What will happen to Uber?

I found the following in my notes app from last October when Uber’s pre-IPO proposed valuation was announced to be $120 billion.

“Is Uber actually worth $120 billion?

Uber will be obsolete if they fail to successfully build out their self-driving fleet.

Google’s Waymo and similar self-driving fleets, such as Apple’s Project Titan, that are nearly to the point of level 5 automation will not necessarily need Uber’s platform to run their business model.

Google and Apple operating systems will create their own apps that implement their respective driving technologies through their own platforms, thus eventually replacing the key advantage Uber currently holds: its network of drivers.”

I’ll admit, my hot take seems preposterous in hindsight, but could it be possible that Uber itself is not the only company that could do what they’ve been doing?

Now, I know, I know, a lot of people will say, “Yes, but other companies don’t have that influx of capital that Uber has from investors.” Uber raised $24.7 billion over the course of their life as a private company. I would argue that this large amount of capital so generously received from venture capital investors at an upward valuation of $72B by late 2018 was absurd.

Well, since then, I have continued to be proven wrong as investors continue to pour in cash, and — though Uber is now public — private markets are continually making me question the real value of a public offering. Why go public — where you have to file quarterly reports, you’re under constant scrutiny from regulators and the media, and you have no idea what traders will do and how your stock will perform — when you can now effectively raise just as much (and in many cases, more) cash in private markets? I can’t decide whether this phenomenon is just a symptom of the economy being “late in the cycle” and sort of just stalling here, or if this private market party is something completely unprecedented that we haven’t seen in the history of financial markets. Only time will tell, I suppose, but I digress.

Returning to Uber, though. What secret sauce does Uber have that makes them so much more valuable than another ride-sharing platform like Lyft? First-mover’s advantage? While Lyft actually came around first, it was more of a side-project for Zimride (a college car commuting idea between Logan Zimmer and John Green). What Uber had were two rock-star founders of Travis Kalanick and Garrett Camp who quickly realized the business potential and had a real plan to take their product to market, allowing them to surpass the incumbent Lyft.

So, if Uber was founded only 10 years ago, and it took them a matter of months before their app was a necessity among the public, what will the next 10 years look like? Where will this insane amount of growth come from that is being priced into its valuation? The truth is that its growth is already slowing. Uber has been telling investors these stories behind UberEats, the self driving unit, scooters, bikes, and Dara’s vision to become “the Amazon of transportation.”

In reality, Uber Eats is struggling against rivals like DoorDash and Postmates, who specialize and aren’t spread across a larger corporation with several different verticals. The scooters and bikes are facing not only increased regulation, but a wave of competitors entering the market. The self-driving unit is battling with accidents and lagging behind larger, more powerful tech companies with gobs of capital that Uber cannot compete with (we need not forget that Apple has over $200 billion in cash sitting around). All the while, Uber’s management is still in the process of trying to remove the stain Travis Kalanick left on its culture, and the drivers are excessively underpaid.

What is stopping Apple, Google, or Amazon from building out their own ride-sharing platform if they beat Uber to market with a self-driving car? If first-mover’s advantage is what got Uber to the level they’ve reached, it might just be first-mover’s advantage from the self-driving space that — albeit potentially more than 10 years from now — leads to a dramatic shift in the company’s prospects.

To their credit, they have surprised people and pulled off miracles to reach the point they are currently at. I am not suggesting that Uber will fail. After all, they have become an essential part of our everyday lives. What’s more is that through effective marketing, they’ve positioned themselves as a sleek, almost luxury brand that is a borderline necessity for many. However, I would not be surprised if, in the next 5 years or so, the company faces a situation where the business is struggling (whether that be slowness to adapt the self-driving unit, regulation, driver pay requirements, etc.) and they may just be ripe for an acquisition from one of the largest tech companies in the world (Apple? Google?).

On the other hand, this could just be another hot take, and as long as investors continue to believe in the long-term story and vision of Uber, they will continue to subsidize the losses and Uber will never run out of cash. At the current rate, this second scenario seems more likely.

Until then, I’m interested to see where this company goes and how they continue to finance their growing operations.