Uber Valuation

The valuation is defensible:

$2 billion in rides, $400 million in net revenues, so valued at 45X revenues, in line with valuations of AirBNB, Dropbox, etc.

Even if you think that’s a bad comparison because there is a general bubble out there, it’s doubling every 6 months (so 400% growth every year), so the valuation seems defensible on its own terms.  i.e., if you hold valuation stable, in a year, revenues would be $1.6 billion and it would be trading at a mere 11X revenues.

It could be a bust investment — but in vc the game is that most of your investments will be bust, salvaged by the few winners — but doesn’t seem to be a crazy investment.  My guess is that the Fidelity types led the investment because they have lower return expectations than a late-stage VC shop.
Let’s all get back to work building our companies.


How to Scale?

Uber, from BusinessWeek interview with Travis Kalanick:

In April you announced Uber Rush, a package delivery service in Manhattan. Are you considering expanding it?

That is going really well. It’s super-young, only a month or two old. It’s almost like I’m talking about an infant. But the growth of Uber Rush in New York is far greater than what the original Uber service was in San Francisco at the same age. There are still some things we want to do on product and operations. We want to get that playbook down. We did a year of Uber in San Francisco before we went to a second city. You get those processes down, then you really get started.

Fragility and Finite Games

The concepts of anti-fragility (Nassim Taleb) and infinite games (James Carse) seem related.  Your choices should ensure the continuity of play, rather than “winning” at expense of continuity of play.  Because the future is so unpredictable and object change, aiming only to win, might end up making you more fragile.   Some quotes from Carse:

“There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.”

“Finite players play within boundaries; infinite players play with boundaries.”

“Finite players are serious; infinite players are playful.”

“Finite players win titles; infinite players have nothing but their names.”

“Infinite players do not oppose the actions of others, but initiate actions of their own in such a way that others will play by initiating their own.”

The Right To Be Forgotten

I’ve noted before that “short memories” and “starting over” may have some fundamental connection to humanity at least how it has developed to date by quoting the following Nietzsche quote:

“Without forgetting it is quite impossible to live at all.”

We have under-thought this in many ways.  See here, herehere, and here.

In many areas, when people fail to proactively think through policy, the courts get ahead of them.  In that vein, the European Court of Justice issued a huge decision yesterday saying:

“If, following a search made on the basis of a person’s name, the list of results displays a link to a web page which contains information on the person in question, that data subject may approach the operator directly and, where the operator does not grant his request, bring the matter before the competent authorities in order to obtain, under certain conditions, the removal of that link from the list of results…”

“An Internet search engine operator is responsible for the processing that it carries out of personal data which appear on web pages published by third parties,”



A classic Andreessen post.  Although he acknowledges it raises many more questions that it does not answer, it’s very useful as to defining what questions are most important as a priority:

Product/market fit means being in a good market with a product that can satisfy that market.

You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.

And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.

Lots of startups fail before product/market fit ever happens.

My contention, in fact, is that they fail because they never get to product/market fit.

Carried a step further, I believe that the life of any startup can be divided into two parts: before product/market fit (call this “BPMF”) and after product/market fit (“APMF”).

When you are BPMF, focus obsessively on getting to product/market fit.

Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.

When you get right down to it, you can ignore almost everything else.

I’m not suggesting that you do ignore everything else — just that judging from what I’ve seen in successful startups, you can.


Full copy of the post is archived here by a Stanford EE class.

Formula, Not Spreadsheets

Andreessen Tweet Stream: 4/16/14

1/A few common fallacies about valuation of public and private technology companies:

2/First, ask any MBA how to value tech companies, she’ll say “discounted cash flow, just like any other company”

3/Problem: For new & rapidly growing tech co’s, up to 100% of value is in terminal value 10+ years out, so DCF framework collapses.

4/You can run as many DCF spreadsheets as you want and may get nothing that will help you make good tech investment decisions.

5/Related to fact that tech co’s don’t have stable products like soup or brick companies; future cash flows will come from future products.

6/Instead, smart tech investor thinks about: A future product roadmap/opp’y, B bottoms-up market size & growth, C talent and skill of team.

7/Essentially you are valuing things that have not yet happened, and the likelihood of the CEO and team being able to make them happen.

8/Finance people find this appalling, but investors who do this well can make a lot of money, but spreadsheet investing is often disastrous.

9/Doesn’t mean cash flow doesn’t matter, in fact opposite: this is the path to find tech companies that will generate tons of future cash.

10/Corollary: For tech companies, current cash flow is usually useless for forecasting future cash flow–lagging not leading indicator.

11/This trips up value investors (Prem Watsa!) all the time; tech companies with high cash flows often about to fall off a cliff.

12/Because current cash flows are based on past products not future products. And profitability often breeds complacence and bureaucracy.

13/Always, always, always, the substance is what matters: WHO and WHAT. WHO’s building the products, and WHAT products are they building.

14/Brand will not save you, marketing will not save you, channels will not save you, account control will not save you. It’s the products.

15/Which goes right back to the start: Who are the people, what are the products, and how big is the market. That’s the formula.

Turning The Tide

From Barron’s:

THE GAME CHANGERS on the supply side are the three new types of oil production that have not been counted as part of the oil supply until recently: deepwater oil, shale oil, and oil sands. Each of these sources of oil has been estimated at more than 300 billion barrels, totaling more than one trillion barrels in all. That’s a huge addition to previously estimated reserves of some 1.5 trillion barrels. According to Citigroup energy analyst Eric Lee, a good proportion of the extra trillion barrels could be recoverable at $75 a barrel or less. In fact, he notes that a $75 cost estimate could even be on the high side, as production costs for shale and even deepwater can continue to fall over time.

Business 2.0 2001

Instant Cliques
February 06, 2001
Business 2.0

Jessica M. Scully

Eight years after moving to San Francisco, Alexandria Ducheneaux still sometimes feels socially isolated. “You go to a bar, and everybody is in their own social circles,” says the 30-year-old acupuncturist. “Everybody in the city goes out for lunch on [their] own,” she says. “You look around and you never know anybody.”

Ducheneaux is one of more than 1,000 people who have joinedfreefor, a Website that offers to help people meet one another nationwide. Neither a dating service nor just a virtual community, freefor helps people with similar interests living in the same area link up via the Web, then meet in person for lunch, hiking, biking, book reading, or other activities.

Four friends from Harvard Law School hatched the idea after scattering to separate internship assignments in New York, San Francisco, and Washington, D.C. They thought they could use the Internet to meet new people and help those people meet one another. “A group of us who founded the company were thinking about how rich Internet action was, but as that increased the real-world connection decreased,” says Shahed Amanullah, freefor’s CEO.

His words echo research conducted during the past several years linking time spent on the Web to a decline in face-to-face “real-life” interactions. About a quarter of people who spend five or more hours per week online say they spent less time with family and friends as a result, according to a study by the Stanford Institute for the Quantitative Study of Society.

The situation could get worse, Amanullah says, as Web shopping further erodes people’s chances for serendipitous interactions at book stores, libraries, even grocery stores. So the company’s founders say they simply want to move these chance meetings online as well.

New freefor members fill out a questionnaire on the site regarding their hobbies, interests, and experience level at each. Once registered, they can suggest an activity–say, a game of tennis or a hike. Then the site matches all members likely to be interested in that activity, and emails them a link to a password-protected page where they can post messages to one another to work out details.

Amanullah stresses that freefor is not a dating service; activities require a minimum of three people. And unlike patrons of dating sites, freefor users can’t search for partners based on age, gender, or physical characteristics. “If you’re going to see a movie, and you have the same interests, what does it matter if there’s an 80-year-old grandmother and a teenager?” he says.

Still, who’s to stop romance from crossing a member’s mind? Wendy Lingo of San Jose, Calif., was searching for a beau when she first signed up. But even though the 31-year-old corporate accounts manager met her current boyfriend in a park, she says she still uses freefor to network and to meet new friends. The best thing about freefor, she says, is that it’s a casual, stress-free way to meet people. No photos or vital statistics are required.

Daniel Cravens of Albany, Calif., says freefor events help him indulge his interest in the arts, politics, and history. The 32-year-old lawyer, who recently graduated from Boalt Hall at the University of California at Berkeley, says the “real world” can be a lonely place. “In school, there’s kind of an assumption that everyone’s willing to talk with you,” he says. But in San Francisco’s financial district, where he works, “I don’t necessarily feel that I can be at lunch and just start talking to people sitting at the table next to me.”

Despite raves from users, freefor has a long way to go before reaching a critical mass of members nationwide. The site has been operating only since August, and events have been lunches, mostly in and around San Francisco, the company’s launch pad. The site’s creators are in talks with Internet service providers, wireless companies, and several other large organizations to see if they’ll pay to make the service available to their employees or customers, Amanullah says.

So, if that tennis racket has been sitting idle in your closet, or if you’ve been dying to discuss your favorite sci-fi novel with someone, log on. A whole new social life could be freefor the clicking.

Evolution to FreeFor

Fast Forward: Buddy Listings
by Anthony Zurcher
Washington Post
October 13, 2000

“If your golfing buddy just moved across country or you can’t find anyone to go to the movies with, maybe you should look to your computer instead. That is, by using it, go online and find people with similar interests. Many sites try to do this, but Freefor is one of the more flexible and user-friendly. After joining, you answer a handful of personality questions and sign up for activities that interest you–sports, books, dining and so on. Then, whenever someone with a similar personality organizes an event in your area, you’re automatically invited; you can also plan events of your own. Throughout, personal information is kept confidential; users communicate only through the site instead of via direct e-mail or phone. Note that Freefor emphasizes group social life over pairing off; it’s not a dating service and sets up only more-than-two-person events.”


Students Launch Web Networking Service
By Klaus Hamm
Harvard Law Record
Friday, April 30, 1999

For Samir Bukhari ’99, working at a New York City law firm last summer
was a bit like the visit Ebenezer Scrooge once received from the ghost
of Christmas future.

Seeing lawyers working under so much pressure and in such an alienating
environment that it strained their personal lives, Bukhari saw a vision
of what he did not want to become. And like Scrooge, Bukhari has
decided to do something about it.

His answer is freeforlunch.com – a Web site founded by Bukhari and three
classmates at HLS. Designed to link professionals with similar
interstes, the third-year students see the often informal culture of
e-mail as a way to make the corporate world they are about to enter a
more pleasant place.

“The idea is to give professionals a flexible tool to join communities
where none existed.” Bukhari said.

Schedule to launch at the end of May, freeforlunch.com will ask users to
describe their personal and professional interests and to select
preferences. The Web will use matching technology to find
similar-minded people and then send the professionals and e-mail
notifying them that there people are free for lunch. From there, making
the contact is up to the professionals.

It may sound like a computer-assisted dating service, but Bukhari
insists the service is designed to focus on professional connections,
rather than purely personal ones.

Generally, the question we’re most frequently asked is whether or not
this is just a dating service and the answer to that is absolutely not,”
he said.

Eventually, the four founders hope the Web site will take on a life of
its own and become a center for various professional communities.
Co-founder Paul Oostburg Sanz ’99 sees it as a way for minorities to
increase their Web presence and build professional communities more
easily. The third-year students also envision the service fertilizing
cross-professional connections, for example linking lawyers with

The overarching vision, though, will be to combat workplace alienation
and isolation, a phenomenon co-founder Ketan Jhaveri ’99 noticed soon
after starting work as a summer associate last year.

“As soon as you walked into a law firm, you communicated very, very
differently with the same people,” he said. “There was something not
very personal and inhumane about it. There’s something very dishonest
about it.”

In the face of this environment, Jhaveri and Bukhari found their e-mail
communcations taking on the qualities their professional communications

“We realized that one way a lot of us tended to communicate with each
other was through e-mail,” Bukhari said. “In fact, people’s e-mail
lives were really bursting with the richness of new acquaintances.”

“We think people just talk different on e-mail then they do in the
office,” Jhaveri said.

This realization, of course, led to the creation of freeforlunch.com.
The goal is to have the liveliness of e-mail communications cross over
into real life communciations.

Each of the four students has made a small investment in the service.
To help with the technical aspects, they have engaged a programmer and a
Web site designer, both from California. The service will be free, and
although they haven’t ruled out eventually seeking venture capital, the
third-year studetns say their goal is not to crete a money-making

“Our guiding philosophy has been that the relationships in the office
need to be transformed, and we want to replace this sterility, we call
it boardroom sterility, into lunch-room civility,” Bukhari said.

Available May 24th.