According to a Bloomberg report yesterday (Thursday), Uber is in talks to begin a new round of fundraising that would value the on-demand taxi-booking company at more than $10 billion.
The company is reportedly looking to raise less than $1 billion, and has again stoked rumors of an Uber IPO.
The $10 billion valuation would be a dramatic increase from where the company was previously valued. Last summer, Uber completed a $258 million round of fundraising at a valuation of $3.5 billion.
Uber allows users to book a ride through a smartphone application, which uses navigation software to pinpoint the locations of users and drivers. The company typically uses more upscale vehicles than traditional taxi cabs.
According to the report, Uber is looking to raise money so it can boost growth and operations. Company officials have not publicly discussed the report, however.
Uber was founded in 2009 following an incident in which founders Travis Kalanick and Garrett Camp couldn't hail a taxi during a stay in Paris. Throughout its first five years, the company has raised more than $307 million, with Benchmark, TPG Capital, and Google Ventures serving as the largest investors.
"Our vision is to build a technology company that changes transportation and logistics in urban centers around the world, and this financing gives us the fuel to make that a reality," Kalanick wrote on the company's blog during its previous round of funding.
Today, the company operates in 115 cities across the world and has more than 900 employees, and the company makes its money by charging a 20% commission fee from its drivers. According to thenumbers leaked to Gawker in December 2013, Uber was making approximately $20 million in revenue per week at the time.
In November, Kalanick addressed rumors that the company may file for an IPO but said that he had no plans to take the company public in the near future. Now six months later, the company is planning another massive round of fundraising, which only leads to further IPO speculation.
Uber officials may once again reject the notion of an IPO in the near future, but as the company continues to grow and raise money, it will eventually make the public leap.
And these are the factors that will be worth watching in a potential Uber IPO...Uber IPO: The Major Issues Facing the Company
The biggest issue facing Uber ahead of a possible IPO is its competition. The market has been flooded with similar ride-booking apps including SnapCar, Sidecar, LeCab, and Allocab, just to name a few.
While these apps are much smaller and less well-known as Uber, there is one competitor that is quickly gaining ground: Lyft.
In December, Lyft was experiencing a growth rate of nearly 6% per week. That compared to the 2.8% growth rate Uber saw in the five weeks of data that was released to Gawker.
And the size of Lyft should be a concern for Uber as well. Last April, Lyft raised more than $250 million and expanded its operation to 60 cities in the United States. At the time, that put Lyft on par with the $307 million Uber had raised.
Additionally, that influx of cash allowed Lyft to drop its prices, which created an even more intense battle with Uber.
Uber's price points have long been irksome to some users. The company adjusts its rates depending on the time of day, user traffic on the app, or day of the week. That has created numerous negative headlines about Uber users getting stuck with exorbitant bills at the end of their rides. Before a potential IPO, Uber will need to address these user concerns.
Finally, Uber has been facing a number of regulatory issues.
Essentially, Uber is an unregulated company operating in the regulated taxi and limousine industry. Uber has continually claimed that it is a technology company that pairs drivers with travelers like any other travel company. That has drawn the ire of taxi companies and government regulators. Next month for instance, a 10,000-cab protest will take place in London regarding this regulatory issue.
With an estimated $10 billion market valuation, Uber is the clear leader in the driver-on-demand industry. It's raised millions of dollars and is poised for an IPO sometime in the next several years.
But in the meantime, Uber still has numerous issues it must address.
Is an Uber IPO something you would be interested in investing in? Join the conversation on Twitter @moneymorning using #Uber.
You can make money in stocks no matter what interest rates do. And here are three excellent examples...
- Bloomberg: Uber Said to Be in Funding Talks for More Than $10B Value
- TechCrunch: Hey Uber, Lyft Is Growing Faster Than You
- The Financial Times: Lunch with the FT: Travis Kalanick
- The Detroit Free Press: Uber Car Service Rolling into Regulatory Trouble in Detroit
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