Article

Students at Le Web 2014
Students at Le Web 2014 10 December 2014
Categories

Is Fundraising Becoming The New National Game Of Web Startups?

As seen at Le Web 2014, companies such as Uber are being valued at millions of dollars. Is this viable and can other startups expect the same evaluation?

At LeWeb 2008, Travis Kalanick got stuck in the streets of Paris because of exceptional snow. Looking desperately for a taxi, he thought about using his cellphone to get one quickly. Uber was born!

Eight years later, the success of Uber has created a snowball effect in the web startup field. For the first session of LeWeb 2014, Fred Wilson, the influent managing partner of Union Square Ventures, has been asked about the astronomical expecting valuation of Uber.

Read more on Digital Doughnut

After having raised 1.2 billion dollars in summer, to reach a global valuation of 18,2 billion dollars, Uber is going back to investors at the end of this year and the experts consider that it’s IPO, expected in a couple of years will propel Uber at a 40 - 100 billion dollar valuation. 

 

Uber is not an exception in this sector. A few hours later on the same stage, Peter Pham was sharing his 200 million dollar fundraising experience. Those dizzying numbers have become part of the every day life of entrepreneurs and venture capitalists in the Silicon Valley and worldwide.

Seen from the outside, that looks like a new technological bubble. An overvaluation mechanism that might end up with a big collapse and important losses.

But listening to Fred Wilson this potential valuation is not crazy. In fact, looking at the economic reputation, the revenues of Uber, the business model and the evolution perspectives of the service, a wise investor could legitimately invest money in Uber.

Looking at the figures, Uber might generate a 10 billion dollar revenue at the end of the year. About 20% of this turnover will be captured by the company, the 80% goes to the drivers. If we consider the fact that their charges are quite limited, the benefits are still high and the profitability of the company should be maintained for years. That give us a careful ratio of 1 to 20 between the annual company revenue (2 billion dollars) and the low expected stock valuation (40 billion dollars).

At this point the investor can bet on the fact that the revenu will increase and the profitability will continue for 20 years. The 1 to 20 ratio seems rational!

Fred Wilson ended his intervention about viral valorisation by adding that we are not facing a frightening technological bubble, but the valuation system should evolve, taking in account the exceptional performance of the sector at the moment.

Follow @Studentsatleweb to get live updates from Le Web 2014 with brilliant content from student bloggers on www.studentsatleweb.com

 

Please login or register to add a comment.

Contribute Now!

Loving our articles? Do you have an insightful post that you want to shout about? Well, you've come to the right place! We are always looking for fresh Doughnuts to be a part of our community.

Popular Articles

See all
7 Things Every Company Website Should Include

7 Things Every Company Website Should Include

What elements to include in your company website? This is the first question you should ask yourself before you start designing the site. We’ve shortlisted the following essential elements every business website must have to effectively engage with customers.

simon walker
simon walker 20 February 2017
Read more
Digital Marketing Vs. Traditional Marketing: Which One Is Better?

Digital Marketing Vs. Traditional Marketing: Which One Is Better?

What's the difference between digital marketing and traditional marketing, and why does it matter? The answers may surprise you.

Julie Cave
Julie Cave 14 July 2016
Read more
4 Important Digital Marketing Channels You Should Know About

4 Important Digital Marketing Channels You Should Know About

It goes without saying that a company can't do without digital marketing in today's world.

Digital Doughnut Contributor
Digital Doughnut Contributor 5 November 2014
Read more
Designing The Data Management Infrastructure Of Tomorrow

Designing The Data Management Infrastructure Of Tomorrow

Today, more than ever before, organisations realise the strategic importance of data and consider it to be a corporate asset that must be managed and protected just like any other asset.

Ronald van Loon
Ronald van Loon 22 February 2017
Read more
10 Awesome Examples of Great Referral Programs—That Rock.

10 Awesome Examples of Great Referral Programs—That Rock.

Referrals are increasingly forming part of a successful marketers' toolbox. But what constitutes a truly successful referral program? We took a closer look at some of our favourites.

Angela Southall
Angela Southall 17 February 2017
Read more