The ride-sharing app company Uber last week raised $1.2 billion in venture capital on terms that valued the company at $17 billion. As Will Oremus at Slate.com observed, that's almost as much as Hertz and Avis combined.
It's more plausible to see Uber's valuation not as an artifact of its genuine potential, but of growing inflation within the high-tech bubble.
Consider this: the number placed Uber in a rarefied club that previously included Groupon (worth $16.6 billion on its first day of public trading in 2011) and WhatsApp (worth $19 billion, based on the price paid for it by Facebook).
Of course, Groupon today is worth about $4.2 billion in market capitalization, a sizable plunge from that first day. And WhatsApp was paid largely in Facebook stock, which in time may or may not prove to be as valuable as quatloos.
Rational analysts have been pointing out the flaws, or at least the pitfalls, in treating Uber's $17-billion valuation as a number that reflects actual conditions in Silicon Valley, the business category, as opposed to "Silicon Valley" (the HBO satire).
One is tempted to think of the latter when hearing Uber insiders say things like: "Uber is building a digital mesh -- a grid that goes over the cities. Once you have that grid running, in everyone's pockets, there is a lot of potential for what you can build as a platform. Uber is in the empire-building phase." Watch the show, and tell me that couldn't come right out of the mouth of any of its leading characters, verbatim.
As is pointed out by Rags Srinivasan, a marketing expert who blogs at IterativePath, Uber is worth $17 billion today only if one makes very aggressive projections of the total market for taxi services and Uber's potential share of that market.
On the other side of the coin are the head winds that Uber enthusiasts like to pretend don't exist. There's the legal pushback the firm is facing from municipalities and competitors, including taxi drivers. Maryland regulators, for instance, are proposing to designate Uber as a common carrier, which the company grouses would impose "antiquated regulations on our decidedly modern industry."