Uber’s $41bn Valuation: What?

Let’s face it: Uber – the seemingly ubiquitous on-demand taxi company- is killing it.  Their most recent round of financing brings them to a lofty valuation of $41bn.  Back in the summer when the company garned a then lofty $18bn round, noted valuation guru Professor Damodaran suggested a valuation in the $6bn range.

So what has happened since then?  How do we have a company that, over the course of 6 months, is valued at $6bn and then $41bn?  Well now that is a fantastic question.   Without geeking out over valuation concepts, let’s just through out a few items:

  • We lack insight.  The company is not publicly traded, and deep information on the company’s operations, plans, and performance is thin.  The VC’s investing at these steep valuations surely have much deeper insights into these items.  We’re pretty sure they aren’t investing these sums on a lark.
  • The company has changed.  The company has taken in massive amounts of capital, and in turn has aggressively expanded its presence both in the US and abroad.  As the addressable market grows, and market penetration grows, so does valuation.
  •  Misunderstanding the Narrative.  Damodaran published a great follow up piece that speaks to how narrative impacts value.  Definitely worth a read.

Uber remains a fascinating study of young company valuation.  It’s managed explosive growth in a very short period of time.  You can bet we’re going to keep talking about this one.