Such funds are now seeing spectacular falls in their portfolio valuation. This madcap expansion was accelerated by funding provided by a new class of non-traditional, or tourist, investors, including Masayoshi Son’s SoftBank and “crossover” hedge funds such as Tiger Global. With capital becoming a commodity, it made sense for opportunistic companies such as Uber to grab as much cash as VC firms would give them to “blitzscale” their way to market domination.
There is certainly a strong argument that the extraordinary boom in tech stocks over the past decade was largely fueled by the unprecedented low-interest-rate policies in response to the global financial crisis of 2008. Has the speculative froth just been blown off the top of the market? Or have the rules of the game fundamentally changed for those venture capital-backed start-ups trying to emulate Uber? My bet is on the latter, but that may be no bad thing. Its belated conversion to financial orthodoxy shows how much markets have been transformed since the turn in the interest rate cycle and the crash of the tech-heavy Nasdaq market, which has dropped 26 percent this year.Īs ever, when bubbles burst, it is hard to distinguish between temporary adjustment and permanent change, between the cyclical downturn and the secular trend. Founded in 2009, the company floated a decade later at a valuation of $76 billion without recording a single quarter of profits. No company has been more emblematic of the long, crazy, capital-doped bull market in technology stocks than Uber. “We are serving multitrillion-dollar markets, but market size is irrelevant if it doesn’t translate into profit,” he wrote.įor the boss of Uber to be trumpeting cash flow and profit would once have seemed about as likely as Elon Musk shouting about the benefits of personal humility and petrol-fueled cars. Mangling his metaphors, Khosrowshahi explained that the market was experiencing a “seismic shift” and the “goalposts have changed.” The ride-hailing and food delivery company’s priority must now be to generate free cash flow.
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Following a series of “super clarifying” meetings with shareholders, Uber’s chief executive, Dara Khosrowshahi, emailed employees on Sunday night with an arresting message: “we need to show them the money.”
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