Travis Kalanick thinks self driving cars are good for Uber. He's wrong.
Uber is rumoured to be working on its next round of financing at a $17 billion valuation. 60x forward revenues (Uber's run rate is reportedly $300MM in net revenue) is reasonable for a hypergrowth technology company with a multi-billion dollar global market, right?
The problem is that Travis Kalanick left no doubt this week that Uber is a transportation company. According to TheVerge Uber will eventually own and operate a fleet of driverless cars:
Uber will eventually replace the people who drive its cars with cars that drive themselves, CEO Travis Kalanick said today at the Code Conference.
Kalanick is excited about this because drivers are a problem - they're not as easy to scale, they ask for more money, and the quality of the service is less reliable. Customers should also be excited because the service will be better and cheaper. Everything will be reduced to math which means it'll be much more reliable, predictable, and consistent - i.e., a commodity.
Ultimately, the problem for Uber is that a service with driverless cars is also easier to copy. Buy some driverless cars, install some off-the-shelf fleet management software, plug into a centralized dispatch app (e.g., Kayak for taxis), and compete away all the profits with the other taxi companies. That's the future of the "driverless taxi" business: low prices and choice for customers and low profits and bankruptcies for the companies. Just like the airline business.
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TheStartup100 and this blog are a project of Frank Anderson. I'm an internet entrepreneur; former investment banker and consultant; and studied at the University of Illinois and the University of Chicago. You can email me at frank(at)thestartup100.com.