Ride-sharing service Uber Technologies Inc. said Thursday a new round of funding valued it at $41 billion, a bet by some of the world’s top investors the firm can sustain a breakneck global expansion pace despite fierce challenges from regulators and taxi companies.
The San Francisco-based company collected $1.2 billion that enables it to expand its workforce, lure new drivers, test a delivery service and subsidize prices in some of the 250 cities around the world where it operates. The closely held company has raised eight times as much as its closest ride-sharing rival, Lyft Inc.
The funding is a vote of confidence in Travis Kalanick, Uber’s co-founder and chief executive whose brash personality has courted controversy. A recent privacy scandal stirred by one of Mr. Kalanick’s deputies appeared not to faze investors focused on Uber’s business prospects.
Uber is now valued at $41.2 billion, easily the highest for any private startup now backed by venture capitalists, and above the market capitalizations of publicly traded companies including Delta Air Lines Inc., Charles Schwab Corp. , Salesforce.com Inc. and Kraft Foods Group Inc.
Now, the five-year-old company must prove it can turn a mobile app for hailing a ride into a significant and profitable global business. Its app, which lets people hail a car from professional or nonprofessional drivers with a few clicks and a credit card, has become a part of daily life in cities from Anchorage to Shenzhen, China.
Some of that cash will go into defending its services. Uber is in fierce fights with local regulators in many places where it operates. It has faced protests by taxi drivers, shutdowns and laws aimed at forcing ride-sharing services into compliance with safety measures and work rules governing taxi operators.
Uber also is exploring using its fleet of drivers to transport goods and services in addition to people. The company has tested deliveries of items including ice cream, flu shots and fresh meals and recently poached the head of Google Inc. ’s same-day delivery business.
The latest financing assumes that Uber’s rapid expansion overseas will overcome these hurdles and continue apace, said Bill Gurley, a partner at Uber venture investor Benchmark and a board member of the ride-sharing company.
“International expansion probably is the key theme of the fundraising,” said Mr. Gurley. “We feel remarkably good about where we stand in the domestic market and our real growth initiatives are focused internationally.”
Uber profits by keeping 20% of the fare paid on most rides on its service and gives the rest to its drivers, who work as independent contractors.
It made hundreds of millions of dollars in revenue last year and is growing sales at a clip of more than 40% a quarter, said a person familiar with the company’s operations. That is an increase from earlier this year, when Mr. Kalanick said revenue was doubling every six months.
By the end of next year, Uber expects to be operating at an about $2 billion net annual revenue rate, excluding driver pay, according to the person familiar with the company’s financials. Such growth is coming from a cookie-cutter global expansion, where the company moves quickly to open up shop, splash out incentives to sign up drivers and then hire lobbyists and lawyers to gird for legal challenges from taxi companies and regulators.
“They are doing exactly what they need to do to change the market,” said Dave Ashton, co-founder of SnapCar, another app-based car service in France that competes with Uber. “They don’t even make any effort to comply with what they think are bad laws.”
That plan doesn’t always work. Uber last week suspended operations in Nevada after a judge issued an injunction against the startup amid accusations that it competes unfairly with taxis because it doesn’t follow the same rules regarding drivers, insurance and more. Elsewhere, regulators in Brussels are readying new laws that would allow Uber and taxis to coexist, while a decision from a French court over the possible banning of Uber is due Dec. 12.
In Europe, Uber has been the focus of violent protests by taxi drivers and regulatory bans on a carpooling service it calls UberPop that was unveiled this year. UberPop, which uses drivers without professional taxi or chauffeur licenses, is banned in Brussels and facing court challenges in Berlin. In France, the national consumer-protection agency and the Paris prosecutor say the new service is illegal and are backing a suit against Uber in commercial court.
Uber’s response last month was to hold a news conference at its Paris office to declare that the firm would expand UberPop in Paris. In a presentation before giving televised interviews, executives said their goal is to have 70,000 drivers without professional licenses picking up fares across Paris in two years.
Uber executives say they are operating under outdated laws that they fully expect to change once lawmakers see the service’s popularity with constituents.
“If every time somebody wants to ban us, we just go along with that, we wouldn’t be in business,” said Mark MacGann, Uber’s main lobbyist in Europe and the former head of government affairs at NYSE Euronext in Brussels.
Uber’s strategy has been to get a foothold in a market in any way possible, whether it offers a way to hail traditional metered taxis, livery cabs or drivers without professional licenses through its ride-sharing services. The key is to get potential customers to download the app and then expand the range of services.
In London, the company has tried to recruit taxi drivers, but many drivers of London’s iconic black cabs refuse to work with a company they believe is breaking the law. Cabdrivers say the smartphone app that calculates fare based on time and distance is tantamount to a taximeter, which is only allowed to be used by the more expensive black cabs.
Any delay into a city costs Uber potential market share. Uber hasn’t successfully cracked the Dublin market, for example, where the London-based competitor Hailo Network Ltd. is widespread.
Authorities in Berlin and Hamburg banned the service. In response, Uber lowered the fares drastically in an attempt to appease passengers. But the low fares make it unattractive for drivers to offer their services. In recent weeks, Uber cars have been unavailable in the city.
Mr. Kalanick said in a blog post on Thursday that the Asia Pacific region is a priority for the company’s international growth. It recently opened in Vietnam and Singapore, joined with a rental-car firm in Jakarta and plans to add rickshaws in India.
But the company also faces increased scrutiny in Thailand, Vietnam and Singapore, where regulators are examining the service’s legality. On Monday, Thailand’s transport minister, Prajin Juntong, said the government would ask Uber to cease its operations there because it uses private cars that lack fare meters, among other issues.
Uber hopes to recruit prominent investors in India, Latin America and the Middle East as it raises $600 million, with the goal of fostering powerful new allies who could help the company clear obstacles to growth, according to people familiar with its goals.
Uber is also seeking to rebuild its public image in the wake of controversial comments made last month by one of its executives, who suggested in a private dinner that the company should do opposition research on journalists critical of its business. The incident sparked concerns about Uber employees’ access to its customers personal data, and Sen. Al Franken (D., Minn.) called on the company to explain what data privacy policies it has in place.
“We also need to invest in internal growth and change,” Mr. Kalanick said in the blog post. “Acknowledging mistakes and learning from them are the first steps.”
Uber’s latest valuation is double the amount set by investors just six months ago and is nearly 12 times last year’s total. The company didn’t disclose which investors participated in the funding.
No other private tech startups are valued anywhere near Uber. Four companies currently have $10 billion valuations—home-rental site Airbnb Inc., software company Dropbox Inc., mobile-messaging service Snapchat Inc. and Chinese smartphone maker Xiaomi Inc.—though those valuations could climb quickly with a newly announced funding round. Various reports have said Xiaomi is raising funding at a valuation above $40 billion.
Uber has now raised more than $2.7 billion from a wide range of investors, including mutual-fund managers Fidelity Investments and Wellington Management; venture-capital firms Benchmark, Kleiner Perkins Caufield & Byers and Menlo Ventures; and private-equity firm TPG Growth.
—Chase Gummer, Newley Purnell and Friedrich Geiger contributed to this article.
Authored by Douglas MacMillan at firstname.lastname@example.org
Original article found here.
A renowned technology hub that is home to some of the country's top universities, Boston is emerging as an unlikely battleground for web-based businesses like Airbnb and Uber, with some saying more regulations are needed to prevent the upstarts from disrupting communities and more established industries.
Boston, prompted by the arrival of the mobile app Haystack, recently banned services that allow people to offer their public parking spaces for sale. Now the City Council is considering restrictions on ride-sharing services like Uber, Lyft and Sidecar and lodging websites like Airbnb, HomeAway and FlipKey, which allow users to book short-term stays in private residences. Across the river in Cambridge, home to Harvard and MIT, officials have been trying for years to restrict rideshares.
From New York to San Francisco, cities have been wrestling with the same questions and developing solutions ranging from outright bans to minimum safety requirements. At the heart, officials say, the issue is about balancing public safety and governmental oversight with the services' growing popularity.
But technology companies point out that the push for regulation is ironic in many technology-heavy cities that have built their reputations, in large part, on being on the leading edge.
"For a city known for its innovation and progressiveness, it is shocking that Cambridge would cling so blindly to the past," Uber wrote on its website in June as it called on supporters to speak out against proposed regulations.
Andrea Jackson, the chair of Cambridge's Licensing Commission, said Uber was oversimplifying the challenges emerging business strategies pose to cities.
"We know that these things are likely here to stay," she said. "My only concern is that they are safe. I want to make sure the drivers have background checks. I want to make sure they have adequate insurance."
Safety mandates have been imposed in other cities. Chicago, for example, assesses licensing fees and requires rideshare companies to submit to background checks, vehicle inspections, driver tests and random drug screens of their employees. The companies are also required to obtain $1 million in commercial auto liability coverage.
Uber spokesman Taylor Bennett said the company understands the need for thoughtful regulations but will fight attempts to protect the local taxi industry.
Cab owners complain rideshares offer lower prices because they avoid licensing fees and other costly mandates imposed on their highly-regulated industry. Boston-area cab drivers staged a noisy, rolling protest around Uber's downtown Boston office in May.
"Simply reacting to taxi or creating regulations or ordinances to protect taxi is protectionism, and that only serves one entrenched industry when consumers are clamoring for more and better options to get around town," Bennett said.
Bennett said Uber is focused on securing specific, statewide authority from legislators to operate in Massachusetts, as they have in Colorado and other states.
For short-term lodging services, cities have focused their energies on imposing local hotel taxes, establishing basic registration programs, and making sure property owners meet minimum housing standards.
Austin, Texas has set up a licensing system with an annual fee and limits on the number of units in a building - or houses in a residential neighborhood - that can be rented at a given time. Portland, Oregon allows single-family homeowners - but not apartment and condo owners - to offer short-term rentals, as long as they complete a safety inspection and neighbor notification process.
In Boston, City Councilor Salvatore LaMattina, who has requested public hearings on Airbnb-type services, says short-term lodging operators should, at minimum, be required to register with the city, so officials at least know where they are, for safety reasons.
He's also concerned the services could eventually end up pricing out families and full-time residents. Landlords, increasingly, are turning their apartments and condos into full-time lodging operations rather than renting them to longer-term tenants, he says. "They're taking away the affordable housing stock," LaMattina said. "I'm working to keep my neighborhoods stable, with families that know each other."
Airbnb spokesman Nick Papas disputed that notion, citing a company-commissioned study that suggests offering rooms for short-term rentals provides extra income to families living in high-cost metropolitan areas.
"We've heard countless stories from people who have been able to stay in their home and the neighborhood they love thanks to Airbnb," he said.
Papas says the San Francisco company has already had "productive conversations" with Boston leaders and looks forward to working on "clear, progressive and fair" rules for home sharing. But he declined to elaborate on what proposals the company would support and which it would strongly oppose.
"We believe people should be able to share the home in which they live," Papas said.
Brooks Rainwater, of the National League of Cities, which is helping cities develop strategies to address these new services, says it's not surprising that the most pitched battles are playing out in tech-friendly cities like Boston and Cambridge.
The college students and young professionals that comprise a large part of their populations are usually the early adopters. And historical urban centers are also the ones that tend to have outdated and oftentimes byzantine local codes.
"It's really a reflection of cultural shifts that are happening in cities globally. As society is speeding up, people are expecting services are their beck and call," Rainwater said. "The landscape is constantly shifting. ... Cities are actually working fairly swiftly to address these issues."
Authored by PHILIP MARCELO ap.org.
It’s not surprising that Airbnb, the peer-to-peer room rental service, has decided to court business travelers by pairing up with the travel expense manager Concur. Global business travel spending is shooting through the roof, and working with the deep-pocketed business travel world beats dealing with thesquatters and scammers that crop up among Airbnb’s leisure-heavy clientele.
Linking up with Concur may lessen the friction, for businesses, of booking and expensing a room with Airbnb, but it won’t necessarily turn Airbnb into a seamless, business-facing company. Harried and demanding business travelers should beware of the following:
The discounts aren’t as great outside the most expensive US citiesAirbnb bookings aren’t always the bargain they appear to be. That’s partly because business travelers are more likely to need an entire apartment for work privacy, not just someone’s spare room. A US city-by-city study by the web data company Priceonomics found that while renting a private room on Airbnb is about half as expensive on average than staying in a hotel, renting an entire apartment is less of a bargain, with a cost savings of just over 20%.
And Airbnb is not always cheaper in smaller cities, where apartment inventory and living costs are lower. Big companies also have the bargaining power to negotiate deep discounts on hotel rooms for employees--up to 40% off the rack rate, according to hotel managers—which, if you work for a big firm, makes the hassles of booking through Airbnb less appealing.
Successful business trips are worth spending the moneyGetting travel deals is often necessary for leisure travelers, and minimizing travel expenses is a priority for businesses too. But if you’re skimping on your lodging to justify a business trip, it begs the question of whether the travel is worth it, in these days of video-conferencing and lightning-fast communications. Business trips can contribute amply to a company’s growth and seal deals that wouldn’t go through on the phone or virtually—but only if the in-person visit pays off.
If your Wi-Fi cuts out, using Airbnb probably wasn’t worth itBusiness travelers may be willing to forego a lot of niceties to save money for their company, but an internet connection isn’t optional for most. In a recent survey by Hotels.com, 56% of business travelers said that a Wi-Fi connection was the most needed amenity when booking a hotel room, versus 34% of leisure travelers. That makes sense: losing your internet during a rushed business trip can be a disaster.
People renting out rooms or apartments don’t have the collective bargaining power to do battle with internet service providers during an outage, nor the needed sense of urgency (especially if they’re away on vacation themselves). They also don’t typically have a business center with Wi-Fi to offer for a quick fix.
I’m a frequent Airbnb user for leisure travel, and can attest that a bad or nonexistent internet connection is a regular feature of the Airbnb travel experience, even when the service is promised by the renter. Internet troubles haven’t mattered much when I’ve traveled for leisure, but when I’ve had Airbnb internet troubles while traveling for business, the panic was enough to turn me off using the service for business altogether.
Authored by Roya Wolverson via qz.com.