Are IPO’s the new Ponzi Scheme?

💸 🎣 Since Uber became a public company in May of this year, they have to report their quarterly numbers. In the last Q2, they reported an insane loss of 5.2 Billion Dollar 😳! On the other hand, they have an average of 17 million trips a day and an expected total turnover of $59 billion for 2019.

According to their CEO Dara Khosrowshahi, the total addressable market for Uber is $12 Trillion, which is 15% of all Global economic activity ($80 trillion). Would it really be possible for 1 company to take such a giant piece of the global economic pie? 

Len Sherman, adjunct professor of business at Columbia University states that none of the ride-sharing companies around the world can articulate a path to profitability. “Along with Lyft, Uber will be able to sustain itself without posting a profit for as long as the capital markets remains confident in the companies’ predictions about the future”. 

This sounds crazy to me, as long as interest rates are low and people have no clue where to put their money, the capital market can keep fueling these beautiful, crazy and ambitious dreams. But in the end the only ones who actually see money in the bank are founders, early employees and VC’s.
The same kind of system, appears to be happening at WeWork

“When applying our average revenue per WeWork membership for the six months ended June 30, 2019 to our potential member population of 149 million people in our existing 111 cities, we estimate an addressable market opportunity of $945 billion. Among our total potential member population of approximately 255 million people across our 280 target cities globally, we estimate an addressable market opportunity of $1.6 trillion”. Hahahahaha, this makes my WSJF’s calculations seem a lot less crazy! 

Ben Thompson from Stratechery: “Did you catch that? WeWork is claiming nearly every desk job around the globe as its market, a move that by definition means moving beyond being a real estate company”.[ ] “Everything taken together hints at a completely unaccountable executive looting a company that is running as quickly as it can from massive losses that may very well be fatal whenever the next recession hits”.

I might be old-fashioned or maybe even naive. But I prefer a company like Foursquare, who spend the past 10 years figuring out how to turn their technology into a profitable business. So I was really happy to read that Foursquare is is reporting to surpass the 100 Million revenue this year with a team of 350 people. Such of good job of perseverance and actual love for your product! 

Exiting times ahead! I just hope that the crazy – and beautiful – dreams of Uber, WeWork, Peleton and the rest are not leading us into the next tech bubble!