- Most investors would be insulated against losses through diversified portfolios.
- Uber's staff would lose their stock options, and along with drivers, would face unemployment.
- Other services would grow to meet consumer demands.
Uber is reeling.
Allegations about its treatment of women have hurt its brand among investors, riders and engineers. The company is facing lawsuits on several fronts and has huge holes in senior leadership, which could make it hard to raise more funding, while shares of Lyft are suddenly in hot demand among investors.
And as previously reported, Uber burns a lot of cash — a reported $2.8 billion in 2016 alone — to keep drivers and riders on its app.
What happens if Uber can't go public, can't raise another round of funding, and disappears?
We asked three investors for their take. Here's what they said.
Investors would be fine — but others would suffer. Waze and Moovit co-founder Uri Levine said, "It's not investors you should worry about, but Uber's employees, drivers and users."
Seven-year-old Uber now employs about 12,000 full-time. Millions of drivers rely on its platform to find fares and generate income as independent contractors. And the company has boasted that 20 million people have downloaded its ride-hailing app.
If Uber fizzles, employees would lose their stock options at a minimum. If Uber folded entirely, employees and drivers would face unemployment, and riders would be left waiting for other services to fill the void in transportation.
Tech investor Bedy Yang, a managing partner with 500 Startups, said, "If Uber failed, investors would be hurt only if they paid a high price for their shares, and have Uber as the single standout in their fund. But that's not how investing works, generally. Investors generally learned that lesson in the dotcom bust. Firms do not bet everything on a single company."
Uber's investors have included everyone from tech juggernauts like Google (via its venture arm GV) and Microsoft, to financial firms like Lowercase Capital, NEA, Goldman Sachs, TPG Growth and BlackRock, to even Jay-Z.
Other companies would race to fill the void. One Uber investor, Shawn Carolan of Menlo Ventures, did not think a total collapse at Uber would have a chilling effect on venture capital or travel and transportation start-ups.
"I can't say Uber's fate won't effect the psychology of investors at all," he said. "But investors see a greater landscape that includes all kinds of great companies and deals that come with enormous risks and rewards." (Besides Uber, Menlo was also an early investor in Warby Parker, Roku and Siri.)
Entrepreneur Levine said, "Especially since I am not an investor in Uber I am not worried about this at all." He believes that especially if Uber flames out, venture firms will redouble their investments in travel and transportation. "Mobility is probably the most important infrastructure issue in the U.S." he said. "Communication has been solved. Transactions are easy to do here. But mobility is still a pain!"
Big companies might become more risk-averse. A director of business innovation with Daimler Trucks North America, Lori Heino-Royer, said: "If Uber all of a sudden folded, my concern would be that people in corporate America would have an excuse not to take risks any more."
Uber may have done things in an questionable manner, but it brought competitive heat that has proven motivating to companies across the board, from large automakers and public transit agencies to other upstarts in travel and transportation.
Start-ups won't ignore HR or diversity. Investor Carolan says that if nothing else, Uber's troubles show other start-ups that they have to take human resources seriously.
"No matter the outcome, their example is showing start-ups you cannot put HR or diversity on the back burner. It's critical to the business, and you can't use fast growth as an excuse for sloppiness."
If these troubles eventually drive Uber out of business, the lesson will be that much starker.