How Do You Value A Company Like Uber?

Uber’s $51 billion valuation is thrown around so cavalierly these days, it’s easy to overlook just how much money that really is.  

It’s nearest competitor Lyft, is valued at ‘just’ $3 billion, but $3 billion is still a heck of a lot of money.  $51 billion is A LOT more though.

How Do You Value A Company Like Uber?
How Do You Value A Company Like Uber?

Today, RSG contributor, John Ince, takes a look at an article that provides an unbiased look at Uber’s valuation.  Investors might not like the result, and there’s even a cool spreadsheet you can use at the end to come up with your own Uber valuation based off a set of inputs and assumptions.

How Do You Value A Company Like Uber?

Sum and Substance: Each week brings more Uber stories, with some containing good news for those who believe that the company is on a glide path to a $100 billion IPO, and some containing bad news, which evoke predictions of catastrophe from Uber doubters. For me, the test with each news story is to see how that story affects my narrative for Uber and, by extension, my estimate of its value. In keeping with this perspective, I broke the news stories down based upon narrative parts and valuation inputs.

My Take:  This clearly is the biggest issue facing Uber – what is the value of what they have created?  They’ve been gliding along often ignoring inconvenient facts.  Along comes this NYU B-school prof who pulls it all together in one tidy package and comes up with a valuation that’s less than half of what the insiders have assumed.  And he does it with both intellectual rigor and a fair measure of discretion.  So what if … this guy is right?  It basically means that Uber investors have been taken for a ride, with a destination that is still unclear.

‘Daily Show’ Takes On Uber And The Sharing Economy (VIDEO)

Sum and Substance: “The Daily Show” took on Uber on Tuesday night’s episode with host Trevor Noah trying to figure out if the ride-sharing service (and other like-minded apps) were really a good idea. Uber and other mobile apps constitute the “sharing economy,” which employs thousands of independent contractors for short-term projects such as driving, dry cleaning and laundry, moving and general to-do list finishing. But the status as an independent contractor can mean the wages may be lower. “For some Uber drivers, it’s a minimum-wage job,” Noah said. “But you don’t get into this for the money. You get into Uber for the glitz and glamour of having a 19-year-old vomit in the backseat of your Camry.”

My Take: This is easily the best video segment I’ve seen on the ridesharing – funny and insightful.  Well worth a watch.  He gets into the faux economics of driving and captures some of the complexity of the experience, using a light touch.

Exclusive: Uber checks connections between hacker and Lyft

Sum and Substance:  Eight months after disclosing a major data breach, ride service Uber [UBER.UL] is focusing its legal efforts on learning more about an internet address that could identify the hacker. That address, two sources familiar with the matter say, can be traced to the chief of technology at its main U.S. rival, Lyft. In February, Uber revealed that as many as 50,000 of its drivers’ names and license numbers had been improperly downloaded, and the company filed a lawsuit in San Francisco federal court in an attempt to unmask the perpetrator. … U.S. Magistrate Judge Laurel Beeler ruled that the information sought by Uber in a subpoena of Comcast records was “reasonably likely” to help reveal the “bad actor” responsible for the hack. … Lyft spokesman Brandon McCormick (NYSE:MKC) said the company had investigated the matter “long ago” and concluded “there is no evidence that any Lyft employee, including Chris, downloaded the Uber driver information or database, or had anything to do with Uber’s May 2014 data breach.”

My Take:  In this spy vs spy drama, we’re left to wonder who’s really at fault here.  No real evidence has been presented that Lyft was involved in any way, yet the headlines are all over that possibility.  Just as likely that Uber is trying to score points by implicating Lyft – and pin the “bad guy” image on its foe.

China just threw a major wrench into Uber’s biggest expansion plans

Sum and Substance: Uber’s plans to expand in China may be about to hit a roadblock. China’s Ministry of Transport has just issued draft rules that could pose big problems for the ride-hailing service’s efforts in China, according to a report in the Wall Street Journal on Sunday. The new draft rules would significantly tighten the regulations that ride-hailing companies such as Uber and local rival Didi Kuaidi must adhere to, requiring the services to shoulder many of the costs of traditional taxi companies. That could be a big problem for Uber, which has apparently declared China its most important market outside of the US. Among the proposed rules are requirements that drivers of ride-hailing services have at least three years of experience and that drivers work only for a single ride-hailing company. Ride hailing companies would have to register their cars as taxi services, insure vehicles and passengers and sign labor contracts with drivers. The companies would also need to maintain servers in China and share data with local transportation authorities.

My Take:  If these policies do, in fact, become the law of the land in China, I can’t see how Uber would be able to compete.  Maybe that’s why they’re being considered.  It’s not as if Uber was invited to their party.  They’ve crashed the China gig, just like they’ve been crashing parties all over the world.  This time, however, the authorities seem to be fairly clear about how they’re going to keep them from gaining a toehold in the largest market in the world.

Lyft partners with Hertz and Shell, taps Stripe to pay its 100k drivers faster

Sum and Substance: Lyft has partnered with Hertz to deliver industry-leading car rental rates for its drivers on a daily, weekly, and monthly basis. The first market to take advantage of this is Las Vegas. More markets are planned in the future. The advantage of this Hertz partnership is more freedom for drivers who want to make some more money without paying tens of thousands of dollars for a vehicle you’re not driving otherwise. Of course, while drivers win, Hertz also gets a pretty significant benefit because it’s now competing against Avis’ Zipcar and Enterprise’s offering — which coincidentally was started by Lyft’s founders. Car rental deals are great, but what about helping drivers get paid? Today, Lyft has introduced Express Pay, a way for drivers to get their earnings on demand. It has partnered with Stripe to facilitate these instant deposits. Opening up the driver app, you can see your stats and then choose how much of your earnings you want to cash out rather than waiting for Lyft to disburse the funds. Express Pay is rolling out to drivers over the next month (some drivers may get access to it sooner). Think of it as being like Square’s Instant Deposit, but on Stripe instead. To help drivers reduce their costs, Lyft has formed a partnership with Shell. The more rides a driver gives in a week, the more money they will save at a Shell gas station. Drivers will receive a personal PIN code, and the price comes off the pump in real time. The discount will be available at any of the 12,500 Shell stations around the country and is going to be rolled out in Chicago, San Francisco, and Boston first, before expanding nationwide by the end of the year.

My Take: Lyft, oh yeah, remember them … the little guys with the pink mustache … well guess what … they’re still there and coming up with some stuff that makes a ton of sense for drivers.  These announcements are more evidence that Lyft is determined to be perceived as the more driver-friendly alternative.

Related Article: What’s It Like to Give Up Uber For A Week And Drive For Lyft?

It’s Like Uber for Janitors, With One Huge Difference

Sum and Substance:  It’s scorching on the streets of Midtown Manhattan as Afonso Oliveira strides around the lunch-break crowds, unbent beneath his 45-pound, $350 industrial backpack. He is carrying everything that might be needed to tighten a leaking faucet at a digital marketing agency or repair a social network office’s electrical outlets. His feet move with a runner’s rhythm in Salomon Speedcross trail-running shoes rather than the typical work boots of a handyman. The 27-year-old does marathons in his spare time, and he doesn’t break a sweat moving between appointments. It’s difficult to keep up. “This job, walking is one of the things that comes with it,” Oliveira tells me. “Usually I walk pretty fast. This is slow for me.” Oliveira’s job is to show up whenever an office signed up with his employer, Managed by Q, needs something done: a pipe secured, a monitor mounted, a standing desk built. A client simply touches a special iPad installed in their office space, and Oliveira or one of his dozens of colleagues shows up like a food-delivery order or a ride to the airport.

My Take: Yet one more iteration of the “Uber for xxx” series of startups.  This one actually seems to make sense.  I can’t wait for the “Uber for people who are allergic to Uber,” to announce they’ve raised $1.86 gazillion in a seed round of funding.

What did you guys think about the week’s top stories?

-John @ RSG