Big money managers including Fidelity Investments, T. Rowe Price and BlackRock have all struck deals worth billions of dollars to acquire shares of these private companies that are then pooled into mutual funds that go into the 401(k)’s and individual retirement accounts of many Americans. With private tech companies growing faster than companies on the stock market, the money managers are aiming to get a piece of the action.

Fidelity’s Contrafund includes $204 million in Pinterest shares, $162 million in Uber shares, and $24 million in Airbnb shares. Over all, there were 29 deals last year in which a mutual fund bought into a private company, and they were worth a collective $4.7 billion, according to CB Insights. That was up from six such deals, worth a combined $296 million, in 2012. T. Rowe Price was the most active big investor, making 17 investments in private tech companies.

Because these tech companies are not required to issue financial reports and are not traded on traditional exchanges, they are the sort of speculative investments not normally found in retirement accounts. Increasingly, however, investors are betting that these companies will be bought or go public at prices that exceed their latest funding rounds, a prospect that is anything but guaranteed.

Chthonic_Goat_666 posted:

interesting tidbit from an older Financial Times article



We recently spoke to one of Uber’s earliest London drivers, who declined to be named. He told us that to survive he had to forge a driver syndicate which collectively owns the underlying car capital. With more drivers than cars to hand, the cars can be fully utilised 24 hours a day improving the return on capital invested. To economise further, the drivers take turns with shifts, step-in for each other if and when they need leave and recruit temporary staff if and when they find themselves under staffed. They also mutualise the costs and the insurance. Yet, even then, he said “it’s really hard to make the economics work” and that “when Uber increased its margin from 20 per cent to 28 per cent it knocked our profitability in half”.

so the drivers formed a cab company and gave the profits to uber lol

Uber’s boardroom has gone full reality TV

Two months ago, when Uber was struggling to resolve one of the worst scandals to ever shake a Silicon Valley giant, it seemed as if the crisis had reached its climax. It might be a rough road to redemption, but at least Uber could turn its focus to cleaning up the mess.

Instead, Uber’s tale has soured into something more like a reality TV show, in which power plays and ego battles inside the board of directors — the very entity needed to stabilize the situation — have pushed the company back to the point of crisis.

Here’s what’s happened at Uber in the past week alone. Benchmark, an early Uber investor, sought to sell its stake to Softbank at a steep discount ($40 billion to $45 billion) from Uber’s $70 billion valuation. The Information reported this story, noting that the move inflamed already high tensions on the board. Softbank CEO Masayoshi Son later said he’s “interested in discussing with Uber,” or even with its rival Lyft.

The next day, another report said that Uber ex-CEO Travis Kalanick was seeking support from key employees to help him reassert control in a potential shareholder battle. On Monday, Google cofounder and board member Garrett Camp told employees, “Travis is not returning as CEO.” On Thursday, Ryan Graves, Uber’s first employee and a board member, left his job as a SVP but retained his board seat.

Also Thursday, Axios reported that Benchmark was suing Kalanick for fraud, breach of contract, and breach of fiduciary duty, alleging that Kalanick had abused, through “material misstatements and fraudulent concealment” of information, a 2016 board decision that let him appoint three new board members. The lawsuit is seeking to remove Kalanick from Uber’s board. On Friday, another shareholder group struck back, demanding Benchmark divest some of its assets.

And that’s just one week. Previously, Uber’s board tensions simmered at a slow boil as different parties leaked out tidbits to the press to advance their respective agendas. Now that the conflict has escalated into a legal battle, the chaos on Uber’s board is likely to drag on for a while.

This is exactly what Uber does not need right now. Both the pro-Kalanick and pro-Benchmark factions are fighting for short-term, personal victories — and the more public the fight becomes the more their egos are on the line. But these factions are risking long-term damage for everyone involved, including the controversy-weary Uber employees and shareholders who don’t have a say.

The trouble with board battles is that they often look like they can be resolved quickly but tend to drag on for years. After a board dispute led HP to fire Carly Fiorina in 2005, HP endured years of turmoil, including a boardroom spying scandal and a series of six CEOs in a seven-year period. The turmoil ended after HP named Meg Whitman CEO, but it still took a toll on the stock, which went from $52 a share in 2007 to $12 a share in 2012. Whitman, of course, recently removed herself as a candidate to replace Kalanick as CEO.

Uber’s conflict is still young, yet already it seems more intense than HP’s. For one thing, Uber has remained private, which has been a mixed blessing. On the one hand, avoiding an IPO prevented public scrutiny, which allowed Uber’s corporate culture to fester unchecked under Kalanick. On the other, it has so far shielded Uber from a collapse of its market value because its private shareholders must turn to illiquid secondary markets if they want to sell shares.

Look at what happened to Blue Apron and Snap this week after the two hit speed bumps in their respective growth plans: Both are more than 50 percent below the highs they posted shortly after they went public. And that’s just from disappointing on earnings expectations. Imagine if they were facing a bitter board battle in the wake of a series of scandals.

Based on the reports of a Softbank investment, Uber has already lost about 40 percent of its value. That could decline further if the company needs to tap financial markets for more capital before it can resolve its array of problems. Uber also faces a number of outside threats, from a growing rival in its Chinese partner Didi to lawsuits such as its dispute with Waymo.

A united board could try to tackle these problems and rebuild Uber’s wounded corporate culture. Instead, the company is still struggling over what to do about Travis Kalanick. Outside the boardroom, Uber looks like it’s being eaten by its internally generated chaos. You have to wonder what it must look like inside.

https://venturebeat.com/2017/08/13/ubers-boardroom-has-gone-full-reality-tv/amp/

l m ao

SoundCloud has just closed the necessary funding round to keep the struggling music service afloat. CEO Alex Ljung will step aside though remain chairman as former Vimeo CEO Kerry Trainor replaces him. Mike Weissman will become COO as SoundCloud co-founder and CTO Eric Wahlforss stays as chief product officer. New York investment bank Raine Group and Singapore's sovereign wealth fund Temasek have stepped in to lead the new Series F funding round of $169.5 million.

SoundCloud laid off 40 percent of its staff last month, with 173 employees departing in an effort to cut costs. The company only had enough runway left to last into Q4, and today's investor decision was viewed as a do-or-die moment for the company. Now it will have the opportunity to try to right the ship, or sail into an established port via acquisition.

SoundCloud declined to share the valuation or quantity of the new funding round. Yesterday, Axios reported the company was raising $169.5 million at a $150 million pre-money valuation. That's a steep decline in value from the $700 million it was valued at in previous funding rounds. The new Series F round supposedly gives Raine and Temasek liquidation preferences that override all previous investors, and the Series E investors are getting their preferences reduced by 40 percent. They're surely not happy about that, but it's better than their investment vaporizing.

Raine will get two board seats for bailing out SoundCloud, with partner and former music industry attorney Fred Davis, and the vice president who leads music investments, Joe Puthenveetil, taking those seats.

...



TechCrunch broke news about the magnitude of the SoundCloud crisis last month. Sources from the company told us the layoffs had been planned for months, but SoundCloud still recklessly hired employees up until the last minute, with some being let go within weeks of starting. Employees told TechCrunch that the company was "a shitshow" with inconsistent product direction and dwindling cash. Ljung was seen as reluctant to be honest with the team, and unfocused as he partied around the world like a rock star.

https://techcrunch.com/2017/08/11/soundcloud-saved/

...soundcloud "saved", in the way one might "save" a dying person with palliative care

tears posted:

was thinking about how so few of these tech companies actually have any assets, like what does snapchat, or uber actually have.... no factory installations, no productive capacity, not even a bag full of bad securities that it can flog at a discount rate,... not even any IP really...just an app...that some kid could probably make in a day, and some "users" + a rapidly shrinking pile of cash. So when this train crashes there's not even the hope of recouping money by selling off assets... ... ...i...cannot...wait

yeah i was thinking about what Uber has that'd be worth any money... they have Offices and they have user travel data which might be of some worth. that's about it i think.

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Chthonic_Goat_666 posted:

i gotta find the articles but shrieking violet will be happy to know Sydney might be doing a similar stupid thing to Edmonton - subsidising Uber instead of improving public transport

rip i'm sorry, rip. i'm sorry.

Chthonic_Goat_666 posted:

http://fortune.com/2017/08/23/uber-valuation-ride-pricing-investors/

there is a straight up a video message from lyft's ceo like "yes, uber is useless and pretty soon everyone will be installing the convenient lyft app" does lyft even have anything different going on that will keep them from the same fate as uber?

Not long after that, the press started reporting that the board had settled on a name that had been kept under wraps, that of Dara Khosrowshahi, currently the CEO of Expedia, who was also the highest paid CEO in 2015, pulling down a cool $94.5 million in 2015. While there has been some grumbling about Khosrowshahi’s rich compensation, he’s never made any of the “overpaid CEO” lists. That’s because his spectacular 2015 payday was almost entirely the result of a grant of $90.8 million in stock options…for signing a long term employment agreement stipulating that he remain at the helm until September 2020. In 2016, his pay was a more staid $2.45 million.

But Khosrowshahi is going to be Uber’s $100+ million man, since that’s going to be the order of magnitude cost of buying him out from his Expedia agreement plus whatever special inducements needed for him to join Uber (almost certainly vastly richer in expected comp if you believe that Uber will be able to do an IPO at a suitably lofty valuation, an idea we regard with considerable skepticism).

hubert horan:

The short term questions at Uber are how he can resolve the civil war between the Kalanick and Benchmark factions, how he can rapidly reestablish a semi-functional senior management team, and how he can manage the external/PR perceptions of Uber.

All evidence suggests that — no matter how smart Khosrowshahi might be — he has no particular understanding of the economics urban car service industry. The very first internet article of mine on Uber was over two years ago. Mark Ames had posted a piece at Pando about an Uber imitator called Convoy that wanted to be the “Uber of trucking”. I sent Ames an email arguing that while he clearly understood that Uber (and Convoy) were highly dubious, he hadn’t quite grasped that the economics of these businesses were far worse than he’d imagined, and grossly violated all known precepts of transport economics. Mark graciously published my email as a full Pando article. Neither Convoy nor Uber Freight has gone anywhere, demonstrating the fundamental flaws in their business models.

But one of the investors in that business model as it turns out was Dara Khosrowshahi. It will be interesting to see whether he still has the same naïve faith in things sold on the internet he had in 2007, or whether he has figured out that the world of 2017 works a bit differently.

Edited by Chthonic_Goat_666 (Aug. 28, 2017 22:27:30)

When asked about when the company would go public, which would allow employees to cash out, Khosrowshahi said that it could be anywhere between 18 and 36 months.

https://www.theguardian.com/technology/2017/aug/30/uber-new-ceo-dara-khosrowshahi-all-staff-meeting

better make it 18 rather than 36... at current loss rate uber has enough money for about 30 months.

Edited by Chthonic_Goat_666 (Sept. 1, 2017 04:01:52)