A few days ago I have talked about Uber, their massive VC round at $18 Billion valuation level and what that means. Yesterday, the fools at The New York Times have argued…. “Why Uber Might Well Be Worth $18 Billion”
Think about the basic math. There are a lot of numbers floating around about the global revenue for taxis, but here are the basics: In the United States, the taxi business generates $11 billion annually, according to IBISWorld.
In big cities like New York and London, The Financial Times reports that the average person spends $238 a year on taxis. If you extrapolate that Uber could one day control a quarter of the current global taxi market, the investment would turn out to be a home run. The business is currently in 128 cities in 37 countries and says it is doubling its revenue every six months. (TechCrunch reported Uber’s revenue last year was $213 million on more than $1 billion of bookings; Uber takes a 20 percent cut of all driver’s receipts.)
This is the basic rationale of all start ups and idiot investors who believe them. “If we only get 2% of the market we will make a Trillion Dollars”. Unfortunately, I have never seen this pipe in the sky dream come to a fruition. So, why is Uber, a company with $213 Million in revenue and net losses is valued at more than Hertz Global Holdings Inc, Best Buy Co, Alcoa or another 250 companies on the S&P 500 index?
Let me tell you why. Because we are in a massive financial and speculative bubble reminiscent of the 2000 and 2007 tops.Venture Capital and the stock market tend to sync up for the most part and the excesses (or absolute insanity) you are seeing in terms of Uber valuation levels are the direct result of the massive bubble in the stock market. Let’s just not pretend or hope, we all know what happens next.
What You Ought To Know About Today’s Massive Financial Bubble Google