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

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

#301

Post by mathattack » Thu, Jun 02, 2016, 12:13 PM UTC

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…

Without knowing any inside info, my impression is there are large fixed costs entering a market. Once the double sided market is built there is a large cash flow, but it takes effort in each new city.

Additionally if they are doing R and D beyond this (autonomous cars, universal delivery service, whatever) then they need lots of cash.

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

#302

Post by froo » Thu, Jun 02, 2016, 12:15 PM UTC

em3rgent0rdr wrote: post #282

froo wrote: post #258

Earlier quoted context omitted.

Probably none. By having an open system, prices will invariably get pushed down (better for end users) which will deincentivize drivers (worse for end users) There may be some equilibrium somewhere, but I don't believe it will be in the users best interest having to wait for cars. Just my thoughts. I'm probably wrong.

By having an open system, since there is no longer a corporate middleman entity which takes a cut off a profit, and since anyone can compete, therefore prices will get pushed down. But just like any other perfectly-competitive system ( https://en.wikipedia.org/wiki/Perfect_competition ), the price in equilibrium will approach the marginal cost when marginal cost equals marginal revenue, not get pushed down indefinite…

In an open system, how do you ensure basic safety needs are met - eg, do drivers have licenses?

I sure as hell am not getting into a car with an unlicensed driver

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

#303

Post by driverdan » Thu, Jun 02, 2016, 12:21 PM UTC

gaius wrote: post #265

loeg wrote: post #225

Earlier quoted context omitted.

Yes, like a taxi. The primary benefits Uber has over traditional Taxis are 1. price; 2. they have an app, and it works well; 3. drivers arrive in vaguely predictable times that are less than 45 minutes; and 4. it doesn't discriminate as badly as cabbies. > Uber will never come close to moving the sheer numbers that public transit does. You can't do it, not enough road to fit all those cars. Especially in downtown cor…

2-4 apply to every taxi firm these days too

Not in the US. Taxi companies in US cities are terrible.

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

#304

Post by adgulacti » Thu, Jun 02, 2016, 12:47 PM UTC

rexreed wrote: post #19

koolba wrote: post #10

Earlier quoted context omitted.

> Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model. If someone is willing to give you $3.5 billion dollars I'd argue you've got a solid business model. Either that you're just really good at raising capital.

Let's revise "solid business model" to "solid ability to sell the company's value". A solid business model doesn't require this sort of continuous cash infusion.

uber's got a solid ability to sell the "driverless car fleet monopoly" dream to possible investors. thus valuation = dream selling while acquired invesment = subsidizing current transportation. all those in uber dominant countries, you should enjoy cheap transportation while you can. all other should pray that uber gets significantly big yet still not all powerful so that there is some competition left to keep the prices in check.

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

#305

Post by bogomipz » Thu, Jun 02, 2016, 1:24 PM UTC

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've had the same though about their initial business plan leveraging latent capital and also can't understand the need for all of this funding but I tend to think that it is in fact being used to keep fares artificially low for the time being. Back in January I believe of this year they dropped fares ~ 15%. There's not many business that can sustain that type of cut overnight. So my guess the cash is needed to sustain them until most of the existing monopolies(local taxi) are out of business.

The other reason I see is China. I've heard estimates that and seen probably at least one story here on HN about Uber spending 1 Billions a year to try to compete in China and it's largely not working.

So the question is how sustainable is this valuation? It's too big for anyone to step in and acquire at this point at least in terms of its current model - cars with drivers, since the long term future is likely driverless cars.

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

#306

Post by codecamper » Thu, Jun 02, 2016, 1:39 PM UTC

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…

Folks... How many years was Amazon not profitable? And what is that stock worth?

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

#307

Post by bogomipz » Thu, Jun 02, 2016, 1:40 PM UTC

“Of course we think women should be allowed to drive,” said Jill Hazelbaker, an Uber spokeswoman. “In the absence of that, we have been able to provide extraordinary mobility that didn’t exist before — and we’re incredibly proud of that.”

Of course we think women should be able to drive but we have no problem doing business in and with a backwards repressive society that doesn't believe that women have the same rights as men as long as they give us money. Besides such inequalities are a business opportunity since those repressed women need rides. Hey Uber how about "disrupting" the farce that is the Saudi Royal Kingdom.

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

#308

Post by bogomipz » Thu, Jun 02, 2016, 1:42 PM UTC

birken wrote: post #27

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…

How did you calculate the 5% dilution figure? I didn't see where in the article that they mentioned what percentage of the company the would give for that 3.5 billion. Different sourc?

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

#309

Post by codecamper » Thu, Jun 02, 2016, 1:43 PM UTC

chillydawg wrote: post #288

encoderer wrote: post #283

Earlier quoted context omitted.

No it's called priming a two sided market. Do you think supply and demand grow in harmonious lockstep?

They do if you don't mind waiting 30 years, but the Valley wants billions tomorrow.

I doubt it would take 30 years. More like 3-5. But when your competitor has the cash infusion, you better have it too.

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

#310

Post by codecamper » Thu, Jun 02, 2016, 1:48 PM UTC

cmurf wrote: post #197

macspoofing wrote: post #158

Earlier quoted context omitted.

>You can split an Uber 4 ways but you can't split a bus fare. Like a taxi? Uber will never come close to moving the sheer numbers that public transit does. You can't do it, not enough road to fit all those cars. Especially in downtown cores. So Uber competes with public transit as much as taxis compete with public transit.

Taxis are a kind of public transit. So call me skeptical if Uber manages to sink taxis and this is part of their long term strategy, because unless they have enough money to become the sovereign in their dominant markets, they're going to end up being regulated by the local government should they supplant taxis.

Interesting. I think this is a very valid point.

Eventually governments will get wise to the fact that this is not magic. Just a new way to dial up a ride.

Governments didn't allow individuals to install a radio into their private car & drive around making rides. Why should they allow the same just because you have a smartphone?