- What will it cost one to have a startup like Uber?

Shaping the great minds.

Friday, 2 March 2018

What will it cost one to have a startup like Uber?

Sorry for sounding like a smartass, but…

Uber is worth about $51 billion dollars at the time of this writing. Lyft, which is like Uber, is worth $11 billion. So I would guess somewhere between $11 billion and $51 billion would be your cost for having a startup like Uber.

If you try to do it for less, you might still succeed, but you will much more likely fail. (Most startups fail). And if you fail, you won’t be like Uber or Lyft.

At its core, Uber is a glorified automated taxi dispatching service which uses the internet, public wireless data access, smart phones, and GPS to help connect drivers to passengers automatically and efficiently. The technology is not earth-shaking.

One key to Uber’s valuation is that they have a business model which pushes the financial risks of capital acquisition, capital depreciation, accidents, and fluctuating passenger demand off their books and onto Uber drivers while capturing the financial benefits of such a great service to themselves without sharing it with the drivers. If Uber actually had to buy their own cars and insurance, and put their drivers on salary they would be only a bit better than taxi companies.

Another key to their success is that they are serving markets controlled by rent-collecting monopolies (e.g. taxi companies) which often offer a very distasteful combination of high prices and poor service, thus making market entry very compelling.

If you can find a startup idea which pushes risks onto partners and subcontractors, and which breaks up a badly behaved monopolist, you might end up with similar success.

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