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Uber Turns to Saudi Arabia for $3.5 Billion Cash Infusion Uber Turns to Saudi Arabia for $3.5 Billion Cash Infusion
(about 7 hours later)
SAN FRANCISCO — In its quest to build a global empire, Uber has turned to the Middle East for its biggest infusion of cash from a single investor.SAN FRANCISCO — In its quest to build a global empire, Uber has turned to the Middle East for its biggest infusion of cash from a single investor.
Uber said on Wednesday that it had raised $3.5 billion from Saudi Arabia’s Public Investment Fund, the kingdom’s main investment fund. The money was part of the ride-hailing giant’s most recent financing round and continued to value the company at $62.5 billion. The investment does not cash out any of Uber’s existing investors. Uber said on Wednesday that it had raised $3.5 billion from Saudi Arabia’s Public Investment Fund, the kingdom’s main investment fund, in one of the largest-ever investments into a privately held start-up.
As part of the investment, a managing director at the Public Investment Fund, Yasir Al Rumayyan, will take a seat on Uber’s board, joining Uber’s chief executive, Travis Kalanick, and other directors, including Arianna Huffington. The money was part of the ride-hailing giant’s most recent financing round and continued to value Uber at $62.5 billion. The investment, which was months in the making, does not cash out any of Uber’s existing investors.
“We appreciate the vote of confidence in our business as we continue to expand our global presence,” Mr. Kalanick said in a statement. “Our experience in Saudi Arabia is a great example of how Uber can benefit riders, drivers and cities and we look forward to partnering to support their economic and social reforms.”
Uber, which has viewed the Middle East as an important area in its expansion, said the investment further aligned the company with Saudi Arabia as the kingdom planned to transform its economy, reducing its dependence on oil and improving employment.Uber, which has viewed the Middle East as an important area in its expansion, said the investment further aligned the company with Saudi Arabia as the kingdom planned to transform its economy, reducing its dependence on oil and improving employment.
The investment from Saudi Arabia is one of the biggest single investments collected by the technology world’s top privately held companies. Uber, whose valuation makes it Silicon Valley’s most valuable private business, has collected billions at a rapid clip over the last three years. Until now, Saudi Arabia has not been known for venture capital investing, though some members of its royal family have made some deals. Prince Alwaleed bin Talal, for instance, has invested in Lyft, a competitor of Uber.
Uber has drawn from a wide variety of investors, including traditional venture capital firms, mutual fund giants like BlackRock and wealthy clients of firms like Goldman Sachs and Morgan Stanley. Other sovereign wealth funds like that of Qatar have also invested. “We appreciate the vote of confidence in our business as we continue to expand our global presence,” Travis Kalanick, one of Uber’s founders and its chief executive, said in a statement. “Our experience in Saudi Arabia is a great example of how Uber can benefit riders, drivers and cities and we look forward to partnering to support their economic and social reforms.”
Other private tech darlings have been busy raising money as well. The messaging company Snapchat raised $1.8 billion in its most recent round, according to a regulatory filing last month. Among Snapchat’s new investors in the round were the Alibaba Group of China and the investment firms General Atlantic, Sequoia Capital, T. Rowe Price and Lone Pine Capital. Some of those investors invested at different valuations, according to a person briefed on the financing who spoke on the condition of anonymity because the details were private. The investment came together after David Plouffe, an Uber board member, traveled to the Middle East in March and was invited to the Saudi fund for a briefing. The discussions heated up thereafter, culminating in the deal.
Other smaller tech companies have not fared as well in raising money over the last several months. Some so-called unicorns, the term used to refer to businesses valued at more than $1 billion, have struggled to collect new investments, and some, like Jawbone, have had to raise money at lower valuations. Uber, which is Silicon Valley’s most valuable private business, has collected more than $11 billion from investors since its inception. The company has redefined private fund-raising, drawing hundreds of millions in new cash at a rapid pace of once every six months or so, to fuel its operations globally.
Uber is racing to defend its territory — which covers 460 cities in more than 69 countries — against incumbents in other regions like Southeast Asia and Europe. China, in particular, is a difficult battleground, as Uber is spending millions in a subsidy war with Didi Chuxing, the dominant ride-hailing start-up in the country. Both companies have made no indications that they will back down. Uber has drawn capital from a wide variety of investors, including traditional venture capital firms, mutual fund giants like BlackRock and wealthy clients of firms like Goldman Sachs and Morgan Stanley. Other sovereign wealth funds, like that of Qatar, have also invested.
Though Uber dominates the American market for ride-hailing, it has increasingly seen overseas markets as crucial to its growth. Other tech darlings have been busy raising money from private investors as well, pushing back any need to join the public stock markets.
Among Uber’s increasingly important overseas markets is the Middle East, where the company has already said it plans to invest $250 million. The service operates in 15 cities and nine countries in the region, including Saudi Arabia. The messaging company Snapchat raised $1.8 billion in its most recent round, according to a regulatory filing last month. Among Snapchat’s new investors in the round were the Alibaba Group of China and the investment firms General Atlantic, Sequoia Capital, T. Rowe Price and Lone Pine Capital.
“We’ve seen firsthand how this company has improved urban mobility around the world, and we’re looking forward to being part of that progress,” Mr. Al Rumayyan said in a statement. “As the Kingdom of Saudi Arabia’s sovereign investment arm, we’re focused on achieving attractive long-term financial returns from our investments, while supporting Saudi Arabia’s Vision 2030, the blueprint for diversifying our economy away from oil.” Other tech start-ups have not fared as well in raising money over the last several months. Some so-called unicorns — businesses valued at more than $1 billion — have struggled, and several, like the wearables maker Jawbone, have had to raise money at lower valuations.
The ride-hailing start-up said that in the Middle East it now has over 395,000 active riders, up fivefold from a year ago, and 19,000 drivers. Uber said that in Saudi Arabia — where women cannot drive — it has sought to aid the kingdom’s Vision 2030 plan, which includes more than doubling the number of women in the overall work force by 2030, to 30 percent. Already, roughly 80 percent of Uber’s riders in Saudi Arabia are women, according to the company. Uber has been spending not only to expand but also to defend its territory — which covers 460 cities in more than 69 countries — against incumbents in regions like Southeast Asia and Europe. China, in particular, is a difficult battleground, as Uber is spending millions in a subsidy war with Didi Chuxing, the dominant ride-hailing start-up in the country.
Meanwhile, Saudi Arabia has looked for ways to expand its economy beyond oil, with the Public Investment Fund — expected to grow to $2 trillion under management — serving as a crucial part of that strategy. Investing in an American company like Uber, however, could run counter to Saudi Arabia’s threat to sell off investments in the United States, issued during discussion about a bill in Congress that would allow the kingdom to be held responsible in American courts for any role in the Sept. 11, 2001, attacks. The Middle East is among Uber’s increasingly important overseas markets; the company has already said it plans to invest $250 million there. Uber has rolled out its service in 15 cities and nine countries in the region, including Saudi Arabia.
The start-up said that it now has over 395,000 active riders in the Middle East, up fivefold from a year ago, and 19,000 drivers.
Uber said expanding its service may be a boon for Saudi Arabia, a country where women are not allowed to drive because of fatwas, or religious edicts, issued by conservative Muslim clerics that uphold a distinct segregation between the sexes. There is no formal law prohibiting women from driving in the region.
“Of course we think women should be allowed to drive,” said Jill Hazelbaker, an Uber spokeswoman. “In the absence of that, we have been able to provide extraordinary mobility that didn’t exist before — and we’re incredibly proud of that.”
Still, Uber did not say that it planned to hire women drivers in the country, unlike in most other regions where the company operates.
Roughly 80 percent of Uber’s riders in Saudi Arabia are women, according to the company. Uber has sought to aid the kingdom’s Vision 2030 plan, which includes more than doubling the number of women in the overall work force by 2030, to 30 percent.
Princess Reema bint Bandar al-Saud, who sits on Uber’s public policy advisory board, has worked with Uber to usher the service into the country and has the support of female users of the service, said in an interview that the investment was a clear sign of change coming to the region.
Saudi Arabia has looked for ways to expand its economy beyond oil, with the Public Investment Fund — which is expected to grow to $2 trillion under management after the country’s state-owned oil company goes public — serving as a crucial part of that strategy. The $3.5 billion investment in Uber is out of the Saudi fund’s roughly $750 billion in total United States assets.
Investing in an American company like Uber, however, could run counter to Saudi Arabia’s threat to sell off investments in the United States, issued during discussion about a bill in Congress that would allow the kingdom to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.
Part of Uber’s possible attraction in bringing in a sovereign wealth fund like Saudi Arabia’s is that such investors have far longer investment horizons than venture capitalists, who generally seek to cash out their investments after seven to 10 years.Part of Uber’s possible attraction in bringing in a sovereign wealth fund like Saudi Arabia’s is that such investors have far longer investment horizons than venture capitalists, who generally seek to cash out their investments after seven to 10 years.
As part of the investment, the managing director at the Public Investment Fund, Yasir Al Rumayyan, will take a seat on Uber’s board, joining Mr. Kalanick and other directors, including Arianna Huffington.
“We’ve seen firsthand how this company has improved urban mobility around the world, and we’re looking forward to being part of that progress,” Mr. Al Rumayyan said in a statement.