Uber is expanding across 300 cities on six continents in a race to become the dominant mobile ride-calling app. And surprise, surprise Uber is losing lots of money in the process.
Bloomberg reports that a term sheet for Uber's current fundraising round cited total revenue of $415 million and an operating loss of $470 million. The sheet didn't specify the timeframe of the results, according to Bloomberg, and Uber said the numbers were way out of date.
But it shouldn't be any surprise that Uber is losing boatloads of money as it seeks to lock down its dominant position in one of the fastest-growing sectors of the new, mobile economy. The company pays big bonuses to lure drivers away from competing services, faces an ungodly number of lobbying battles from local taxi companies around the world and still needs to build out its map and data infrastructure that's currently reliant on Google (GOOGL). Google was an early investor and board member, but may end up competing with Uber.
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Some observers have complained about Uber's losses exceeding revenue, but both startups and more established companies have followed the same strategy. We now know, for example, that Twitter (TWTR) lost almost $200 million in 2010 and 2011 as a private company on revenue of only $135 million. It's since turned the ratio around, though the company remains unprofitable. Better examples include Netflix (NFLX) and Amazon (AMZN), which pursued huge market opportunities in their earlier days by ploughing every dollar back into expansion.
Uber's blistering fundraising pace also should have hinted at the company's need for cash. After raising $1.6 billion via Goldman Sachs (GS), Uber is reportedly in the market for another $1 billion from investors and a $2 billion line of credit from banks.
All those billions aren't going to sit in a cookie jar and it's not a case of raising money to set aside for tougher times. Uber is in the fight of its life to beat rivals like Lyft, Ola in India, and Didi Kuaidi in China (which is trying to raise another $2 billion to fuel its rapid expansion).
And lobbyists for the taxi industry seemingly never rest. This week France arrested two top Uber executives there on charges of helping run an illegal service. That followed a near riot in France last week by protesting cabbies.
Some of the war chest may also help Uber fight other big regulatory battles, like the controversy over whether its drivers should be classified as independent contractors or employees.
The leaked figures may explain one thing, however. Losses exceeding revenue might make for a tough debut on the public stock market. So it might be best for Uber to remain private for now, forgoing an initial public offering. IPO investors probably have another year or two before they'll get a chance to back the world's leading online ride calling app.