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UBER…The Unicorn’s Unicorn …Fidelity’s ‘Surge’ Investing …and a New Lucky Sperm Club

Full disclosure – I own some shares in Uber from way back at a six million valuation courtesy of an investment I made in a great angel investor’s first fund.

Today, the super conservative and private Fidelity is out chasing down an $UBER (not a car in Manhattan during rush hour, but the company) in order to invest at a $17 billion valuation.

Let’s begin with one of my rare ‘standing ovations’. You go UBERRRRR!!! You are the Unicorn of Unicorn’s.

If you want to know what they can get $17 billion valuation from a Fidelity…take a gander at these metrics.

There is a new ‘lucky sperm’ club in the era since 2008’s bear market and it is for those that actually sprinkled money on founders and angel investors coming out of the 2008 crash.

Twitter, Facebook, Snapchat, Pinterest, Zynga, Groupon, Airbnb and Uber…I am not going to count the sub $1 billion companies for fear of jamming the ‘cloud’. I have been Uber fortunate to have some direct and indirect shares in many of these amazing startups. Now with Fidelity and T.Rowe Price, everyone with a 401k can say they are shareholders in these companies.

An outlier investment in an outlier business does not make our markets a ‘bubble’. UBER is as real, fantastic and gynormous a startup as there ever was. I prefer to call this era of the boom ‘SURGE’ investing. Fidelity has to participate in ‘SURGE’ investing because of how markets work in 2014. Much like income inequality, in the financial world we have asset size inequality. The huge funds just have too much money to participate in startups under $5 billion to move the needle for their own returns. Time will tell if they are victims of their own success.

It’s definitely different, definitely dangerous (new metric justifications), but not going to stop for special assets anytime soon.

I cant’ do the math perfectly but $100,000 invested in Uber in the first angel round is worth somewhere between $100 and $300 million (#asphinctersayswhat!?).

I do not have control over my shares in question but I am a seller (of half my shares) at these prices (on paper here), because of the steepness of the valuation curve ascent. I sell this steepness as a rule in my trend strategy. I can reinvest and redeploy in another 50 entrepreneurs and other stocks to spread that risk around again. That’s what I have done the last 14 years.

As for some context to go along with the steepness…Federal Express $FDX has a market capitalization of $42 billion. I love $UBER and think their growth rate will be faster than Federal Express and their margins will be higher but at this spread in valuation, I would take more money off the table and redeploy.

  • ex1

    why will the margins be high, when there will be multiple simple platforms for potential cabbies to join?

    • Iyinoluwa Aboyeji

      its not about cabbies. Its network effect and logistics

      • Exett

        Sure understand that, but what is the network effect – just as you multiple exchanges competing for same liquidity in electronic securities transactions – why wouldnt something similiar happen to this market – legal/tech barriers are lower in ubers space as well.

        • Iyinoluwa Aboyeji

          you are more likely to use uber for everything if you already use uber. Deliveries, cabs, pick up and drop off from the airport. Its just human nature. Especially since they have your credit card. Switching costs are very high for services like this. Very different liquidity in electronic securities where you are chasing higher magical returns and deliberately optimizing *against* high switching cost (hence the liquid in liquidity).

      • http://www.howardlindzon.com howardlindzon

        correct

  • Ryan Baptiste

    Excellent! Nice work Mr. Lindzon!

  • http://www.startupmanagement.org/ William Mougayar

    Unicorn’s unicorns is a great Lindzonesque metaphor.

    Uber has done a great job branding themselves too, which has helped their valuation. Hello Hailo ???

    I hear they are investing in snow-making factories so they can let it snow in any city they want, and then jack up the prices. Smart growth hack :)

    • http://www.howardlindzon.com howardlindzon

      thanks man

  • Dr Michael Eisenberg

    Howard, Nice home run!

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