Monday, June 19, 2017

Imagine There's No Uber

It's easy if you try...

From CNBC:

Imagine there's no Uber: Here's what experts think would happen next
Uber is reeling.

Allegations about its treatment of women have hurt its brand among investors, riders and engineers. The company is facing lawsuits on several fronts and has huge holes in senior leadership, which could make it hard to raise more funding, while shares of Lyft are suddenly in hot demand among investors.

And as previously reported, Uber burns a lot of cash — a reported $2.8 billion in 2016 alone — to keep drivers and riders on its app.

What happens if Uber can't go public, can't raise another round of funding, and disappears?
We asked three investors for their take. Here's what they said.

Investors would be fine — but others would suffer.
Waze and Moovit co-founder Uri Levine said, "It's not investors you should worry about, but Uber's employees, drivers and users."
Seven-year-old Uber now employs about 12,000 full-time. Millions of drivers rely on its platform to find fares and generate income as independent contractors. And the company has boasted that 20 million people have downloaded its ride-hailing app.

If Uber fizzles, employees would lose their stock options at a minimum. If Uber folded entirely, employees and drivers would face unemployment, and riders would be left waiting for other services to fill the void in transportation.

Tech investor Bedy Yang, a managing partner with 500 Startups, said, "If Uber failed, investors would be hurt only if they paid a high price for their shares, and have Uber as the single standout in their fund. But that's not how investing works, generally. Investors generally learned that lesson in the dotcom bust. Firms do not bet everything on a single company."...MORE
We've pondered the possibility a few times. The introduction to last week's Lest We Forget: "Uber isn't sure if it can 'remain a viable business' without building self-driving cars" mentioned the plight of the Series G and leveraged loan investors:
If I were a late round Uber investor this would be a bit concerning....
In May's "Uh Oh Uber: Didi Chuxing Starts Rolling Out an English Language Version Of Its App" the intro was a little wordier:
If Didi expands out of China the Ubester had better watch out. Here's the problem in a nutshell, Uber can't raise any more money.

They've already done the venture capitalists.
They've gone the debt route, last year they sold a $1.15 billion leveraged loan at 5%, not cheap money.
They tapped the Saudis for $3.5 billion including who-knows-what liquidation preferences and other terms and conditions.
Finally they've done the scoundrel's topper-upper, usually used by VC's to set the immediately-pre-IPO valuation, going to accredited investors to sell a sliver:

"Uber Is Raising More Money From Rich People" (Al Gore and Snapchat do cameos)
This is a very bad sign.
Venture Capitalists will use the dumbest money they can find to get a late round to bump the valuation as high as they think they can get away with. More* after the jumps....
With that background, here's the latest from c|net...
Which was preceded by:

Does Uber Go Bankrupt If Didi Chuxing Decides To Compete In the United States?
Uber has spent a lot of money to open up local markets, one at a time, to "ridesharing".
Opening the door for Didi Chuxing.

And Didi is an awesome competitor.
As noted in the intro to last week's story about Singapore-based Grab's fundraising:
"Uber’s largest Southeast Asian rival looks to raise another US$1.5 billion"
I still can't get the picture of Didi Chuxing's President, Liu Qing (anglicized to Jean Liu), commenting on Travis Kalanick and Uber's efforts in China as cute. Then when Uber proclaimed the $3.5 billion investment from the Saudis she laughed and said she had more than that on the way.
Didi then announced the completion of a $7.3 billion fundraising.

Uber better be on top of their game in Southeast Asia because they weren't in China and got run out of the country....
If I were a late stage Uber investor the following story would terrify me. Long time readers can gloss over some of the details, and the failure to put the Financial Times' Izabella Kaminska* at the top of the list of journos covering the Ube raises some doubts, but the point raised, "What happens if Didi goes international?" is important or as Kalanick might say, existential....
So yeah, it's definitely crossed our minds