Jun 2, 2016 ยท 8 minutes

Yesterday, Uber announced the largest deal in any private company ever: $3.5 billion from the Saudi Arabia’s public investment fund.

That prompted me to do my first ever Twitter poll, asking whether I should even weigh in on Uber’s latest record breaking fundraising, or whether it’d all been said before.

I was leaning toward the latter. But 63% of you voted in favor of wanting Pando to weigh in. For the remaining 37% and me, let’s make this as quick and painless as possible.

Here are my top takeaways from the news:

-- We aren’t seeing an Uber IPO until at least late 2017. Stop dreaming, bankers and Bill Gurleys. If you are hoping that’s going to be some Netscape or Google moment that proves the power of all these unicorns, well, get used to more Twilios.

Given how much money they are burning (more than $2 billion a year trying to gain market share in India and China alone) we all knew one of three things was imminent: Uber was going to have to find several billions more immediately, Uber was going to be forced to go public sooner than it’d like, or Uber was going to have to curtail its money losing international expansion.

It’s picked the first of the three. The only shock there is that they found someone more desperate for Uber at nosebleed prices than individual investors and Russian Oligarchs. Or maybe it isn’t a shock. As I’ve had conversations for weeks about who Uber might tap next the joke in the Valley has been, “There’s always a Saudi Prince.” Guess those weren’t jokes.

It’s obvious why Uber doesn’t want to go public: Right now its founders control the stock and the board and answer to absolutely no one. They won’t cave to driver strikes, public pressure or even horrible publicity. I’ve spoken with VCs who have meaningful stakes in Uber and barely get their calls returned. Once you go public even an investor with a few percentage points can make your life miserable.

Also, there are no doubt things in Uber’s numbers they don’t want us to see. My sources have said the burn in China is well over $1 billion a year at this point to achieve... low double digit percentage points in a hostile market. This in a market where public market investors have grumbled about Google’s moonshots.

While I think the company is hot enough it could go public successfully now, there is a lot of hair there: Ever increasing lawsuits (so much so that the Onion is making jokes), reality that it isn’t the largest ridesharing company in the world, despite many times the valuation of anyone else, and massive question marks about whether self-driving cars will make Uber’s odds better or worse.

Why do any of that public if you don’t have to? Because you owe it to investors and employees? Please. This management team doesn’t feel it owes anyone anything.

-- Expect an increasing “Lyft should file!” drumbeat. With Uber clearly signaling its staying private at least another year, everyone is going to start arguing Lyft should do what LinkedIn and Box did and take the opportunity to get out first. It’s not a bad tactic. Their valuation is considerably more reasonable, according to Lyft and Didi, Lyft has gained market share against Uber in key markets, and clearly there are investors who want to own the category. If Lyft is the only option, that may do better than they would if they waited.

The percentage of people who use ridesharing services is still small, even in the US. These are ultimately two commodity products: The apps look alike, they cost about the same amount, and literally have the same drivers. Going public could give Lyft the funds and marketing push they need to look like a real player. It has the advantage of focusing on one product and one market.

Of course, it matters what their numbers actually look like. It only helps if people read the S1 and say “Oh shit, I didn’t realize Lyft was doing this well!” not “Oh, shit, Uber is crushing them…”

-- How does this impact Didi, who is also raising a monster round? Almost none. Nothing about Uber seems to impact Didi. Even after Uber has upped its spending in China, Didi is growing unabated. It’s not only the largest ridesharing company in the world by completed rides, it’s the second largest commerce platform in China. Sources have told me they open Uber’s China app and immediately get a splash screen trumpeting it’s 30% cheaper than Didi. That tactic seems to be hurting Uber’s bottom line more than Didi’s.

But make no mistake: Didi is playing a long game. They want to hurt Uber by bolstering Lyft. Expect only a tighter relationship.

-- Will Uber start to do acquisitions? For its age, size, and ambition Uber has been remarkably unacquisitive. It’s done one small deal. Part of this is Uber’s ego, but it’s also about keeping control tight. By the time Twitter went public, fractions of stock ownership via various acquihires were spread all over the Valley. But everyone expects consolidation to start at some point. Maybe not internationally, but maybe a Postmates or a DoorDash.

Especially as Uber starts to compete with the largest tech companies in the world as it gets more into logistics and Amazon’s turf and the self driving car war with Apple, Tesla and Google. Uber is going to have to bring more to those battles if it wants to continue to fight both of those domestically and the Didi alliance globally.

-- They will have to go public at some point. For all the talk of “Why would they go public?” Uber will have to at some point. It’s burning billions of dollars per year, and there’s not a lot of categories after Russian Oligarch and Saudi Prince. The rise of Didi has hurt its ability to fundraise in China already. In another nine months, we’ll all start having the conversations we were having earlier this year: Raise more? Go public? Or make fewer bets? Then the likeliest outcome will be number two. If this isn’t Uber’s last private round, it’s one of the last.

And while it’s the largest round we’ve ever seen in a private company, it won’t last as long as you might expect given Uber’s burn rate and the pressure to lead in self driving cars.

Related note: Please stop using Uber as an example of “unsustainable burn rates” in Silicon Valley. Even Didi doesn’t burn close to this much cash. Uber is in a class by itself of using cash like a weapon, but even people heralding that strategy, have noted it has a shelf life.

-- Self driving cars: Solving and creating Uber’s biggest problems. Last night at Code Conference, Elon Musk said self driving cars are two years away technology-wise and three years away if you include regulatory approval. That’s faster than most people’s estimates of five to ten years.

But is that good news or bad news for Uber? It may solve the company’s “driver problem” but only if mainstream adoption is instantaneous. That’s hard to imagine. Uber may live in a mushy middle of fighting its old fights and newer ones where it doesn’t have the deeper pockets, more aggressive management advantages that it’s enjoyed over Lyft.

At a minimum, it introduces massive uncertainty.

-- Somewhere Bill Gurley has punched a wall. Reminder of his manifesto earlier in the year:

The main message for investors who are just now being approached is the following: it’s not the second inning or even the sixth, it’s the fourteenth inning in a five hour baseball game. You are not being invited to a special dance, you are being approached because you are the lender of last resort. And because of how we meandered to this place in time, parting with your dollars now would be an extremely risky move. Caveat emptor. 

He might as well have opened that section, “Dear Saudi Arabia...”

-- The Rachel Whetstone effect. Sure, plenty of other tech companies have also taken money from the Saudis. But few try to claim it’s a human rights win. From the New York Times:

Uber said expanding its service may be a boon for Saudi Arabia, a country where women are not allowed to drive because of fatwas, or religious edicts, issued by conservative Muslim clerics that uphold a distinct segregation between the sexes. There is no formal law prohibiting women from driving in the region.

“Of course we think women should be allowed to drive,” said Jill Hazelbaker, an Uber spokeswoman. “In the absence of that, we have been able to provide extraordinary mobility that didn’t exist before — and we’re incredibly proud of that.”

Even some Uber investors had to admit that was pushing it: