February 7, 2020
As we end the week, let's take a look at the state of the big "disruptors" following Uber's earnings report yesterday.
It was a little less than a year ago that Lyft IPO'd. And Uber went public about a month later. Based on the first day trading of Lyft and the early indications on how Uber would be priced, the ride sharing industry was being valued at an absurd 14 times the size of the traditional rental car industry. As I said last year, "Lyft and Uber, dumping shares on the public at a combined $140 billion plus valuation, may mark the end to the Silicon Valley boom cycle."
When Lyft went public, Silicon Valley VCs were dumping a company on the public that was doing $2 billion in revenue and losing $1 billion. Today the company does $3.5 billion and losses $2.6 billion.
When Uber went public it was doing $11 billion in revenue, and losing $4.2 billion. Now it does $13 billion in revenue and loses $8.7 billion.
In both cases (Lyft and Uber) we had over-hyped "hyper-growth" companies with slowing revenue growth and widening losses. Now, less than a year later, the growth continues to slow and the losses continue to widen, and the two companies are worth $85 billion, not $140 billion — in a stock market sitting near record highs.
The era of paying $1.60 for a dollar of revenue, and then turning back to Silicon Valley for another injection of cash is over.
The question is, will Wall Street pick up where Silicon Valley left off, funding business models (the "disruptors) that are monopoly hunting/designed to destroy the competition with predatorial pricing? Unlikely. More unlikely: Washington allowing it to happen.