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Uber Turns to Saudi Arabia for $3.5B Cash Infusion

nytimes.com

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

#171

Post by Spooky23 »

methehack wrote: post #82

I've always been a little confused about uber's capital needs. When I first heard about uber, the part I thought was super-clever was that you wouldn't _need_ lots of capital because all the drivers would have their own cars. Leveraging the latent capital of one side of the two-sided market was the genius of it. (Airbnb too) Same for the staffing -- hook up both sides of the market. No need to pay anyone out of your…

Über has enchanted the tech people. It's this golden goose that every conversation turns to. Listen to the Ben Thompson podcast -- if he was reacting to an article about ham sandwiches, he would tie it to Uber.

There's no reality here. No magic self driving electric taxis, no robot delivering your takeout.

18-24 months this thing will be like Groupon (remember they were magically saving writers by hiring thousands of them to copywrite Yoga Studio coupons) -- the insiders cash out, and the dumb money takes a bath.

That said, I thank the Saudis for subsidizing my next black car ride. God knows I've shipped $100k for gas to them over the last two decades.

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

#172

Post by kinkdr »

rexreed wrote: post #30
kinkdr wrote: post #15

Earlier quoted context omitted.

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.

I wouldn't be surprised if Uber and Lyft start lobbying for legislation that will make it difficult for new entrants in the market.

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

#173

Post by morgante »

downandout wrote: post #98
methehack wrote: post #82

I've always been a little confused about uber's capital needs. When I first heard about uber, the part I thought was super-clever was that you wouldn't _need_ lots of capital because all the drivers would have their own cars. Leveraging the latent capital of one side of the two-sided market was the genius of it. (Airbnb too) Same for the staffing -- hook up both sides of the market. No need to pay anyone out of your…

I believe that your assumption of insane driver subsidies is indeed the reason they are sucking down so much money. That is a problem, because the moment that people have to pay the actual costs of an Uber ride, they may go back to taxis or driving their own cars. The only strategy I can see with the absurd amounts they are raising is that they are trying to get enough money to sustain the subsidies until they kill a…

> That is a problem, because the moment that people have to pay the actual costs of an Uber ride, they may go back to taxis or driving their own cars.

There doesn't seem to be evidence of that.

Uber is apparently profitable in its mature markets (mainly the US).[0]

The money is mostly used to prop up new markets, where you have to give lots of incentives to get both sides of the market in place fast (keeping supply and demand matched is the constant challenge of nascent two-sided marketplaces).

That being said, the fact that they're having to turn to Saudi money (nobody's preferred source) isn't encouraging.

[0] http://fortune.com/2016/02/18/uber-profitable-us/

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

#174

Post by morgante »

nilkn wrote: post #101
CPLX wrote: post #78

Earlier quoted context omitted.

In my experience this is actually happening. For example many of my friends are now using Dial-7 to get to and from the airport these days for business trips. It's just more predictable than wondering if there will be surge pricing when you need to leave, they actually are slightly cheaper, and you know what you're going to get. Uber's user experience has a lot going for it but it's very, very far from flawless or un…

For getting to/from the airport in my own city, I still use the old limo driver that I was using before Uber took off. Literally the same guy, not just the same service/company. When friends or family members fly down to visit I sometimes book him for them as well. It's about the same price as Uber (I voluntarily pay more because I tip him generously), but it's a 100% guaranteed fantastic experience. With Uber, you n…

Normal people don't take limos to the airport.

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

#175

Post by mikeyouse »

stefanstokic wrote: post #125
mikeyouse wrote: post #45

Earlier quoted context omitted.

You're probably thinking of Sacca and Twitter: http://techcrunch.com/2011/02/27/jp-morgan-twitter-chris-sac... He may have done the same for Uber, but I haven't heard anything about that at all.

http://www.forbes.com/sites/alexkonrad/2015/03/25/how-ventur... "the Uber CEO got upset with Sacca for trying to repeat his Twitter move of buying up secondary shares in Uber from other initial investors."

Ah good eye, thanks, hadn't heard anything at all about that.

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

#176

Post by prostoalex »

tlrobinson wrote: post #127
downandout wrote: post #98

Earlier quoted context omitted.

I believe that your assumption of insane driver subsidies is indeed the reason they are sucking down so much money. That is a problem, because the moment that people have to pay the actual costs of an Uber ride, they may go back to taxis or driving their own cars. The only strategy I can see with the absurd amounts they are raising is that they are trying to get enough money to sustain the subsidies until they kill a…

> The only strategy I can see A more cynical version: they're trying to pump up their valuation, IPO, and dump their stock before anyone notices.

That would make sense if founder/employee liquidity was in the works, but from the information we have it's going straight to the company.

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

#177

Post by fiatmoney »

khc wrote: post #166

If they can get cash at a good deal, why not? 10 years later, if they do make a truckload of money from overseas expansions, they can pay back their investors with oversea cash without paying American taxes. Double win!

It is typically not legal to pay out (via dividends or share buybacks) to different investors of the same class in differing amounts.

I'm not enough of a tax lawyer to say if you can do a miniature version of that by buying back stock of a US company listed on foreign exchanges without repatriating capital, but after arbitrage you would expect the effect to ripple back to the US-listed share price by the same amount.

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

#178

Post by morgante »

Mendenhall wrote: post #170
dragonwriter wrote: post #84

Earlier quoted context omitted.

Women are not allowed to drive in Saudi Arabia, but that doesn't mean that the particular official given a board seat believes that they shouldn't be allowed to drive (or even that the monarch believes that that's the way things should be, generally; just because its not a democracy doesn't mean that Saudi government policy isn't shaped by a desire to appeal to particular constituencies.)

I agree with your statement completely. The thing I notice is he works for the government and I would think he would never be able to say that openly. A competitor could instantly draw that into question and make them defend the point and use it as a propaganda tool. If he says women should be able to drive he goes against the kingdoms laws and those constituents, if he says they shouldnt or stays mute the propaganda…

I think you're overthinking the likelihood of that becoming a controversy.

Sovereign wealth funds routinely invest in companies which run contrary to government official policies. Their foremost duty is as investment managers, not politicians.

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

#179

Post by morgante »

macspoofing wrote: post #138
jessedhillon wrote: post #39

Earlier quoted context omitted.

> A solid business model doesn't require this sort of continuous cash infusion. Where is this assumption that this cash is required coming from? A very common use for investment is to accelerate plans which would otherwise unfold over long/impractical timelines. Another common use is to get ahead of competitors. I know much of HN is very eager to see all billion dollar valuations deflate so as to prove that extremely…

>but there's nothing inherently troubling about a highly-valued, late-stage company raising so much money. Maybe not troubling, but interesting. There's definitely something interesting there. For one thing, nobody wants a representative of the Saudi government to sit on their board and yet they took their money. Clearly they didn't have a lot of suitors willing to dump money on them and clearly they had some (major?…

> For one thing, nobody wants a representative of the Saudi government to sit on their board and yet they took their money.

Why do you assume that? It guarantees them favorable treatment in a growing market.

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

#180

Post by assface »

intrasight wrote: post #155
methehack wrote: post #82

I've always been a little confused about uber's capital needs. When I first heard about uber, the part I thought was super-clever was that you wouldn't _need_ lots of capital because all the drivers would have their own cars. Leveraging the latent capital of one side of the two-sided market was the genius of it. (Airbnb too) Same for the staffing -- hook up both sides of the market. No need to pay anyone out of your…

They hired away almost half of CMUs robotics department. That's gotta be expensive. They are building (in the city no less) an autonomous driving test track/facility. That's also gotta be expensive. Human drivers are just a brief stepping-stone.

I can't go into details, but it wasn't that much. The public number for "buying" CMU's NREC is $5.5 million.

http://www.nytimes.com/2015/09/13/magazine/uber-would-like-t...

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