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

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

#331

Post by estefan » Thu, Jun 02, 2016, 5:51 PM UTC

Since I'm reading "Zero to One", let's try to answer Thiel's "7 questions":

1. Engineering - Have they created a "breakthrough" technology (10x better than current tech)? No.

2. Timing - Is now the right time? Maybe they're gambling that self-driving cars are only a few years away so they can subsidise human drivers until that happens in order to build a brand and demand/market presence.

3. Monopoly - Are they starting with a big share of a small market? Only by subsidising prices which isn't sustainable.

4. People - Do they have the right team? Not sure.

5. Distribution - Their app has widespread distribution and some key partnerships solidify that.

6. Durability - Will the market position be defensible 10 and 20 years in the future? I can't see why it would be. If they're betting the company on self driving cars, then that removes any benefit of a network effect based on a two-sided market. Fast forward 10 years and another well-funded company could pump a city with autonomous cars which would face little barriers to entry (barring regulation, but they'd probably ignore it like Uber have).

7. Secret - Have they identified a unique opportunity that others don't see? Not unless they can move into adjacent markets or have a major ace up their sleeves, but there are so many competitors that it would seem they haven't.

They are obviously targetting economies of scale which would mean their plan is to keep prices so low no one else can afford to enter the market barring major technological innovation. This must be why they're burning so much cash.

Self driving cars would remove one barrier to entry since once they exist there will be no need to have a pool of human drivers. So in that case there would be no network effect to act as a barrier, only any effects of economies of scale. That means there's potentially no monopoly being fought over, and therefore no monopoly rents to be gained. Economies of scale take funding to break into, but probably won't inherently create a monopoly with a significant defensible position a well-funded competitor couldn't break into.

Is their valuation the result of a bubble because investors have few other places to put their money? Google invested, probably just hedging their bets or buying access to a future market, and now their valuation keeps spiralling...

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

#332

Post by butisaidsudo » Thu, Jun 02, 2016, 7:19 PM UTC

tomcam wrote: post #42

rexreed wrote: post #30

Earlier quoted context omitted.

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.

Their long-term play is driverless cards--buy or lease fleet cars, then charge people a subscription to commute or use the cars a certain amount per month. The current business is building brand awareness and inertia.

Further, they're also collecting massive amounts of data about commuting patterns that will give them an edge over new entrants once driverless cars are a thing.

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

#333

Post by dafrankenstein2 » Thu, Jun 02, 2016, 7:25 PM UTC

jaxondu wrote: post #274

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…

Maybe Uber needs much more cash to fend off the alliance of Lyft (US) + Didi (China) + Ola (India) + Grab (SEA). Grab in Singapore just announced that you can now use the Grab app to book Lyft drive when in US.

apparently clever initiative from Uber+Lyft

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

#334

Post by hkmurakami » Thu, Jun 02, 2016, 8:04 PM UTC

perbu wrote: post #300

hkmurakami wrote: post #247

Earlier quoted context omitted.

You aren't taking into account multiple liquidation preferences, ratchets, and profit guarantees on a downround IPO that are in the term sheets for this round. Warning of such "dirty term sheets" is Benchmark's Bill Gurley. http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/

Did Uber accept any such preferences when taking investments? I thought only clueless entrepreneurs fell for such trickery.

It is widespread suspicion that Gurley's post was directed at Uber's latest fundraising round (as an early investor, they take a hit from these dirty terms)

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

#335

Post by paloaltokid » Thu, Jun 02, 2016, 9:33 PM UTC

filoeleven wrote: post #324

paloaltokid wrote: post #62

Earlier quoted context omitted.

No, in the USA our executions are cruelty-free.

This is not true. States have been unable to get the drugs they are supposed to use for lethal injection, so they've been substituting others, with horrible consequences. The linked article[0] is one example; there are plenty of others. There's also the fact that the second drug in the cocktail has always been a paralytic: "But the paralytic also meant that, for years, witnesses could not necessarily tell if somethin…

I think you were missing the sarcasm in my comment. ;)

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

#336

Post by hackney » Thu, Jun 02, 2016, 10:29 PM UTC

Considering Saudi Arabia likes their slaves, I find it quite coincidental they would invest in what is a perfect scheme to get uber to provide what for that country will be a ton of slave drivers. Remind me never to use uber.

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

#337

Post by 205guy » Fri, Jun 03, 2016, 12:41 AM UTC

eru wrote: post #237

adventured wrote: post #235

Earlier quoted context omitted.

You're talking about one of the most successful companies in the history of business, in Google. Their speed to their present scale in terms of profit - from founding to now - is unprecedented. Add to that that they make most of their money from operating a hyper-margin software service in terms of costs (with nothing at all similar to Uber's drivers and regulatory problems), one that has been almost entirely unregul…

Perhaps I was too subtle. That was exactly my point. (And if you discount my need to look smart, I think I got it across---you had exactly the thought I was intending to create in the reader.)

I really think that this isn't the place to be playing rhetorical games. I think discussions would be much simpler and clearer if people state their points clearly and unambiguously.

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

#338

Post by eru » Fri, Jun 03, 2016, 2:16 AM UTC

205guy wrote: post #337

eru wrote: post #237

Earlier quoted context omitted.

Perhaps I was too subtle. That was exactly my point. (And if you discount my need to look smart, I think I got it across---you had exactly the thought I was intending to create in the reader.)

I really think that this isn't the place to be playing rhetorical games. I think discussions would be much simpler and clearer if people state their points clearly and unambiguously.

Presenting the evidence to help people come to their own conclusions can be more effective than hitting them over the head with a hammer.

My point was ambiguous to begin with: yes, Uber might very well grow to a trillion USD in valuation, but doing so would give it twice the market cap of any other company so far.

Nuances are important.

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

#339

Post by bogomipz » Fri, Jun 03, 2016, 3:38 AM UTC

koolba wrote: post #10

Retric wrote: post #6

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

> 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.

There's a perverse logic in your statement, the fact that someone is willing to give you money does not mean that you have a solid business model. It does say something about the other party's risk tolerance however.

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

#340

Post by selimthegrim » Fri, Jun 03, 2016, 4:29 AM UTC

linkregister wrote: post #182

selimthegrim wrote: post #135

Earlier quoted context omitted.

So in the eighties, would we (the US FBI) have been cool with MI6 assassinating all those people in Southie funding NORAID?

I would hope that the US would enforce rule of law within its own borders. Using terrorism funding criminal statutes, the extradition process, or enemy-prisoner-of-war exchange (that would be bizarre, but not unprecedented) to mollify the UK government would have been better solutions. That's another example of a really murky conflict without one side having a moral upper hand.

Those statutes didn't exist in 1985 when Peter King, their biggest cheerleader, was marching down Fifth Avenue with Nassau County's finest behind him.