As part of our “feet on the street” approach to research, this week we are in Aspen, CO attending Fortune’s Brainstorm Tech Conference. Below are our highlights
Uber focusing on a road to profitability: Despite lacking a chief financial officer and the recent resignation of its top human resources official, CEO Dara Khosrowshahi seemed confident about the business and path to an IPO. Khosrowshahi reiterated that CFO search remains “work in progress”, and the company remains on track to go public in 2019. Khosrowshahi is focusing on generating enough cash from its core business so Uber can self-fund its operations. Uber also appears satisfied with its efforts to develop the self-driving car technology, preferring to keep R&D efforts in-house, at least over the next couple of years. On international expansion, Khosrowshahi seemed comfortable with Uber’s geographic footprint outside of China, Southeast Asia and Russia and hinted that the company does not have any deals in sight into fiercely competitive markets like India.
Our Take: Dara’s record at the end of the first year as the CEO of Uber is filled with significant business and funding milestones. But, recent staff departures and C-level criticisms continue to highlight the challenge of reforming company culture. Despite Khosrowshahi’s confidence that Uber will go public next year, we believe that a 1H:2020 IPO feels realistic right now.
Lyft’s future plans focus on subscription plans, e-bikes, and scooters: Lyft President John Zimmer emphatically denied media reports that Lyft’s market share growth slowed from 2017 into 2018. In fact, he said the company’s U.S. market share has continued to accelerate this year with Lyft controlling more than 50 percent of the market in several cities. Zimmer added that Lyft has a significant opportunity to provide consumers with last-mile mobility options, including bikes and scooters, which could also significantly reduce traffic in cities. The company recently acquired bicycle rental firm Citi Bike in New York.
Our Take: Lyft has executed very well in the shadows of Uber’s recent miseries. Having raised $3 billion over the past 12 months, Lyft can significantly build on that momentum. However, we are worried that a step up in cash burn could push Lyft’s IPO well beyond 2019.
Grab plans to become a provider of financial services and payments to consumers: Grab co-founder Hooi Ling Tan touted her company growth prospects in Southeast Asia (which reminded her of China decade ago): 640 million consumers, with just 240 million of them connected to the Internet. Today, Grab, which recently acquired Uber’s operations in the region, offers ridesharing, e-bikes, motor-bikes, scooters along with food and grocery delivery. Since Southeast Asia is more fragmented than China and the United States, Grab can aggregate services beyond what its ridesharing counterparts offer today. Tan said Grab will expand beyond transportation and mobility into financial services and payments to consumers and merchants. Tan said they are working very closely with regulators and feels confident they will approve the Uber deal. Under the terms of the agreement, Uber will own a 27.5 percent stake in Grab, along with a board seat for Khosrowshahi.
Our Take: The Uber deal has unlocked several growth opportunities for Grab. The company boasts an enviable list of investors, including Toyota, Softbank, Didi Chuxing, and now Uber. With more than $5.5 billion in venture capital, Grab is well positioned to grab significant market share in the global ridesharing industry over the next couple of years.
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