Don’t be surprised if mobile ride hailing startup Uber goes public in the next year and a half.
According to an exclusive report published on the Wall Street Journal earlier today, Uber is planning to raise a $1.5 – 2 billion round by the end of this month, citing people with knowledge of the deal. A later report by the New York Times confirmed the news, and added another interesting fact: instead of using the new funds for expansion purposes like the company usually do, Uber plans to use it for “strategic [purposes], with an eye on partnerships.” With the new funding round, Uber is aiming for a ~$50+ billion valuation, although that number can quickly balloon as Uber talks to more investors.
This new round is interesting for a few reasons.
First of all, it would make Uber the most highly capitalized private startup in the world, beating Chinese smartphone manufacturer Xiaomi (last valued at $45 billion).
Secondly, if Uber’s post-money valuation reaches or exceeds $50 billion, the company will join Facebook as the only Silicon Valley startups to have attained a $50 billion valuation as private companies.
But the third point should be the most interesting for Uber observers: going public.
Late last year, as we were preparing our huge “State of Uber” post, we talked to a few of Uber’s investors.
They told us a bunch of stuff about the company, but the one notable thing that stuck out was this: most of Uber’s investors expect the company to IPO when it reaches a valuation in the ballpark of $50 – $100 billion. This belief was established based on several factors: Uber’s aggressive foreign expansion, the predicted maturity of current markets and trajectory that the company is headed towards under the guidance of CEO Travis Kalanick.
On average, Uber raises a new round every seven months. Which means that if Uber hits the predicted $50 billion valuation (which I don’t doubt at all that it will) sometime soon, then it would certainly not be too far-fetched to think that Uber might go public in the next year and a half or so.
As the WSJ highlighted, it is important to note that all current/future investors are/will be investing on Uber’s potential, and not on its current performance (although it has, statistically, been nothing short of spectacular).
When Facebook raised their final round at a $50 billion post-money valuation in early 2011, the valuation was worth about 25 times its prior-year revenue of $2 billion. But given that Uber’s net revenue last year was $400 million, Uber may eventually be worth 120 times its trailing revenue – a legitimate cause of concern for investors who are worried that the company may have taken its eyes off the road of profitability.
Uber’s ubiquitous service currently exist in some 250 markets around the globe, and has secured more than $5 billion in debt and equity financing from investors just five years since inception.
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