It is late (for me) on a Sunday night and my Monday is packed, so I’m going to forego some sleep and quickly jot down my thoughts and reactions to the news that Uber is leaving China, taking investment from its Chinese rival, Didi, and taking a 20% ownership stake in the combined Didi-Uber China entity. There’s no way for me to cover every angle of this and I’m half-asleep, so please forgive the short burst of thoughts — tracking a company like Uber may require a full-time staff! I’m glad I didn’t go through with the book — Uber writes a new chapter every month:
1/ Cutting Uber’s Burn Rate: It’s an open secret that Uber burns a lot of cash, way too much for public market investors to stomach. Because it’s market opportunity is so large (transportation, logistics, applications), they can curry investment favor from strategics, nations, and consortiums. One wonders how much cash Uber had to spend to compete in China, arguably the fiercest market in the world. Now Uber can conserve the cash on its balance sheet (see below) and direct that cash toward other things.
2/ In Land War, China Is The Prize: There was probably little to no chance for Uber to survive in a market like China’s, for a host of reasons. Nevertheless, it competed with strength, but as the belts tightened and as the cap table for each company became more strategic (cough cough, Apple invests in Didi a few months ago, perhaps to position itself against Uber if needed?), the end-game was near. As an exit, 20% of that combined entity feels like a steal for Uber, as China’s massive population and growth rate are unparalleled. (Uber, which may go public one days — will need a clear story to tell The Street. Not all of Uber’s experiments will work out in the end, but they’re trying so many and doing well with them, demonstrating this discipline will win points down the road as Uber undoubtedly will get more focused.)
3/ Scale and Scope of Uber’s Geographic Ambition: We should pause and stand in awe of Uber’s pace of execution and the scope of its ambition to even go into China. Incredible.
4/ Uberducken Alliances: Can anyone follow which major tech companies have invested in Didi or Uber or Lyft, or all of them? Or can anyone track all the allegiances, treaties, in-app cross-promotions, etc. between companies like Apple, Tencent, Didi, and Lyft, and others? I cannot and will not even try. It’s like one big Turducken.
5/ Uber Can Now Focus Up The Stack: Ok, so Uber won’t own China outright. That was likely never possible. Now as it presumably preserves some cash, it can apply those resources to technologies “up the stack” for a world in which your Ubers are autonomous — that could be pods or cars, sensors, robotics, mapping technologies, deep learning, and a host of other requirements to make a fully-integrated self-driving network a reality. With 80% of each fare you pay going to your driver, the company has a huge incentive to bite into that for its next big meal.