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What's going on?
On Friday, Uber took an unusual step for a private company: it publicly disclosed its financial results (tweet this). So everyone got a peek at the companys significant revenue growth and cash burn!
What does this mean?
Uber lost almost $3 billion in 2016, a huge amount even for a company most recently valued at $68 billion. Meanwhile, gross revenue from bookings more than doubled in 2016 versus 2015. Uber says its revenue growth is outpacing the increase in its losses, which would suggest that the company is moving, albeit slowly, towards becoming profitable.
Why should I care?
The bigger picture: Uber encapsulates the current startup era perhaps more than any other company.
Founded just eight years ago, Uber is now the worlds most valuable private tech company. It operates in more than 70 countries and reported revenues of over $6 billion in 2016. Yet, it loses billions each year staggering losses even in comparison to other tech firms that have gone on to become profit behemoths (e.g. it lost more last year than Amazon ever has in a year). We are perhaps either witnessing one of the greatest examples of investment-driven development of a company or a prime example of a private-market funded bubble.
For the markets: Its tougher for public market investors to find early stage growth companies.
High growth, highly valued tech startups that remain private, like Uber and Airbnb, represent somewhat of a problem for traditional public market investors. These companies can raise so much money in private markets that they are far less incentivized to go public than similar companies in previous decades. That makes it harder, although not impossible, for public investors to find high growth opportunities.
Originally posted as part of the Finimize daily email.
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