Thread by @sajithpai

Thinking aloud on the likely Uber Eats - Swiggy Deal (not yet confirmed). What follows in this tweet thread is not based on facts (but hard to come by) and some theorizing and speculation.

Caveat: I am an interesed party given Blume's stakes in Zomato (via Runnr) and Dunzo. /1

Uber Eats selling itself to Swiggy, with Uber getting ~10% stake in Swiggy (last valued at $3.3b in Dec-18) means it is effectively buying a tenth of Swiggy for what it has invested in Uber Eats. /2

Let us look at what Uber Eats has invested (effectively the burn, which is revenue from food orders less what it is spending to service the orders) - we have the recent stat that $25m is its burn for Dec-18 for 9m orders / month (or 3lacs / day). /3

But this is only Dec. We have data for Oct-18 that it is 4m/m or 133k/day - equivalent burn would then be ~$11m (projected downward FWIW), the Aug-18 nums were 100k/day so $8m and so on... /4

In Mar-18, Uber was only doing 12-15k/day, a burn of $1-1.5m a month (projected), maybe the burn would be higher due to higher overheads etc. Maybe not. /5

Uber Eats launched in May-17; So for the 1st yr or so, it grew steadily to ~15k orders /day, then it started spiking every quarter sharply to hit 300k/day by Dec. What would then be the effective total burn in the business? Projections follow /6

All projections / assumptions
FY18 - $24m
AMJ of 2018 - $9m
JAS - $24m
Oct18 - $8m
Nov18 - $17m (assumed)
Dec18 - $25m
Jan19 - $25m
Feb19 - $23m
TOTAL - $155m
Maybe I have underestimated, so round off to $200m /7

If this is right, then Uber Eats is effectively buying Swiggy at a discount. At $3.3b, 10% of which is $330m, Uber Eats is paying 2/3rds. Not bad. Uber swung a similar bargain in Didi where it 'invested' / burnt $2b to get 17% of Didi (then $6b). /8 acquired.fm/episodes/episo…

Uber did a similar move with Grab, getting 27.5% stake in a $6b business having invested $700m in the region. Once again a bargain buy. We need a new term for this. I suggest "Threat Capital" (Rocket Internet invented this kinda). /9

Threat Capital: "I will bleed you and me to death, unless you buy me out and give me a chunky stake in the business!" Uber with its Didi, Grab and now likely Swiggy move has emerged as the ultimate practitioner of 'Threat Capital' /10

Now just because Uber gets Swiggy at a discount doesnt mean it is wrong for Swiggy not to do the deal (or for Didi, Grab). For them giving away a portion of their business at discount may be less expensive than the high losses / burn they would have to keep incurring /11

End of speculative thread!

Happy to be proven wrong!

Pls note numbers are based on a key assumption that the burn of $25m at 9m monthly orders can be projected across all months. Would love to get correct burn nums for previous months and calibrate. /12