Uber turns to Saudi Arabia for USD 3.5 billion cash infusion
06/02/2016|9:56:28 AM|NYTimes

Uber said on Wednesday that it had raised USD 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 USD 62.5 billion. The investment does not cash out any of Uber’s existing investors.

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.

“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.

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.

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.

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.

Though Uber dominates the American market for ride-hailing, it has increasingly seen overseas markets as crucial to its growth.

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 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.

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.

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.

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