How To Build A Successful Business. Lose Lots Of Money

“We’re all mad here.” So said the cat in ‘Alice in Wonderland’. We’re beginning to understand where the book’s author Lewis Carroll was coming from. How else can you explain the likely valuation that been put on the ride sharing company Uber when it likely floats early next year. And that valuation? A cool $120 billion.

OK so the market may have headed south by then and they may not get that price. They may even decide not to go public at all. (A thought that must keep all the bankers advising them awake at night) but if they do, then what does it say about the world we now live in? Remember, this a company that was only set up nine years ago. And still only employs 12,000 people.

Did we tell you that it doesn’t actually make anything apart from very large financial losses? A $4.5bn loss in 2017 which was up (down?) from $2.8bn in 2016. So despite a financial track record which would have most sane investors running for the hills, others (no doubt keen Lewis Carroll fans) just keep throwing money at it. In 2013, Google Ventures put in $258 million and just three years later, the Public Investment Fund of the Saudi Government lobbed in $3.5 billion.

It has no real assets to speak of as all the cars that collect Uber’s passengers are owned (and maintained) by the drivers themselves who are all naturally self-employed so saving on things like employers’ National Insurance contributions, healthcare, holidays and staff development costs. You know, the costs that old-fashioned companies still pay?

We’re not disputing that Uber is a very successful company. It has an estimated 41 billion users in the US alone where it has now grabbed over 70% of the market share. And its now achieving similar sized market shares in countries right around the world too. And why? Well, because it offers a very cool service that clearly answers lots of people’s travel requirements. So perhaps it is worth its $120 billion price tag. Just don’t tell all those CEOs who work so hard to build up their companies that employ people and make things; like a profit.

 

 

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