Valuation of the Week #1: Narrative and Numbers

In this week's valuation, I try to illustrate the importance of narrative in valuation, using Uber as my example. In particular, as Uber's profile and estimated value (based on VC investments) soars, it is worth asking what the company's value is and what that value depends on.

The place to begin this journey is with this blog post that I had on Uber in December, where I looked at the different narratives (stories) you can tell about how Uber will evolve over time. Thus, the post starts with the fundamental question of what type of business you believe Uber is in, with your choices ranging from urban car service (taxicabs and limo services) to transportation (where Uber becomes an alternative to buying a car), thus determining your total market potential. It then moves on to questions about whether Uber has a local or a global network benefit (which determines the market share that you use in the valuation), how strong and sustainable its competitive advantages are (which determine margins) and what you think the chances are that the company will not make it. The spreadsheet that is attached to the post takes your choices and converts them into a value for Uber.

As you go through this process, there are two fundamental problems that you will have to face and overcome. The first is that as a private business, information on Uber is hard to come by, with only snippets and rumors filling in the void. The second is that almost every week brings a a news story that could affect your narrative for Uber and by extension, its value. I have prepared a list of news stories, and while it is long, it is definitiely not comprehensive or complete.

Once you are done with your narrative choices and come up with a value for Uber, please do go into the Google shared spreadsheet that is also linked to in the post and enter your estimated value for Uber.

Blog Posts

1. My initial post on Uber's value (June 9,2014)
2. My "build your own valuation" of Uber post (December 2014)

News Stories (My curated list)
Operating News

1. Indian woman sues Uber over driver rape allegations
2. California Labor Commissioner rules Uber drivers are employees, not contractors
3. New York city backs down against Uber
4. Shanghai's car sharing service seen as benefiting Uber
5. Uber backlash in London, Paris, Berlin and rest of the world.
6. Uber launches food delivery service (UberEats) and moving service
7. Uber's leaked financials look ugly (August 2015)
8. Uber's leaked financials look great (August 2015)

Valuation/Pricing News

1. Carl Icahn announces investment in Lyft
2. Lyft's forecasts for 2015 and beyond
3. Didi Kuaidi raises $2 billion, has $15 billion value

Spreadsheets

1. Build you own valuation spreadsheet
2. Google Shared Spreadsheet