In case you haven’t seen the news, Uber just raised a private round of $1.2 billion ($1.4 billion after a secondary round) at a post-money valuation north of $18 billion (can someone explain the difference between pre and post-money to the Huffington Post, please?).
That’s insane. A valuation bubble inside the Silicon Valley bubble. The Uber Bubble.
Don’t get me wrong. I love Uber, even though the German in me cringes every time I see the spelling (it should really be Über with an Umlaut, people, how much cooler would that be?) Despite the butchering of the spelling, I use the service whenever I can. I am tired of dirty cabs, drivers who have no idea where they are going, or who don’t care about providing a pleasant service experience. And yes, SFO airport authorities, that includes rides to and from the airport, even though you want to keep Uber out at all cost, it seems. My last ride after a long flight was in a Mercedes S-Class with wet towels and cold water provided. Sweet!
But, is this company that has nothing but an App that hails a driver worth $18 billion? Hardly. I cannot see how the company at present can go public at this valuation, and not many companies have the balance sheet to afford buying them at this or an even higher price (presumably, the investors in this round want to make some money, too).
The Wall Street Journal lists the startup companies that were valued north of $1 billion in their “Billion Dollar Startup Club” graphic. It’s an impressive and long list. Too long.
So, in my mind, there is a valuation bubble here in the bubble that is Silicon Valley. I don’t think that the implosion that is going to come will be as bad as during the first Internet bubble, but there will be pain down the road. There already is today, as some areas of Silicon Valley have become completely unaffordable. And I am pretty sure that there are entrepreneurs out there with great ideas that cannot get funded because insanely large amounts go into these mega deals. As long as these club deals exist (the investors in this round are not officially known yet), it will only get worse before it gets better.