Uber's valuation is not a bubble.
Some quick thoughts on Uber's valuation and bubbles...
Some writers are crying "bubble" again, mostly because they don't understand Uber, "bubbles," or why venture and tech investors invest at seemingly crazy valuations. Or maybe it's just sour grapes.
To be sure Uber's $17B pre-money valuation is high (~60 times estimated net revenues of $300MM). But a high multiple is merely an indicator of risk. Since venture investors are risk-seeking, all of their investments are high risk with high multiples (or often undefined multiples). "Bubbles" only happen when value becomes disconnected from any intrinsic or fundamental value of an asset. That's another way of saying that value is purely speculative with people investing in price momentum on the belief that they can just sell the asset to someone else at a higher price - i.e., the greater fool theory.
Many smart venture or late stage investors would say that Uber has some incredible fundamentals and, perhaps more importantly, fits the profile of a company that could crack the $100B club. Let's take a look:
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Gross revenues are estimated at $1.5B and growing rapidly.
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Uber has a big, big vision: Basically make car ownership a thing of the past. (SpaceX is the only startup with a bigger vision.)
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Uber's total addressable market is so big that it's hard to wrap your head around it. Broadly speaking I would say that their total addressable market is every dollar spent on transporting people or goods within every city in the world. Uber's TAM is a multiple of any markets or companies people are using as comps (like Hertz or Avis).
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Uber has executed incredibly well in the face of many obstacles.
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Travis Kalanick might just be one of those elite founder-CEO types (near perfect SAT score, "edgy" personality).
The bet the Uber investors are making is that Uber can join Facebook and Google in the $100B+ club. Speculative and risky? Yes. Bubble? No. I've been tracking the 100 most valuable startups over at TheStartup100 and I think Uber has the best case of any startup to crack the $100B club. That's why it's at the top of the list, and that's why I'd say the valuation looks perfectly rational even though it might ultimately be wrong.
About TheStartup100
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.