Dec 10, 2015 ยท 6 minutes

It’s probably about time we talked about Uber again.

The company is reportedly raising a new $2 billion round at a $60 billion-plus valuation. Though we should note Bloomberg’s headline, “Uber Raises Funding at $62.5 Billion Valuation,” differed greatly from the meat of the story, which was more muted: Uber is “looking to raise” according to anonymous sources:

Uber Technologies is looking to raise as much as $2.1 billion in a financing round that would value the car-booking company at $62.5 billion, said people familiar with the matter. Uber has filed paperwork in Delaware detailing the fundraising plans, said the people, who asked not to be named because the plans are private. 

There’s a big difference between those two versions of the story. Uber China was raising $1 billion until it couldn’t, and Uber itself had to chip in a whole $500 million to make that round “oversubscribed.”

But let’s assume Uber – which has impressive growth and financials by most metrics – is actually going to raise this money at this price. What they will need is a compelling growth story. One even more compelling than the one they told back when they raised at a $50 billion price earlier this year.

And that’s an issue – depending on how smart potential investors are, at least. Because that round was predicated on Uber ruling the world…. particularly the world’s largest ridesharing market, China. Last time around, that was the rationale for why Uber needed all that cash and why it was worth $10 billion more than its previous round (which closed around the time no one got fired for threatening to “go after” me and other journalists.)

So how’s that whole world domination thing gone? Well, Uber is spending $2.5 billion – by its own admission – in India and China alone, mostly on subsidies – and it’s still nowhere close to the market leader in either spot. Yikes.

We’ve reported at length on Uber’s issues with fraud, fundraising, WeChat, and inevitable  regulatory pressure in China. None of our facts have ever been disputed by anyone. And finally – some months after our reporting-- the mainstream business press is agreeing.

As we predicted months ago, the Lyft/Didi Kuadi partnership has expanded to GrabTaxi and OlaCab. Softbank, Tiger Global, Coatue, Alibaba, and Tencent are all in this anti-Uber fight. Didi is the first ride-sharing company on the planet that has deeper pockets than Uber, and homefield advantage in the largest market. There’s a very real scenario under which Uber will not be the largest ridesharing company in the world.

This gives Uber two choices at this juncture: The first is continue to argue the international angle as a rationale for another $10 billion increase in valuation. Argue that another – what? $1 billion? $2 billion? $3 billion? – in subsidies will get it out of the low teen market share in China, and even then just roll the dice that a company that employs the former head of the CIA and a current pentagon advisor won’t be shut down by the Chinese government.

For what it’s worth, even current investors I’ve spoken with aren’t buying the strategy. One told me he’d asked the company why on earth they thought they could win this fight and were investing such a large percentage of their capital in it. Another, who’d spent time in China, recently told me the best use of Uber China’s $1.5 billion – one third supplied by Uber itself – would be to invest that cash in Didi Kuadi.

Alternatively, Uber needs a new story. Enter the auspicious launch of something it has threatened for four years: UberEats as a standalone app. Reminder: Uber’s approach to the food market was mocked by Stephen Colbert. Reminder #2: Food is an over-crowded and shitty business. Uber will not enjoy the same margins it does providing rides, and unless it has a drone strategy up its sleeve it can’t hope for self-driving cars to completely take away the hassle of, yunno, real people who are expensive and inefficient, according to Uber CEO Travis Kalanick.

So Uber desperately needs a new story. A reason investors in this round can look their partners in the eye and justify paying $10 billion more than some six months ago, paying a higher price than Facebook ever got as a private company. Than Google ever got as a private company.

Because things appear to be getting worse in China for Uber, not better. And the timing couldn’t be worse, as the mainstream press finally catches on to what we reported months ago.

WeChat has suspended Uber’s accounts again. WeChat, of course, is owned by Tencent, investor in Didi. And this isn’t the first time this has happened. WeChat cleverly says its actions are not about that relationship, that Uber was just breaking some rules on its platform. Maybe. Or maybe WeChat is doing what China does best: Fucks with you. Uber has cried foul, and for once the company could well be telling the truth.

But it’s scary beyond WeChat. Alipay – owned by Didi’s other major investor Alibaba and crucial to Uber’s operations in China – could be next.

And then there’s the most recent scandal: According to reports, Uber is illegally exploiting interns in China, forcing them to work up to 15 hour days, refusing to give them certifications necessary for graduation, firing them without notice, and more.

From one press report:

According to Li Yifan, a former operation assistant who was in charge of monitoring more than 20 interns at a time, Uber's Guangzhou branch employs at least 50 interns, none of whom signed any form of interning agreement or contract with the company.

The number of interns once reached seven times the amount of formal employees and they have to work 10 hours a day on average -- some as many as 15 hours, according to Li's social media account on Weibo.

Less than 8 percent of the interns have been able to secure a permanent position after the arduous journey which leaves "their hands shaking at the end of the day", noted Li. 

Ok, no one is less confident than I am that Uber will ever do the right thing by anyone, given the option. But come on, China. Uber interns are badly treated by Chinese labor standards? Even I don’t quite buy that.

What it does is start to build a dossier for why Uber shouldn’t be allowed to operate there. Which everyone knows is coming.

China is fucking with you, Uber. You should know that as an expert in fucking with people. The bad news: China is even better at it.

But yeah, I’m sure investors will “eat up” – har, har – the chance to deliver casseroles out of the back of a Buick as a $10 billion-better growth opportunity than even getting a meaningful market share in the largest ridesharing market in the world. Sadly, someone likely will invest under those terms.

It’s fitting that the rumored lead is Tiger Global, also an investor in Didi, GrabTaxi, and Ola. Once upon a time, Uber admittedly tried to sabotage Lyft’s attempts to raise money by dangling the option to invest in Uber to Lyft’s suitors. Of course, they couldn’t possibly allow it if those funds invested in Lyft. Suddenly, those objections have fallen by the wayside.