Value of ridesharing service Uber soars
06/06/2014 9:18 PM
06/06/2014 9:29 PM
Ridesharing service Uber said Friday it has raised $1.2 billion in funding, pushing the value of the startup to a whopping $18.2 billion, the largest valuation ever for a venture-backed company.
The eye-popping investment secures the San Francisco company as the leader among on-demand car services and underscores the rise of the sharing economy, a favorite among some venture firms.
Uber chief executive officer Travis Kalanick said he was keeping the round of financing open to strategic partners that might pitch in an additional $200 million.
“This is about capitalizing for the opportunities that we see ahead of ourselves,” said Kalanick, who in the last four years has steered Uber into 128 cities in 37 countries worldwide. “If you can make it economical for people to get out of their cars or sell their cars and turn transportation into a service, it’s a pretty big deal.”
Uber's newfound wealth and star power as one of Silicon valley's hottest startups comes despite a series of challenges that have raised questions about its safety policies and ability to grow nationally.
On Thursday, the Virginia Department of Motor Vehicles became the latest regulatory body to ban ridesharing services. On the other side of the ledger, Colorado on Thursday joined California, passing a law authorizing the services.
Kansas City is one of Uber’s new cities, though Uber hasn’t started regular operations here. Uber has been talking with the city about what it needs to do to operate legally. In contrast, a rival service, Lyft, is in a contentious dispute with the city over whether it must meet regular taxicab regulations.
The $1.2 billion investment, Uber's fifth fundraising round, was led by Fidelity Investments and far exceeds Uber's previous $258 million investment led by Google Ventures. Other investors in the new round include Wellington Management, Summit Partners, BlackRock, venture capital firm Kleiner Perkins Caufield & Byers and existing investors such as Google Ventures and Menlo Ventures.
The company said it expects to soon close a deal with other investors that will bring the total investment to $1.4 billion and nudge Uber's valuation to $18.4 billion.
That would put Uber's worth almost twice that of Dropbox and Airbnb, among the second most valuable venture-backed firms, each valued at $10 billion, according to data from Dow Jones and The Wall Street Journal.
The cash infusion could help passengers’ pockets too. On Friday, Uber announced plans to slash prices by 20 percent or more in most markets.
Uber, founded in 2009, pioneered on-demand car services that make mobile apps for passengers to order a ride and raised the ire of city cab companies who saw passengers flock to the new services.
It has since been joined by Lyft and Sidecar, which were also founded in San Francisco. The fledgling industry operated outside regulatory authority until September, when the California Public Utilities Commission approved new regulations to license ridesharing and required the services to meet safety and insurance standards.
Uber is garnering new financing to boost growth and expand its operations. Kalanick said he will ramp up in Uber’s existing cities and continue its international expansion. Just this week, the company started operations in Miami, Austin and Orlando in the U.S., as well as Lille, France, and Tijuana, Mexico.
Kalanick added that Uber will continue to experiment “aggressively” with lowering prices in an attempt to boost demand and increase the number of trips that drivers can make each hour.
Uber has 900 employees and says it is creating 20,000 jobs a month, apparently referring to the drivers it is signing up. It takes a 20 percent commission from its drivers. It recently started a courier service in Manhattan that may be expanded elsewhere.