Uber's problem is taxi companies have lower overhead because among other thing their drivers sometimes get hailed by people at street level. Which means their either taxi prices are lower and people stop using Uber or they pay drivers more and drivers mostly stop working for Uber.

[1] http://www.businessinsider.com/ubers-revenue-profit-and-loss...

I would assume that would also depend on how much of their fixed costs they can shed in conjunction with that. Uber may not die quickly but it could still die slowly if they lose the ability to move forward because they had to cut too much of their R&D and sales infrastructure to get to that positive number.

Plus such a massive layoff would be a big red flag to customers too. By Uber's nature, a particular ride isn't a long-term commitment, but I think people would start looking for a stronger-looking horse even so. One of those differences between homo economus, who every time they need a ride rationally examines all their options regardless of the future and realizes that as long as Uber can complete this ride the internal state of Uber doesn't matter, and homo sapiens, who will take into account the fact that Uber doesn't seem to be doing well even if doesn't rationally matter at this particular point.

> someone is going to eat the valuation hit

Liquidation preferences mean earlier investors (and employees holding Common Stock) take the hit of a down round.

Let's say Company X has 9,000 shares of common stock outstanding. It raises $1 million at a $10 million post-money valuation with a 1x non-participating liquidation preference. Its cap table is thus 1,000 shares of Series A preferred stock on top of 9,000 shares of common.

It then raises $10 million at a $50 million valuation with similar preference terms. Its cap table is now 2,500 shares of Series B preferred stock on top of 1,000 shares of Series A preferred stock on top of 9,000 shares of common.

Let's contemplate a $100 million exit. Everyone converts to common at $100 million / 12,500 shares, or $8,000 per share. Series A bought at $1,000 and thus sees an 8x return; Series B bought at $4,000 and thus sees 2x.

Let's contemplate a $50 million exit. Everyone converts at $50 million / 12,500 shares, or $4,000 per share. Series A gets 4x; B comes out flat.

Let's contemplate a $25 million exit. Series B does not convert. Instead, it demands its 1x liquidation preference and gets $10 million. This leaves $15 million on the table, or $1,500 per share. Series A converts and sees its 1.5x return; B comes out flat.

Let's contemplate a $15 million exit. Series B does not convert and gets its $10 million. This leaves $5 million on the table, or $500 per share. Series A does not convert and demands its $1 million. Series A and B come out flat; common gets $4 million / 9,000 shares, or about $444.

Let's contemplate a $10 million exit. Series B gets its $10 million and comes out flat; everyone else gets screwed.

Let's contemplate a Theranos exit. Everyone gets screwed. Turtleneck doesn't go to jail.

TL; DR Later stages are least volatile. They get screwed last, but also see upside last. Lower rungs' returns pay for this safety.

> Can you walk me through the math. How does one arrive at 1K of Series A preferred from 9K of common stock? How is that being derived? I'm not following.

At time t=0 (probably at founding and when hiring its first few employees) Company X issued 9,000 shares of common stock. At time t=1 it decides to issue 1,000 shares in a series A offering (most likely to VCs and outside investors). They are separate events.

1000 shares x $1000/share = $1m raised for the company in the series A.

> Also what is meant by "post-money" valuation? I'm assuming there is a corresponding "pre-money"?

https://en.wikipedia.org/wiki/Pre-money_valuation

In this case, pre-money valuation of Company X = $10m - $1m = $9m

> Lastly by "coming out flat" you mean made whole again i.e recouped their initial investment? Thanks.

Yes.

>"Let's say Company X has 9,000 shares of common stock outstanding. It raises $1 million at a $10 million post-money valuation with a 1x non-participating liquidation preference. Its cap table is thus 1,000 shares of Series A preferred stock on top of 9,000 shares of common."

Can you walk me through the math. How does one arrive at 1K of Series A preferred from 9K of common stock? How is that being derived? I'm not following.

Also what is meant by "post-money" valuation? I'm assuming there is a corresponding "pre-money"?

Lastly by "coming out flat" you mean made whole again i.e recouped their initial investment?

Thanks.

And there aren't too many NYCs in the world.

Uber is far more expensive in NYC than other cities such as Chicago.

Now that Uber has allowed tipping and since there is a rating system, everyone must now tip otherwise risk getting low ratings which effectively makes NYC rides even more expensive than they had been.

Most people don't own cars in Manhattan so that they either have to take mass transit or use Uber/Lyft/Taxi. There are many elderly on fixed incomes that have trouble ambulating (moving around) where lower cost taxi service is important.

In NYC at least, Uber doesn't need all of that corporate overhead and perhaps they should spin it off into some low-overhead operation.

- There is already a rating system for drivers, and riders, so this isn't a "will be" thing, right?

- The rating system is not currently blind, as far as I know. Certainly riders can see drivers rating, and I believe drivers can see riders rating as well.

Even if they cost more I have no idea how I'm going to get around when I travel. The other options are so disgusting I'm not going back to that.

I would use them even if prices went up 30%.

There are a few costs like background checks that may go down when they stop expanding, but fewer than you might think.

Uber demand is definitely elastic.

I don't understand why that would decrease overhead?

I also don't understand why the other aspects of overhead (dispatcher, offices, taxi lots) don't add up to more than Uber (whose only cost is servers and support)

More than a team of four can manage certainly.

It does not, however, take a constant number of engineers to maintain the infrastructure that lets a single engineer push a feature to millions of users. (P/I)AAS can help, but you still need people to monitor performance, find regressions and bugs, and track them down.

Uber only works if there are enough drivers so that I can always get a ride. If I get told that I have to wait 30 minutes for a ride more than a tiny handful of times I'm uninstalling the app. Growing organically in region would be very tough since it would take too long to get enough drivers in place that users could rely on the service and conversely drivers would be unwilling to sign up because not enough users where bothering to use the service.

Those 4 can handle everything backend related too?

There is always demand for Uber/Lyft just because there isn't a taxi cab nearby 24/7. How is that difficult to understand?

There's certainly a market for app/phone jailable cabs because there isn't one within street hail range at all times, but regular cabs have been phone hailable forever (it's the only way to get one outside of a few major urban cores) and are increasingly app hailable. Aside from regulatory supply restrictions (flouting which may not be sustainable) there's no real basis for a market for alt-taxis as anything but interchangeable competitors supplying the same substitutable commodity as regular taxis.

For me, this wasn't particularly true, especially in San Francisco. The dispatch was unreliable and slow.

Other areas, sure!

Now that the idea of phone-trackable dispatch has become commonplace, regular taxi companies are starting to do this too.

With Uber you also get know the fare upfront, the time of arrival, no need to tell them your address, there is a driver reputation filter, passenger insurance and it's safer than normal cabs in many countries.

Not the same thing as a phone call.

Turns out the car service business isn't very sticky at all (even the drivers work for multiple companies...). Drivers start to leave and the downward spiral begins. They just couldn't get to self driving vehicles fast enough - which may be why they were trying to borrow technology from Google.

When Uber started and raised its first investment rounds, self-driving cars were too far away to be part of a business plan. I doubt the latest investors take that view either - spending billions per year until self-driving cars happen is a way too expensive way to build up a fickle user base who will switch the moment a competitor offers 10% lower rates.

And when self-driving cars do arrive, there is no reason to believe that Uber will have exclusive access to them. Google and other software companies will be licensing the technology to anyone who pays for it, car manufacturers will be selling cars to anyone who pays for it.

It may kill taxi driver as a career, but there is no defensible advantage to Uber compared to Lyft, Hailo, Taxify, and so on.

Uber as a play on driverless cars is a smokescreen to distract people from the fact they have little advantage over other companies and can't for the life of them turn a profit.

At this point why doesn't Uber just lay off a HUGE portion of their staff and kill the R&D. It's hard to imagine if they downsized significantly and quit investing in self driving cars, that they couldn't tip the needle into profitability.

Isn't that a fairly common move for a startup? Burn money to get off the runway, then downsize to stabilize?

And when will that be exactly? This entire thread is overflowing with nothing but fantasies of Uber dying - basically raw emotional hatred - and little else.

Eight years on, they've never had a serious problem with raising capital and there's no evidence to suggest they'll struggle to do so now. The absolute last problem that Uber has right now, is money.

Except that there are no shortage of people who have maintained this view long before Uber's CEO was asked to resign and before Susan Fowler's blog post. Also there are also plenty of people who have commented here that believe Uber's prospect without Travis Kalanick as CEO are not good and also believe he should not have been removed.

>"Eight years on, they've never had a serious problem with raising capital and there's no evidence to suggest they'll struggle to do so now."

You might want to look up the term "irrational exuberance":

http://www.investopedia.com/terms/i/irrationalexuberance.asp

"drivers start to leave" where are they leaving to?

The thread link is: https://news.ycombinator.com/item?id=14456973

Not even sure if I installed Uber last month when I got a new iPhone.

So yea when billionaires are paying your taxi fair to try and drive the local taxi firms out of business naturally they're everywhere.

But when that cash runs out the necessary price hike could just as easily drive them out of business. It's not like the drivers have any great loyalty.

We really need pro-competition legislation to stop this sort of predatory capitalism.

$5 per hour per driver goes to Uber

Assume 80,000 drivers (half of # U.S. Uber drivers) drive 8 hours a day, 7 days a week

52 weeks in a year

5x8x80000x7x52=$1,164,800,000

So about $1.1 billion just in the US. The only expenses are at headquarters (engineering, operations, design, legal, marketing, support) and the tiny field support offices they have in each city (local, entry-level employees).

That's a non-sequitur

This conclusion refers to the idea of VCs(billionaires) subsidizing rides in order to remove the entrenched player(taxis.) How is that a non-sequitur?

I think the confusion stems from saying pro-competition legislation will prevent competition.

As it is, Uber doesn't need to do too much to hit break even. Some central costs cut, and a slight rise on price.

That creates a bit of a puzzle for industries with very thin operating margins that want to make significant investments in R&D. Generally they don't do it. That is why innovation at the Grocery store or in Long Haul trucking is so slow. From an engineering point of view, they are ripe for disruption, until you bring in an accountant to tell you that the disruption doesn't pencil out. Uber, like everything else, said to hell with it we're going ahead anyway. So how can they make things pencil out?

One option is to raise unit revenue in the future, which in an industry that's currently competitive means driving out the competition. IMO Uber was originally targeting this. But it turns out -- and really anyone could have told you -- that what Uber is doing isn't technically difficult. The heavy lifting is smartphones, GPS and Maps, whose availability made Uber/Lyft possible. Uber doesn't own any of the key technologies that make Uber possible, nor do they have a track record of being able to tackle really hard technology problems. They've had huge problems scaling and when Uber started using its own maps, it was a disaster. Bad maps is the #1 problem with Uber. Lots of new competitors have sprung up already that give basically an equivalent user experience, so Uber is not going to get real pricing power.

The next option would be "Lower unit costs in the future", But so far, that means spinning tales about self-driving cars, which is way beyond their technical ability as well as decades out even for those that have the chops to pull it off. IMO this only works because the latter round investors are naive about technology and the current investment climate is conducive to reaching for yield.

So while it's perfectly possible for Uber to continue existing as a concern, I don't think it's possible to satisfy their investors, and this means, unfortunately, that Uber may not make it. Many companies engage in a lot of self-destructive acts to meet unrealistic profit or growth goals set by investors, but in this case, Uber has only themselves to blame for setting these expectations. This is a shame, because I prefer Uber to Lyft and think they've created enormous value for both riders and drivers.

Why "win"? There's no moat. I suppose there will be patents, but those expire or can be worked around.

More likely is that whoever gets there first will make all the mistakes that others can learn from. Every major car company has a self-drive effort now. Apparently Tesla, GM, Ford, and BMW are pretty far along. Lyft has a few partnerships here. It's only a matter of time before most cars drive themselves to some degree.

self driving hardware+software is much more complex than just writing some software... a non player can't trivially get into the game just because someone else have higher advancement

No mass produced self driving appliances that any dumb human can use improperly. The industry won't take that chance of a poor impression and destroy public's confidence all together.

In urban/high density locations, a ride hail company leveraging driverless vehicles can make a killing.

It's not actually dying and it's not going to die.

Routinely skeptics here will point out that Uber is selling a $1 service for $0.75 (or a similar invented sum). Said skeptics then intentionally, comically ignore that Lyft is and has been doing the exact same thing and has radically less capital & valuation to play that game with. The name of the game is: last company standing; that's going to be Uber because they can afford to be and Lyft can't. It's that simple.

The downside of this approach is that Lyft doesn't have anywhere near the upside potential that Uber has. If Uber pulls off all of its ambitions it will be larger than Lyft could ever dream of being. The upside for Lyft's more humble goals is that it's chance of reaching them are much larger.

Unless Uber is willing to change its DNA and scale back its ambition, give up on its long term goals, and stay just a basic ride dispatching service then your analysis is incomplete. However perhaps this scaling back is what the CEO change is fundamentally about.

If internal, I gusss that's true. But we don't hear much about Lyft's internal workings. We don't know the morale of workers or how productive the company is.

About controlling costs - that's why I mentioned losses. Lyft is only in the US yet its losses are worse than Uber. It makes Lyft looks worse to me. Has Lyft said it is profitable anywhere or even break even?

But then Uber's insane valuation is not helping itself. I guess both companies are in bad positions, hard to say which is worse. And I agree it will be interesting to see how Uber does over the next year with new top executives.

Has Lyft said it is profitable anywhere or even break even?

The CEO said in a recent Forbes interview that their losses are currently coming in "under budget" and that they have a definite path to profitability. Make of that what you will.

And yeah agree with Kalanick and Uber by extension seem to be only content with winning everything. They only gave up on China after spending a ton of money and clearly not being able to win. Luckily they were able to get a decent stake in Didi from the merger and leaving China.

The drivers certainly care.

Travis offended and insulted the drivers, while Lyft is chugging along quietly. As long as people have brand loyalty to them (which they sure do), they'll win the ridesharing battle as it's looking like Uber is teetering

Yeah... that's why they have so much investment from car companies... ;-)

I'm blown away that you have to read more than half way down all the comments to get to this observation. It should be an automatic reply every time someone echoes the fantasy that Uber runs out of money and Lyft is magically left to take over. I don't understand the mental gymnastics and contortions one needs to make to arrive at this absurd idea.

Not sure what "its" is, but characterizing Lyft as a lifestyle business seems absurd. It's not as highly leveraged s Uber is, but that's one of the few companies I can think of that one might consider more aggressive.

Well, if you're spending more than your revenue, that is the eventual outcome if money stream from investors dries up.

Uber doesn't really have many physical assets that could be liquidated. Their value is entirely based on profitability. Which is currently negative.