Uber: $1.2 Billion Funding and a Valuation of Over $41 Billion

Uber just finished raising $1.2 billion to continue its expansion throughout the world, specifically in the Asia Pacific Region. After this recent funding, Uber has an expected valuation of $41.2 billion. The startup has valuation higher than well-established companies like Delta Air Lines Inc. and Kraft Foods Group Inc. Although Uber didn’t announce the investors that contributed to the $1.2 billion, people familiar with the matter stated that Middle East sovereign wealth fund Qatar Investment Authority, Valiant Capital Partners, Lone Pine Capital, and venture capital firm New Enterprise Associates invested for the first time in Uber.

Investors seem confident that Uber will continue to sustain its expansion, although it is currently facing many challenges. Recently, Uber had a reputation issue where an Uber executive was caught discussing the possibility of spying on the private lives of journalists writing negative stories on Uber. This poses a question on how the startup treats private information collected from passengers. Uber has also been dealing with challenges from regulators as they claim that Uber has an unfair advantage over local taxi companies because it doesn’t follow the same regulations enforced on taxi companies. However, Uber is hopeful that lawmakers will approve its business model once they see Uber’s popularity with consumers.

Investors are optimistic on Uber’s future based on its rapid expansion. Today Uber operates in more than 250 cities around the world, while a year ago it operated in only 60 cities. Its valuation doubled the amount from just six months ago, and it is almost 12 times last year’s total. The startup doesn’t report revenue, but Wall Street Journal insiders reported that Uber’s revenue has been growing at a rapid rate of 40% per quarter.

What’s next for Uber? The startup has reported that it will spent the newly raised $1.2 billion to continue aggressively expanding on international cities; focusing on Asia Pacific region. It will defend its service from local regulators by investing on lawyers and lobbyists. Lastly, the startup will invest on exploring a new area of service, in which it will provide delivery of goods and services. Uber has stated that it might continue to raise funds for its strategic expansions. It will focus on raising approximately $600 million form investors in India, Latin America, and the Middle East. Additionally, Uber is raising over $1 billion through convertible debt sold to Goldman Sachs’s wealth management clients. Clients can buy a 6 year bond in Uber that will convert into equity at a 20%-30% discount to the Uber’s valuation at the time of the IPO. If Uber does not go public in 4 years, the bond’s coupon will increase. This sends a sign to investors that there is pressure for Uber to go public within the next 4 years.

Sources: WSJ, NY Times DealBook, Bloomberg

By: Natalia Graca

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