Seems like the management of super-powered transport startup Uber has been bumbling and fumbling lately, doesn’t it? But not on Wall Street, where investors are reportedly lining up to add more than $1 billion to Uber’s coffers in a deal that will value the company at as much as $40 billion, Bloomberg reports.
That’s a staggering valuation for a private company, topped only by Facebook’s (FB) 2011 fundraising round that valued the social network at $50 billion the year before it went public.
Potential investors, including two leading mutual fund companies, T. Rowe Price (TROW) and Fidelity Investments, haven’t been scared off by the well-publicized missteps. Buzzfeed reported last week that Uber Senior Vice President Emil Michael was threatening to investigate a journalist. A couple of other writers have reported that Uber executives apparently tracked their personal use of the service. And The Verge highlighted that Uber alleged efforts to sabotage competitor Lyft.
Still, there is no evidence yet that the bad press has risen to the level where mainstream consumers have noticed. Uber moved to contain the damage, with Michael issuing an apology, CEO Travis Kalanick condemning the remarks and the company deciding to hire outside lawyers to review its privacy practices.
And, despite battles with local taxi regulators in some cities, Uber’s market opportunity still looks immense. The company is able to harvest great intelligence about future expansion because current customers open the Uber app in new cities as they travel. That helps Uber read the future and estimate where demand will be strongest.
That future includes not just point-to-point passenger rides, but also potentially other kinds of local delivery services.
There is “a very good chance” that Uber could become a dominant delivery service for groceries, packages and other items, displacing various efforts by companies like Amazon (AMZN) and Google (GOOGL) to develop separate services, independent analyst Ben Thompson noted this week.
“More likely, Uber will become the delivery network of choice for an ecosystem of same-day delivery retailers,” Thompson wrote. “Needless to say, that will be a lucrative position to be in, and it will only do good things for Uber’s liquidity.”
Uber will use the additional capital raised to fuel even faster expansion, as many attribute its market leading position to its speed in entering new markets and quickly expanding service to 220 cities around the world. The company last raised money in June, collecting $1.2 billion at a valuation of $17 billion from a group of investors led by Fidelity.
Investors see large, private tech companies as among the best bets for high growth while many public tech companies struggle to stay relevant and grow at all. Fidelity and T. Rowe, in particular, have used venture capital investments to bolster returns for their funds, as well as gaining an edge in buying more shares when the companies eventually do go public.