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Comment by opendais | Hacker News Reader

http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/06/0...

Given they are getting banned in entire markets, I think this evaluation is crazy.

UPS, Fedex, etc already have software just as advanced for planning their routes. Uber isn't going to magically beat them somehow. Heck, part of why they lean on the USPS is there is some economics in delivery outside of big cities that create a situation where it makes no sense for more than 1 delivery company to deliver for the entire area (and even then the USPS loses money on rural deliveries in some areas!).

EDIT: To be clear, I'm not saying this proves a bubble...I'm just saying Uber is overvalued given the fact they are going to get hit with regulations eventually that will squeeze their margins or be forced to retreat from numerous markets.

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They have plenty of money to fight the regulatory situation, and it looks like they're gearing up to do so: https://www.uber.com/jobs/12416

("Urban transportation has looked the same for a long time—a really long time—thanks in large part to regulatory regimes that don't encourage innovation. We think it's time for change. Uber’s legal and public policy teams are helping facilitate that change around the world, and we’re looking for a hustler-wonk to help us develop that will change the world. This is no ordinary, run-of-the-mill gig -- seriously, have you read the news? We’re navigating some very interesting policy waters. Are you ready to dive in? This position is based in San Francisco or Washington, DC.")

Tesla is larger and how well has that worked for them?

http://www.valuewalk.com/2014/03/tesla-motors-inc-tsla-now-b...

Uber, unlike Tesla, is costing the government money in the form of licensing fees. Its contractors are not paying for such licenses frequently. You can't simply "fight" the tax system like that.

Can they fight lobbying by the taxi companies? Yes. Can they convince the governments to go tax someone else instead? I doubt it. The taxi companies haven't managed that trick either.

They might be turning around that NJ loss: http://www.engadget.com/2014/06/06/tesla-resume-sales-new-je..., which puts them at 4 for 4. They're in it for the long game, and I don't see them losing it.

To be fair, Tesla has a much stronger case. The regs impeding Tesla make no public policy sense, and the perceived public benefit of Tesla is enormous on its face.

Do you honestly think Uber can do that while simultaneously removing per-trip, tax medallions, and other taxi related revenues from the city coffers?

I don't think cities have to lose taxi-related revenues for Uber to be able to do business. They will have to figure out how to address concerns about liability insurance, overcrowding, etc. But they can still do that and make money.

Fair enough, but that is part of why they are getting banned and upsetting people. Its also part of their price competitiveness. Their contractors haven't been paying.

Until they win that fight there is significant risk. If this is the valuation with a huge legal battle factored in then what will it be without it? To me it doesn't make sense until the regulations are figured out.

> Given they are getting banned in entire markets, I think this evaluation is crazy.

Well, I'm sure they will spend at least some of that $1.2b to bribe politicians into reversing those bans.

I am sure they will be able to exert pressure from their investor community on the political community. I'm pretty sure $1.2 billion in VC money is as valuable than all of those VCs exerting political pressure to keep them in markets. ;)

I'm pretty sure there will be no bribes. :P

I think part of my issue is alot of the rules that their contractors bend/break are reasonable.

It is like my issue with AirBnb. There is a good reason for many of the 'short term' rental laws.

We aren't talking about the bullshit Tesla bans here, after all.

They are expanding pretty fast; have you heard of a (not so) far away country called Colombia? Well, they are already here; as they will be in all the nations that allow them to. Getting banned hurts them, but there is no universal ban in sight.

They are expanding on regulation arbitrage. Being able to bend and/or break the rules by using contractors.

http://bits.blogs.nytimes.com/2014/04/17/uber-faces-rebukes-...

"Oh lets operate in Paris and not pay the licensing fee for a taxi service." Etc.

They've been completely and/or partially banned by more markets, larger markets than the entire country of Colombia at this point.

It is the same thing as AirBNB. You build the software service and then hire out contractors who don't comply with local laws and rake in the money.

I don't see that as a good, sustainable service at an evaluation larger than the entire US taxi market in the US. http://www.ibisworld.com/industry/default.aspx?indid=1951

They are going to hit like AirBNB was and have to play by the same rules as everyone else which will squeeze their margins. :/

Maybe this speaks to my bias against people who bend reasonable rules for profit.

Also, many of the people who were looking into investing agreed with that: "The bidding for Uber was so heated that some venture capital and private equity investors bailed out after the valuation soared beyond $10 billion, according to people familiar with the situation, who asked not to be identified because the talks weren’t public."

Ironically if they go further into South America and end up in the crazy deregulated market of Peru, where it seems like most car owners operate as taxi drivers, Uber will find their value proposition being that of the regulated taxi industry (pay more and wait longer to get registered drivers who are less likely to take you to a dark alleyway full of robbers and more likely to fix the dents in their car)

> Maybe this speaks to my bias against people who bend reasonable rules for profit.

I share the same "bias" (I would actually refer to it as "normal thinking", but hey…) and think it's a shame people in Silicon Valley have collectively decided it's fine to break the law as long as you can get away with it and get a high valuation out of it.

To take one example, AirBnB has clearly had a negative impact on many local rental markets via units being taken off the normal market and instead being turned into unlicensed hotel rooms, but their response has been basically complete and utter defiance to anyone to stop them, and this attitude gets applauded here on HN and elsewhere.

It's a fantastic business model (low liability, high scalability), and if they can pull it off, it will be worth way more than $17B. That's the bet that these investors are making. Same thing with AirBnB (and many many other tech companies).

Yes but the market isn't that large and if they can pull it off, so can other people.

Even if Uber manages to capture 25% of the market, it isn't going to hit $170B market cap.

Exactly. And those other people can do it a lot cheaper than Uber because they'll be taking advantage of the costs/time Uber is spending on lobbying.

>Given they are getting banned in entire markets

isn't it the best confirmation of how big deal they are? Their value isn't in the "logistics math" or other hi-tech mumbo-jumbo. Their value is in the successful building of the momentum, a huge storm wave which can break through existing regulations which hasn't changed in a hundred years. An ability to change political things to be in your favor is one of the most important and lucrative business tools, pretty much an equivalent of Gold Finger. Uber hasn't won this game yet, but he is pretty promising contender...

I'm still unconvinced that Uber's market is one where the first mover has much of an advantage. What prevents those with more marketing and logistics resources from sitting back and waiting for Uber and Lyft to force the social/legal change that creates the industry before entering the market themselves?

Right now, the deep pockets want nothing to do with that business because the future is uncertain and there's a large liability risk. One of many probable ends for Uber and Lyft is being sued out of existence ala Napster. But if Uber succeeds in proving the market, competitors will follow. What does Uber have that's hard to match? Their technology can be replicated by those that know how to build software. Their drivers will bolt to any competitor that will pay them more. Their customers will bolt to any service that's cheaper. Without some sort of network effect, they'll either fail in their legal challenges or they'll find themselves in a race to the bottom and see their margins evaporate.

Worse yet, they could see themselves competing against companies that can bolt the Uber revenue source onto their current product. Facebook Transport, which leverages your network of friends for stuff like trusted reviews from people you know. Domino's ToGo...a ride home and a pizza. Amazon Local Lift...handle your grocery shopping on your way home. And that's not even considering if Google gets to self-driving cars first and decides to compete rather than license/sell the technology to Uber.

At the moment, Uber and Lyft feel like the penguins that gets pushed into the water to test whether there's a Shark or Whale nearby. They're either going to get eaten, or everyone else is going to follow them into the water.

No? If I ran an unlicensed taxi service out of my home using my car I'd be banned too.

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