Uber’s float is a huge gamble on the future of transport
Every time you jump into an Uber, your ride is essentially subsidised by venture capitalists who prop up the loss-making outfit in the hope of riches down the road.
Later today in New York, many more hopefuls will get the chance to back the immensely-popular-yet-controversial tech firm when it finally comes to market.
Similarly to its smaller rival Lyft, Uber’s business model and valuation leans on two expectations: firstly, that new technologies such as driverless cars will slash costs and revolutionise urban transport; secondly, that the companies in question will have sufficiently dominant market positions to take advantage of these futuristic developments.
This is not a mere pipe-dream. Great progress has already been made in the field of automated, clean vehicles, and Uber’s expansion into cities across the globe – not to mention its attainment of a key place in the modern lexicon – has been phenomenal. Its potential is enormously exciting, hence rumours of valuations in excess of $100bn (£77bn) doing the rounds of late.
However the warning signs are numerous, not least as Uber’s final valuation has come in at just $82.4bn. The future of transport, especially on our roads, is fiercely competitive and prone to a range of uncertainties surrounding infrastructure, regulation, technological capabilities and consumer preferences.
Meanwhile, electric and driverless car technology continues to attract a large number of companies from various sectors, such as Dyson, which revealed patents for a new electric car this week. Who is to say which firms will prove most successful in this intriguing but uncertain space?
Earlier this week, Warren Buffett was in sage-worthy form when commenting on hyped flotations. “The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that it’s going to be better than 1,000 other things I could buy where there is no similar enthusiasm… just doesn’t make any sense,” Buffett told CNBC.
Amazon proved that the loss-making model of rapid expansion can work. Facebook proved that big tech floats can deliver exceptional returns. But there are a string of examples, including Lyft, in which such endeavours splutter to a halt.
A punt on Uber represents a bold gamble, not just on the company’s management, but on how the future of transport will look.