos style valuations here that can disappear at any time. They better find an exit scenario before the music stops or it's a world of hurt, especially for the later stage investors.

True, but those are the obvious risks you take as an investor. And late stage investors often negotiate downside protection in the form of liquidation multiples or ratchets.

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#22

Post by dangerlibrary » Wed, Jun 01, 2016, 9:17 PM UTC

breitling wrote: post #7

craigvn wrote: post #3

Blood money while they continue to execute people in the street.

Get off your moral high-ground. We (USofA) still continue to execute people as well.

two wrongs something something.

Moral relativism isn't universally accepted, whether you like it or not.

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#23

Post by christophrb » Wed, Jun 01, 2016, 9:17 PM UTC

breitling wrote: post #7

craigvn wrote: post #3

Blood money while they continue to execute people in the street.

Get off your moral high-ground. We (USofA) still continue to execute people as well.

https://yourlogicalfallacyis.com/tu-quoque

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#24

Post by supster » Wed, Jun 01, 2016, 9:17 PM UTC

charlesdm wrote: post #20

CPLX wrote: post #5

Sincere question, can someone explain to me a plausible scenario at this point by which early investors actually receive a payout even slightly commensurate with their supposedly incredible investment? For example, how can someone in the seed round genuinely be able to cash out given the unbelievable amount of dilution that has taken place. What are the plausible scenarios where this occurs? EDIT: Specifically asking…

It's possible to sell those shares on a secondary market, i.e. seed investors might have already cashed out by now.

Except in Uber's case where they are famous for keeping tight control on secondary sales.

http://fortune.com/2014/06/20/uber-plays-hardball-with-early...

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#25

Post by tyho » Wed, Jun 01, 2016, 9:18 PM UTC

breitling wrote: post #7

craigvn wrote: post #3

Blood money while they continue to execute people in the street.

Get off your moral high-ground. We (USofA) still continue to execute people as well.

Firstly it's presumptuous to assume craigvn is from the USA. Secondly, the USA does not execute people for witchcraft or apostasy, the same cannot be said of the Saudis [1].

[1] http://www.bbc.co.uk/news/world-middle-east-34982154

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#26

Post by charlesdm » Wed, Jun 01, 2016, 9:19 PM UTC

supster wrote: post #24

charlesdm wrote: post #20

Earlier quoted context omitted.

It's possible to sell those shares on a secondary market, i.e. seed investors might have already cashed out by now.

Except in Uber's case where they are famous for keeping tight control on secondary sales. http://fortune.com/2014/06/20/uber-plays-hardball-with-early...

Since I don't have Uber shares, I wouldn't know. But that's how it usually works.

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#27

Post by birken » Wed, Jun 01, 2016, 9:19 PM UTC

CPLX wrote: post #5

Sincere question, can someone explain to me a plausible scenario at this point by which early investors actually receive a payout even slightly commensurate with their supposedly incredible investment? For example, how can someone in the seed round genuinely be able to cash out given the unbelievable amount of dilution that has taken place. What are the plausible scenarios where this occurs? EDIT: Specifically asking…

As long as the valuation of the company is going up more than the dilution, the value of existing shares goes up.

In an early stage company that might mean raising a Series A where the valuation of the company goes up 100% and shares are diluted by 35%. Value still going up.

For an ultra late stage company like Uber that means ~5% dilution in this round and the total value of the company might go up 10-20%. The value of your shares is still going up.

For simple back of the envelope math, assume you invested 10k into Uber's seed round valued at 3.5 MM. Then we'll simulate some excessive amounts of dilution, so let's say our 0.28% stake is diluted by 30% 10 times (which is a ton of dilution and way more than would have reasonably happened).

You are now down to 0.007% of Uber. 0.007% of 65 billion is $5.1 MM. Not bad for a 10k investment.

Based on more reasonable dilution estimates my guess is a 10k investment in Uber's seed round is worth somewhere between 25-50 million.

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#28

Post by toomuchtodo » Wed, Jun 01, 2016, 9:20 PM UTC

charlesdm wrote: post #26

supster wrote: post #24

Earlier quoted context omitted.

Except in Uber's case where they are famous for keeping tight control on secondary sales. http://fortune.com/2014/06/20/uber-plays-hardball-with-early...

Since I don't have Uber shares, I wouldn't know. But that's how it usually works.

Can someone who does have Uber shares chime in anonymously here?

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#29

Post by rexreed » Wed, Jun 01, 2016, 9:22 PM UTC

supster wrote: post #21

rexreed wrote: post #16

Earlier quoted context omitted.

It's only Fat city if there's an exit at that valuation. We're talking Theranos style valuations here that can disappear at any time. They better find an exit scenario before the music stops or it's a world of hurt, especially for the later stage investors.

True, but those are the obvious risks you take as an investor. And late stage investors often negotiate downside protection in the form of liquidation multiples or ratchets.

You can ratchet your way all the way to 100% of zero, but getting a greater percentage of negative is not the way to positive. I think what we're all sensing here is there's a colossal infusion of cash that's not supported by the business model and at some point, there won't be any more cash available. They better find a business model that's not so negative quickly.

Re: Uber Turns to Saudi Arabia for $3.5B Cash Infusion

#30

Post by rexreed » Wed, Jun 01, 2016, 9:23 PM UTC

kinkdr wrote: post #15

Retric wrote: post #6

Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model.

In my simplistic mind, their business model is to spend a lot of money today in order to create a monopoly tomorrow.

In what way is the ride-share market any sort of monopoly when there's little barrier to entry. In fact, I see new entrants in this market all the time. Hardly any chance to be a real monopoly unless they can somehow carve their way to exclusivity in a market, which is never going to happen.