How Uber's New $17 Billion Valuation Will Benefit Hollywood Investors
This story first appeared in the June 20 issue of The Hollywood Reporter magazine.
The June 6 announcement that transportation startup Uber Technologies had raised $1.2 billion on a $17 billion valuation is good news for the slew of Hollywood investors who helped fund the company in its early days.
Sure, their stakes are small and undisclosed, but when the San Francisco-based ride-sharing company makes its inevitable public market debut, backers including William Morris Endeavor, whose co-CEO Ari Emanuel was an early user, and music managers Troy Carter and Adam Leber could expect big returns.
"Depending on the amount of money they invested, this is the type of money that is multigenerational in terms of its impact," says Anand Sanwal, CEO of research firm CB Insights. "Investing in these companies is highly risky, but when they pay off, the rewards can be pretty gigantic."
With its recent $1.2 billion funding round -- raised at the eye-popping premoney valuation -- Uber becomes the highest-valued private tech company since Facebook raised money in 2011 at a $50 billion valuation. Uber's round, led by Fidelity Investments with participation from a handful of private-equity firms and existing investors, has transformed the popular app, which summons black sedans or lower-priced rides on-demand, into a force worth nearly as much as Avis Budget Group ($6.25 billion market cap) and Hertz Global Holdings ($12 billion market cap) combined.
"It's remarkable that it was only four years ago this week Uber started operations," CEO Travis Kalanick wrote on the company blog, noting that it now operates in 128 cities. And Uber continues to add services, including the low-cost UberXL SUV, despite regulatory obstacles and protests from taxi drivers. "I think it's still early for Uber," Carter tells THR. "They haven't even penetrated a lot of markets. Look at the valuation of a company like Amazon. We're talking about a company that could be just as large."
Investor interest in Uber is expected to boost other on-demand mobile services. Startups in this space (excluding Uber) have raised $500 million in the past four quarters, according to CB Insights, and Sanwal predicts more. "It's definitely a bit overheated," he says. "There's a lot of nontraditional money flowing in, especially this big money from hedge funds and mutual funds that don't usually invest in speculative private companies."