Recently, I heard an astounding piece of information: Uber is going to burn $750 million in capital this year as part of their expansion. Considering their most recent funding announcement of $1.2 billion in equity and $1.6 billion in debt, and the idea that most funding rounds are for 18-24 months of runway, the math makes sense. Still, burning $750 million in any context, let alone 12 months, is truly incredible.
$750 million over 12 months is $62.5 million per month (the burn rate won’t stay constant month to month, but let’s assume it does). As a fun mental exercise, here’s how $62.5 million might be spent per month:
- $5 million on legal – With all the local and state regulation battles, I bet Uber has an army of in-house and third-party lawyers.
- $5 million on lobbying – States and local government aren’t going to change their laws based on simple requests, hence lobbyists are hired to help accelerate the process.
- $30 million on market managers – Each market has local staff and regional staff that manage a territory. Assuming each market costs $30,000/month, on average, for fully burdened staff compensation, that provides for 1,000 new cities, which includes international expansion.
- $2 million on office rent – Rent is super expensive in San Francisco, and Uber now has 113,000 square feet there, not counting other cities (this amount references all cities).
- $4 million on insurance – Even though the drivers are independent contractors, Uber still has to carry huge amounts of insurance as things, inevitably, can go wrong.
- $10 million on driver support – Screening drivers, running background checks, training, and ensuring a great consumer experience for hundreds of thousands (millions?) of drivers is no small feat.
- $10 million on technology – While the Uber app is straightforward, a company with such scale and complexity needs a variety of internal tools to ensure continued success, and many of them are custom.
Other potential categories include marketing, administrative costs, financing cars, more staff, etc.
Uber is one of the fastest growing companies of all time, and on a mission to be one of the largest logistics marketplaces in the world. Burning $750 million in a year is incredible, and, a sign of the times.
What else? What are some other thoughts on Uber burning $750 million in a year?
7 thoughts on “Uber Burning $750 Million in a Year”
That is an incredible amount of money. Hard to imagine that they will swing to profitability very quickly.
Good reporting and a good speculation as to what this start up needs to establish itself.
They have actual revenue as well that they are spending, right? What about advertising?
May not be a great comparison. But I would like to see what the burn rate for FedEX was when it was ramping up in the 70’s. Discounting for inflation of course.
i suspect a lot of that money is going to finance cars for drivers. They take the payment right out of the fares. If you assume they buy 500 cars a month for drivers at 30k each, that’s $15m a month right there. That’s a pretty good investment Imo since default rates would be really low and Uber can always reclaim car and give to another driver.
Well to put that number in perspective, they’re apparently doing 500mm/year gross in SF alone.
Two biggies: customer and driver acquisition. Easily in the millions a month.
Uber doesn’t finance cars for drivers. There’s incredible overhead involved with that. Santander Consumer USA etc finances Uber vehicles for drivers.