There is no denying that Uber changed the world in many ways. The ride share app changed how the world travels, but also how the tech world valued new companies.
Not to mentions it’s helps spark entrepreneurship. There are a few key reasons why Uber changed the way tech companies are valued now, and here is why.
Focus Shifted to Users Not Revenue
Remember back in the day a company was valued based on how much money they made? That makes too much sense, right? Well today it’s all about users and not so much money. Actually, Uber loses a lot of money. Billions of dollars annually.
“Look at how many tech startups are valued in the billions, and they don’t make money,” says Darryl Howard of NuWays MD. “This is because it’s become all about the sheer number of users, and not so much the profit at the end of the day.”
Look at Uber’s current value. It’s massively high and they continue to take on more and more VC debt to grow. Is it even sustainable? This is unknown, but one thing is certain, and that is the tech world continues to place a lot of weight on users, and not so much the money each generates.
The “Uber of…” Was Born
Uber changed everything. The entire on-demand app generation was born with so many new startups mirroring the app, and simply changing the on-demand service.
“Every new startup these days claims to be the ‘Uber of’ whatever industry it is that they are entering,” says Chris Moberg of Slumber Search. “Now you have the Uber of car washes, hair cuts, beauty services, dog walking, etc. — all on-demand.”
As a result, these companies all received wild valuations out of the gate, even as a pitch deck, without a product or even a live working demo. The entire tech world was betting heavily on any Uber-ish idea being the next big thing.
And that hasn’t slowed down. There are still wild valuations given to new apps that have a slight margin of winning in the end. It’s never been easier to secure funding and land VC money than it is now.
Why? We can thank Uber for this, because even though the company doesn’t make money, it’s value is still through the roof. Look at the stock’s trade volume per day.
The interest is Uber isn’t going to go away until the bubble bursts. Could it happen? Sure. And if it does, Uber’s decline will change the tech industry again.
Convenience Became the New Focus Point
What Uber also do was change the type of startups that were breaking out in the tech world. It all became about providing convenience to users.
“This trend has forced companies to build products that focus on delivering convenience,” says Henk Schipper of Jaloezieen Fabriek. “Tech companies realized that their greatest leverage point was giving their users more of what they want most — their time.”
So, now rather than just make the most money off a particular user, the tech world put more emphasis on the convenience a product or app provided. In the end, they understand that this will lead to a much larger user base.
Why the shift in thinking? We have Uber to thank. Their success and the reason why so many people use the service is because of the convenience factor.
This is a trend that will continue to grow, regardless of Uber’s success (or failure) moving forward. They have completely changed tech and valuations forever.