Uber Valued at More Than $50 Billion
Uber Valued at More Than $50 Billion
By DOUGLAS MACMILLAN and
TELIS DEMOS
Updated July 31, 2015 8:50 p.m. ET
Uber Technologies Inc. has completed a new round of
funding that values the five-year-old ride-hailing company at close to $51
billion, according to people familiar with the matter, equaling Facebook Inc.’s
record for a private, venture-backed startup.
Uber raised close to $1 billion in the round, one of the
people said, bringing the San Francisco company’s total funding to more than $5
billion. Uber had briefed investors on a plan to raise between $1.5 billion and
$2 billion in the round, The Wall Street Journal reported in May.
Investors in the latest round include Microsoft Corp. and
the investment arm of Indian media conglomerate Bennett Coleman & Co.,
another person familiar with the matter said, as Uber seeks to bolster its technology
and expand outside the U.S.
An Uber spokeswoman said the company had filed a document
in Delaware in May to authorize the latest funding round. “We aren’t commenting
on additional speculation,” the spokeswoman said Friday.
Microsoft declined to comment. A Bennett Coleman
executive didn't immediately respond to a request for comment.
Uber’s valuation has now reached the high-water mark set
by Facebook in 2011, when the social-networking company was nearly seven years
old.
The ride-hailing company also is more highly valued
relative to its revenue than Facebook was. At the time of its $50 billion
round, Facebook had generated roughly $2 billion in revenue in the previous 12
months.
Uber had revenue of more than $400 million last year, the
Journal has reported. Uber has told some investors it expects revenue to grow
to $2 billion this year, the Journal reported.
Uber’s faster climb to $50 billion reflects its
aggressive global expansion into more than 300 cities and growing popularity
ferrying millions of riders daily.
The surge also is a sign of the growing value of
technology companies, both public and private. The tech-heavy Nasdaq Composite
Index is nearly twice its level of January 2011. Facebook itself, which went
public in 2012, is now valued more than five times as high, at $267 billion.
Valuations of private companies are soaring partly
because mutual funds, hedge funds, sovereign-wealth funds and other investors
not traditionally known for pouring money into startups are now flocking to
those that look especially promising. In the first half of 2015, 107 companies
world-wide raised “mega” rounds of more than $100 million, up from 56 a year
earlier, according to KPMG and CB Insights.
Uber tops the list of 104 venture-backed startups valued
at $1 billion or more, up from 77 at the beginning of this year, according to
Dow Jones VentureSource. Uber’s latest financing vaults it past Chinese
smartphone maker Xiaomi Corp. as the world’s most highly valued private
startup. Xiaomi attained a $46 billion valuation last December.
In contrast, Facebook’s early growth came in the midst of
a market correction, which forced its own valuation to drop 33% in a 2009
funding round.
Uber Chief Executive Travis Kalanick has proven to be an
adept fundraiser, creating strange bedfellows among corporate rivals such as
Microsoft, Google Inc., and Amazon.com Inc. founder Jeff Bezos.
A stake in Uber has helped establish venture-capital firm
Benchmark as one of the most prominent investors in the smartphone era.
Increasingly, Uber is drawing investment from outside the
U.S., helping fuel the company’s global expansion. Uber suffers losses in many
cities where it operates and has dipped into its cash reserves to subsidize
deep discounts to passengers and reward new drivers.
The company hopes to attract enough drivers and
passengers that its business model becomes profitable.
For its latest funding, Uber sought out large media
conglomerates in regions of the world where the company is trying to build
grassroots support for its battles with traditional taxi operators and local
regulators.
Times Internet, which runs investments and oversees
websites for Bennett Coleman, contributed to the new investment round after
taking a stake in Uber earlier this year as part of a marketing deal.
Separately, Uber said this week that it would invest $1
billion in India in the next nine months. The company has faced regulatory
roadblocks in the country since December, when the app was banned after a woman
said she was raped by an Uber driver. The driver denies wrongdoing and is
currently on trial.
Uber said it immediately suspended the driver’s account,
in line with company policy “following allegations of a serious incident.” Uber
expressed regret and said it is cooperating with the police investigation.
Last year, Uber said it raised $600 million from Baidu
Inc., China’s leading search engine. That alliance has helped Uber compete with
homegrown Chinese rival Didi Kauidi Joint Co., which has the support of China’s
top two Internet companies, Alibaba Holding Group Ltd. and Tencent Holding Ltd.
Uber also has held talks with investors to raise funds
for UberChina, a separate unit funded by local investors. That round could be
closed as soon as next week, the person familiar with the situation said.
Not all of Uber’s deals have gone smoothly. Google
invested more than $250 million in 2013 and has helped Uber add new users by
promoting ride-sharing in Google’s popular mobile maps. But friction has
emerged between the two companies in recent months as Uber has taken steps to
compete with Google in self-driving cars.
Uber’s rapid appreciation has helped fuel a shadow
economy around the ownership of its private shares. A crop of financial
middlemen has emerged to form investment pools to flip slices of Uber stock to
other investors, sometimes out of the sight of the company, a practice that has
sparked an investigation by the Securities and Exchange Commission.
Uber is also ramping up its investment in new
technologies. Earlier this year, the company poached 40 researchers and
scientists at Carnegie Mellon University’s world-class robotics lab to staff a
new research facility in Pittsburgh. Uber doubled some scientists’ salaries and
offered bonuses of hundreds of thousands of dollars to lure them away.
Microsoft is one of a handful of large software companies
with experience in online maps, an area where Uber has looked to develop its
own capabilities. In a deal announced in June, Uber acquired assets related to
street imaging and 3-D views used by Microsoft’s Bing Maps service and offered
jobs to roughly 100 of its workers.
Microsoft also invested in Facebook when the social
network was emerging as a fast-growing private company. The Redmond, Wash.,
software giant paid $240 million for a 1.6% stake in Facebook in 2007.
Microsoft sold nearly $250 million worth of shares in Facebook’s IPO, and its
remaining stake would be worth $2.5 billion today.
Uber hasn't publicly discussed plans for an initial
public offering, but the company has sold convertible debt to investors in
which the value is tied in part to a future IPO price. Uber also negotiated a
$2 billion credit line with a group of big banks, a move often made by
companies planning to go public, the Journal has reported.
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