Uber, Airbnb, and Lyft valuations immune to market deflation

Ronny Kerr · January 22, 2016 · Short URL: https://vator.tv/n/42d6

Amid a souring financial market, the biggest tech unicorns manage to maintain the hype

The past couple years have been incredibly rich times for the technology industry.

In 2014 and 2015, $126 billion in venture capital was raised by U.S. startups across over 8,000 deals—the highest dollar volume for any two-year period, according to Dow Jones VentureSource data going back to 2009. Raising money was easy and receiving monster valuations were easy to come by.

In the last quarter of 2015, however, we witnessed a deflation of the market, with an 11 percent drop in capital raised and a four percent drop in number of deals compared to the quarter prior. Every other year from 2009 to 2013 demonstrates the opposite: the fourth quarter sees more financings than the third.

Moreover, the overall market has soured.

The Dow Jones Industrial average has plummeted 9.3 percent from its 52-week high of 18,351.36 points (on May 19, 2015), and is down 8.9 percent for the year. The NASDAQ, home to many publicly-traded tech stocks, is down 3.5 percent from its 52-week high of 5,231.94 points (on July 20, 2015), and is down 10.7 percent for the year. Oil prices are down 28 percent this year. Public tech companies from the social media wave—Facebook and Twitter—are down 10 percent and 23 percent this year, respectively. Shares of public-market darlings—Alphabet (i.e. Google) and Apple—are down 6.6 percent and 8.5 percent this year, respectively.

To put it nicely, the market is making all the would-be-stock-picking-rock-stars feel very humble. With so much uplifting news in mind, one has to wonder how the unicorns have been holding up.

Interestingly, while these private companies aren’t valued as frequently as publicly-traded ones, we found that the most hyped companies in the sharing economy—Uber, Airbnb, and Lyft—have managed to keep up the hype and build on it, instead of unraveling due to market fears. 

Uber: $62.5 billion (January 2016)

Uber is in the process of closing a new $2 billion round of funding from a long list of Chinese investors, including China Broadband Capital Partners LP, China Life Insurance Co., China Minsheng Banking Corp., China Taiping Insurance Group, China Vanke Co., CITIC Securities Co., Guangzhou Automobile Group, HNA Group, T. Rowe Price, and Tiger Global Management.

Incredibly, the new round boosts Uber’s valuation from the last-confirmed $51 billion to a reported $62.5 billion, making it the most valuable private company in the world by a huge margin. (The next biggest unicorn is Chinese smartphone maker Xiaomi, valued at $46 billion.)

Based on the newness of Uber’s latest round, it’s safe to say that the valuation is accurate based on recent market conditions. Somewhat absurdly, however, this means that the private company is considered by investors to have a higher valuation than the market caps of many Fortune 500 companies, including American Express ($61.5 billion), Time Warner ($55.0 billion), and even America’s two biggest automakers Ford and GM ($47.0 billion and $45.7 billion, respectively).

Airbnb: $25.5 billion (November 2015)

Airbnb last confirmed a $100 million round of funding in November, valuing the lodging rentals site at $25.5 billion. The deflation was well underway at this point, so the company’s given valuation likely still holds up.

WeWork: $10 billion (July 2015)

WeWork last raised a $434 million round of funding led by Fidelity Management and Research Company, valuing the workspace rental company at $10 billion.

The round closed last summer, just before the market started to deflate, so the company’s valuation may not be holding as much water now that a half year has passed.

Lyft: $5.5 billion (January 2016)

On the last day of 2015, Lyft closed a $1 billion round of funding, half funded by General Motors (GM). As with Uber’s brand new funding and given valuation, this one just happened so it’s as accurate a reflection of the private market as we have.

Instacart: $2 billion (January 2015)

A year ago this month, grocery delivery service Instacart closed a $220 million Series C round of funding led by Kleiner Perkins Caufield & Byers, valuing the company at $2 billion.

This is the oldest given valuation on the list, and therefore the most suspect.

But we don’t have to make any guesses about it. Reports last month revealed that Instacart recently laid off a dozen of its staff and doubled its delivery fees (from $2.99 to $5.99) in the majority of the cities where it operates. Reducing costs through staff cuts and trying to boost revenue through a price increase suggest that the company isn’t performing as strongly as it had hoped, and likely the last-given valuation isn’t as accurate as it was a year ago.

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