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Looking Down the Road at Uber

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Our regular readers know that I seldom advocate predicting the future. Today, I am breaking with that ‘tradition’ to advise taking a look down the road that ride-sharing service, Uber, is traveling. Uber’s hailing-a-car on-demand service is now operational in major metropolitan areas around the world, making headlines nearly everywhere it goes. I would also typically not write about a privately-held company, but  something  happened last week that leads me to believe that investors might want to begin looking more closely at Uber.

Uber’s “Biggest-Ever” Funding News

On 21 January, Goldman Sachs confirmed that it had raised $1.6 billion in the latest round of funding for the disruptive start-up. The company had just raised $1.2 billion in December 2014 . Uber can now lay claim to having “one of the richest-ever valuations for a private start-up,” in excess of $41 billion.

But, here’s the kicker: The investments were made in convertible debt. In fact, speaking of biggest-evers, it is one of the biggest-ever sales of convertible debt. And that is exactly the reason that investors need to be thinking about Uber in terms of IPO preparedness.

For certain, the Goldman Sachs clients have a leg-up on others, with the terms of the funding agreement granting them discounts of 20 to 30 percent when converting to equity in an IPO. This sends a strong signal that Uber may be seriously considering such a move. In fact, if Uber does not go down the IPO road within four years, the interest rate that it pays to the Goldman clients will increase.

I’m inclined to think that an IPO will be announced sooner rather than later.

Uber’s “Biggest-Ever” Operational News

Collaborative Economy analyst and expert commentator, Jeremiah Owyang, founder of Crowd Companies, has closely monitored and documented Uber and other start-ups, like Airbnb and Lyft. On 14 November 2014 he posted a comparison of start-up funding. As of that date, the total funding reported for 219 start-ups world-wide was $10.8 billion. Uber was at the top of the list with $2.7 billion, 25% of the total. What’s more, second-ranked Airbnb had raised only $795 million, making it abundantly clear that Uber is in an entirely different class than other start-up companies.

  • Uber has been operational for 4.5 years.
  • Uber offers ride-sharing in one form or another in 270+ cities
  • Uber has provided rides for more than 1.6 million people.
  • In London alone, Uber has provided more than 900,000 rides and created more than 7,000 jobs.

Uber’s growth has not been without controversy. Taxi services and other competitors have pushed back hard, especially when Uber simply opens its car doors for riders, apparently disregarding governmental regulations and licensing requirements. The company has been banned or otherwise told to stop operating in cities like Madrid, Beijing and Bangkok, but that is not going to stop the driving force behind Uber, founder Travis Kalanick.

Kalanick spoke recently in Munich and shared his continuing vision for the growth of Uber. He said, “We want to make 2015 the year where we establish a new partnership with EU cities.” His plans include creating 50,000 new jobs throughout Europe.

I’m Not the Only One

Silicon Beat has Uber at the top of the list of Top 10 Anticipated IPOs of 2015. Ironically it also occupies the top spot on Nasdaq’s Top 10. I’m seriously thinking of putting it at the top of my own list. You might want to consider doing the same.

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