Under fire but undeterred, Uber set for major investment

21 Nov 2014

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Uber, the ride-sharing service going through phenomenal growth while encompassing an amazing string of controversies, is set for a fresh batch of major investment.

First, lets start with a little recap. In recent months, weeks and even days, Uber has faced criticism for claiming that smear campaigns against critical journalists – which actor Ashton Kutcher has defended – is the way forward. Uber has also faced criticism for its hiring policies and sexist marketing campaigns in some parts of the world. 

Major cities such as Toronto and Berlin have campaigned against the service being available in their jurisdictions and the Twitter accounts of various executives have featured numerous apologies.

However, as a business, Uber is flourishing. Flourishing more than perhaps any business in the world at the moment. Investors are seemingly falling over themselves for a piece of Uber, before it gets floated at some stage in the near future.

Rivals such as Lyft and Hailo don’t even come close to enjoying the investor interest that Uber does. And that’s becoming clearer by the day.

As The Wall Street Journal reports, Travis Kalanick, CEO of Uber, recently presented to some of the world’s top investors at a two-day, closed-door tech conference in Las Vegas, organised by Uber investor Goldman Sachs.

Kalanick spoke of the start-up’s immense growth across 230 cities around the world “and highlighted new initiatives, like its carpooling service in the US and a plan to use rickshaws to shuttle around passengers in India, according to a person in attendance”.

“Uber has held talks with investors to raise more than US$1bn, people familiar with the matter have said, and the round of funding could value the start-up at more than US$30bn,” according to The Wall Street Journal.

The investment into Uber is slightly odd in that it owns very little ‘product’. Other than its software and managing costs, Uber uses “cash as a competitive weapon,” according to Business Insider.

“When a competitor enters an Uber market, one investor in an Uber-competitor says, Uber immediately and radically cuts its prices. Uber then happily loses money on each ride, knowing that the new competitor, with inferior scale, will lose even more money on each ride.

“Uber bleeds the competitor until the competitor realises that Uber will do whatever it takes to crush it. The competitor then often gives up and withdraws — and Uber raises its prices again. It takes a lot of cash to compete that way, but Uber has lots of cash. And after this round, it will have even more cash.”

Car image via Shutterstock

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Gordon Hunt is a journalist at Siliconrepublic.com

editorial@siliconrepublic.com