Bottom Line Benefits from the Sharing Economy

Sharing Economy Ranan LachmanAccording to a recent Wall Street article, the sharing economy has already provided jobs to some 60,000 people, and attracted a total of $15 billion in funding. And the market is expected to double in the next year.  

Apparently, the sharing economy has been a hotbed for the “private IPO” trend – that is, private equity firms, venture capitalists, and international investors injecting huge sums of money into the sharing economy.  By relying on private investors for a longer period of time, start-ups get more runway to figure out sustainable business models. To delay their entrance into the public markets, firms like Airbnb, Dropbox, Palantir, Pinterest, Uber and several other large startups are raising hundreds of millions, and in some cases billions, that they would otherwise have gained through an initial public offering.

For example, following unlikely success in Cairo, Uber is now looking to capitalize on its growth overseas, investing $250 million in expanding its business throughout the Middle East and North Africa over the next several years.

Just last year, the company was having a difficult time expanding its service abroad, receiving pushback from the governments in Thailand, Vietnam and the Netherlands, for failing to comply with legal requirements for essentially operating a taxi service. In response, Uber maintained that its primary goal is to provide choices for consumers, build economies by employing more individual drivers, and develop better solutions to traffic jams, inadequate public transport or lack of personal vehicle, as is the case for many of its users. This is a conundrum for many players in the sharing economy, (i.e. Airbnb) which continue to find themselves hitting figurative walls in the legal sense, as demand and growth outpace due process and protocol for traditional business.

Nevertheless, since that time Uber has only gotten bigger and is now valued at $70 billion, a 79 increase from last year. With this new venture, Uber is planning to target new cities in Saudi Arabia, Egypt and Pakistan, showing no signs of stopping, despite legal roadblocks and sometimes unfavorable press.

Still, the company is not in the clear. Concerns about violence and political unrest still have many skeptics on edge about how the company will handle these very present issues. As a result, Uber has partnered with services like HarassMap, which trains drivers about sexual harassment, and has even worked with non-governmental organizations to solve disputes in Lebanon surrounding the location of a landfill, showing its commitment to building positive relationships in the communities in which it works: an undeniably sound growth strategy.

All eyes will be on the company to see what becomes of this project. Uber already faces stiff competition from local apps in the region, namely Careem, Ola and Didi Kuaidi but as Uber has proven even here in the states, it’s prepared to take on any opponent. Stay posted as we continue to explore how these massive investments translates to bottom line benefit. The jury is still out if at $70 billion Uber can see a huge pop in market valuation in public markets as some of the recent IPOs demonstrated a lower valuations than their last private rounds.

Sources:

  1. http://www.bloomberg.com/news/articles/2015-11-03/uber-invests-250-million-for-expansion-in-the-middle-east
  2. http://www.pymnts.com/news/2014/more-trouble-for-uber-overseas/
  3. http://www.nytimes.com/2015/08/06/technology/personaltech/the-international-answers-to-uber-and-lyft.html
  4. http://www.wallstreetdaily.com/2015/11/10/sharing-economy/
  5. http://www.nytimes.com/2015/07/02/technology/personaltech/as-more-tech-start-ups-stay-private-so-does-the-money.html?_r=0

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