Uber’s IPO may not be as eye-popping as we expected

New analysis pegs the ride-hailing giant’s initial market cap at around $90 billion, $14 billion higher than its latest private valuation and a whole $30 billion lower than early estimates from Wall Street bankers.

Uber is expected to raise $10 billion later this year in one of the largest U.S. initial public offerings in history. The float will value the ride-hailing giant somewhere between $76 billion — the valuation it garnered with its last private financing — and $120 billion — a sky-high figure assigned by Wall Street bankers that’s had even early Uber investors scratching their heads.

A new report from The Information pegs Uber’s initial market cap at $90 billion. To develop the estimate, the site analyzed undisclosed documents Uber provided creditors in 2017 “in which the company projected it would double net revenue to $14.2 billion by 2019,” ran revenue multiples and compared Uber to GrubHub, which investors say is the business’s closest comparison.

Uber declined to comment on The Information’s analysis.

How we got here

Uber confidentially filed for its long-awaited IPO last month, marking the beginning of a race to the stock markets between it and U.S. competitor Lyft, which filed just hours before, according to a source with knowledge of the situation. Founded in 2009 by Travis Kalanick, Uber has brought in about $20 billion in a combination of debt and equity funding. It counts SoftBank as its largest shareholder in a cap table that also lists Toyota, T. Rowe Price, Fidelity, TPG Growth and many more. As for the skepticism surrounding Uber’s lofty $120 billion valuation, the eye-popping figure seems unachievable considering the company isn’t profitable and has and continues to burn through cash.

An IPO that large would certainly make its investors happy. First Round Capital, for example, seeded Uber with $1.6 million in the company’s first two funding rounds in 2010 and 2011, according to The Wall Street Journal. At a $120 billion valuation, First Round’s shares would be worth some $5 billion. The venture capital firm, however, sold some of its shares to SoftBank alongside Benchmark, which itself would otherwise own shares worth about $14 billion.

Bradley Tusk, an early Uber investor who signed on to help the company surmount political and regulatory barriers in 2011, own shares said to be worth $100 million, though he too gave up 42 percent of his equity in a secondary sale to SoftBank, he recently told TechCrunch.

I’m quite happy with the 120 number,” Tusk said. “But … I am a little surprised by [it], it does seem to be a really aggressive number.”

“Any investment in Uber is obviously a long-term bet on the future, like someone who invested in Amazon in the early days,” Tusk added. “One thing [Uber chief executive officer Dara Khosrowshahi] is doing well is really expanding Uber into a mobility company as opposed to just a ride-hailing company.”

Dara Kowsrowshahi, chief executive officer of Uber, looks on following an event in New Delhi, India, on Thursday, Feb. 22, 2018. Photographer: Anindito Mukherjee/Bloomberg via Getty Images

A long-term bet on the future

Uber has opted to go public in a year poised to see the most high-flying unicorn IPOs in history. As we’ve reported in great detail on this site, both Lyft and Uber are planning to float, as are Slack and Pinterest . Many of these companies, however, made the call to make their public markets debut before the stock market took a quick turn south. Poor performing stocks may discourage unicorns from emerging from their cozy VC-protected stalls.

Uber will garner increased scrutiny from Wall Street investors as they begin to parse out its true value. Fortunately the company, which like Amazon has long prioritized growth over profit, has “’clear levers’ it could pull in order to turn on the cash spigots if it wanted to, by reducing its marketing spending both in the U.S. and developing markets and by finding partners to help finance its self-driving car development,” according to The Information. “Pulling those levers would slow revenue growth by a third—from a 33% growth in net revenue to 22 percent growth in net revenue in 2019 [but] it would save Uber $2 billion annually.”

In its third quarter 2018 financial results, Uber posted a net loss of $939 million on a pro forma basis and an adjusted EBITDA loss of $527 million, up about 21 percent quarter-over-quarter. Revenue for Q3 was up five percent QoQ at $2.95 billion and up 38 percent year-over-year.

“We had another strong quarter for a business of our size and global scope,” Uber chief financial officer Nelson Chai said in a statement. “As we look ahead to an IPO and beyond, we are investing in future growth across our platform, including in food, freight, electric bikes and scooters, and high-potential markets in India and the Middle East where we continue to solidify our leadership position.”

We can speculate on Uber’s valuation for days but ultimately Wall Street will determine just how high Uber will go. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.

Political ‘fixer’ Bradley Tusk seeks $70M for Tusk Ventures’ sophomore fund

Led by early Uber investor and advisor Bradley Tusk, the firm has invested in Bird, Coinbase, Eaze and several others.

Longtime political operative Bradley Tusk got his start in Silicon Valley in 2011, when a little-known founder of a transportation startup requested his help surmounting regulatory barriers. That founder, Travis Kalanick, couldn’t afford Tusk’s $25,000 fee, so Tusk agreed to accept half of his payment in equity. As you can imagine, that deal worked out pretty well for Tusk, whose shares in Uber are now said to be worth $100 million.

Tusk (pictured) spent several years advising Uber’s expansion strategy and, in 2015, decided to turn his efforts into a full-fledged business: part venture fund, part political strategy. Today, Tusk and his partner, Jordan Nof, filed paperwork to raise $70 million for their second venture fund, Tusk Venture Partners II.

A spokesperson for Tusk Ventures declined to comment.

The New York-based firm previously brought in $36 million for its debut fund — capital it used to back scooter “unicorn” Bird; medical marijuana delivery company Eaze; the marketplace for household service providers Handy; cryptocurrency exchange Coinbase; and fintech startup Grove.

In addition to deploying capital into startups, Tusk Ventures lends its political expertise to support companies plagued with regulatory barriers and communications issues, as well as help with grassroots organizing, opposition research and partnerships. Bird, of course, is an excellent example of a company that’s struggled with local politics as it has scaled across the U.S. and beyond. The scooter-sharing company was banned from San Francisco after releasing scooters without permits and has upset local leaders in Santa Monica, Los Angeles and more.

“Our diverse team of regulatory and political experts take on entrenched interests and politicians trying to stifle innovation so our companies don’t have to,” the firm writes on its website. “Our unique model provides startups with access to political, investment and operational expertise that is second to none.”

Prior to transitioning into startup advising and investing, Tusk served as campaign manager for Mike Bloomberg, as deputy governor of Illinois and as communications director for Senator Chuck Schumer. He also penned the book, The Fixer: My Adventures Saving Startups from Death by Politics, released last year.

Tusk joined us last week on TechCrunch’s Equity podcast to discuss mobile voting, his thoughts on Uber’s upcoming initial public offering and sky-high valuation and Saudi money in VC. Listen to that episode below.

Bradley Tusk on mobile voting, Uber’s IPO race with Lyft and the Dems taking over the House

Hello!  Welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines. As you know, typically, a few of us try cramming into the Equity podcast dungeon, including the nimble Alex Wilhelm, the scholarly Danny Crichton and, when we can lasso her, the razor-sharp Kate Clark, plus a guest from the investment world. With […]

Hello!  Welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

As you know, typically, a few of us try cramming into the Equity podcast dungeon, including the nimble Alex Wilhelm, the scholarly Danny Crichton and, when we can lasso her, the razor-sharp Kate Clark, plus a guest from the investment world.

With everyone logging valuable family time this week and wondering if it’s worth returning that sweater, we decided to do something a little different and run a special holiday episode, one that features just me in conversation with Bradley Tusk, a venture capitalist, philanthropist, book author and, earlier in his career, a trusted aid to billionaire Michael Bloomberg, whose successful third run for mayor of New York — as first and only mayor to serve three consecutive terms — was managed by Tusk. In fact, one of Tusk’s first roles after moving on from politics was an early advisor to Uber, which sought out his know-how about both regulatory environments and upturning the status quo.

Perhaps because all of these interests, Tusk has become among the country’s most visible proponents of mobile voting, supporting — though not investing in — a app called Voatz that was first used in a small pilot project in West Virginia last spring that gave overseas citizens and members of the military the option of using it to cast ballots on their phones. Not a whole lot of attention was paid to the project at the time, though when the app was used again in 24 West Virginia counties in the mid-term elections, critics who worry about voter fraud were quick to call it an “horrifically bad idea.”

That isn’t stopping Tusk from getting behind more mobile voting efforts, which we chatted about recently for “Equity,” along with a bunch of other things, including the brow-raising valuation that Uber’s bankers have bandied about in conversations about its upcoming IPO, how important it is for Uber to beat Lyft to the public market (assuming they move forward despite the suddenly rocky markets), and what it means for fintech startups that Democrats are taking over control of the House in another week.

We always enjoy talking with Tusk; we hope you’ll enjoy our chat, too. In the meantime, a quick reminder that after this, we’re off for two weeks, then back in full force in the middle of January. Until then, all of us wish you very happy holidays and a terrific New Year. More soon!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.