This weekend’s buzz in Wall Street investment circles was the news that personal taxi and transportation provider Uber Technologies raised an additional $1.2 billion from a consortium of mutual fund and private equity investors and that the current valuation of this technology provider is pegged at over $18 billion. That’s “B” as in billions, more than that of some established service brands.
The latest round of funding included some big, well-known names such as BlackRock, Fidelity Investments, Google Ventures, Kleiner Perkins, Menlo Ventures, among others.
If you are not familiar with Uber, its smartphone anchored technology allows consumers to hail auto transportation operated by a cadre of contract drivers. This privately owned provider currently provides services in over 130 cities and is disrupting traditional taxi for hire operators in these cities. The five year old company reportedly has revenues in the hundreds of millions of dollars and has turned a profit in some of its top markets. It is unclear whether total operations are currently profitable. The company’s current lofty valuation brings back memories of the prior .com Internet explosion of tech companies valued in the stratosphere, only to reach points of valuation reality after the hard numbers became more visible. Uber also competes with other personal transportation disruptors such as Lyft.
However, it is important to note that the secret sauce for Uber is its software algorithms that route vehicles to consumers needing transportation and a flexible fare structure that charges a premium in periods of high demand for transportation services such as worker commuting periods, major storms, or perhaps when a major attraction has completed and lots of potential fares line-up to secure transportation.
Indeed, Uber has supply and demand chain technology roots, and that fact has not been overlooked by financial investors. In its reporting over the weekend, the Wall Street Journal noted that in addition to transporting people, Uber has the potential to create other services opportunities that penetrate or disrupt last mile logistics networks. That may include sending packages, food, medicines or other items between two points in a city. Indeed, Uber can be another player in same day delivery for online fulfillment.
While being positioned as the next disruptor in transportation services, Uber faces lots of obstacles in its current growth trajectory. The service markets it competes within are indeed tough to penetrate because they involve lots of entrenched players with political, regulatory and organized labor connections. Uber was recently forced to back out of one city, that being Vancouver.
None the less, the provider is a current day reminder that advanced technology and new thinking can disrupt any established service-focused market. An infusion of over a billion dollars helps as well, and adds more evidence to a new cycle of funding for supply chain focused technology innovators.