Saudi Arabia’s Sovereign Wealth Fund has just poured US$3.5 billion in the San Francisco-based ride-hailing company Uber Technologies. Officially, Saudi Arabia now holds a 5 percent stake in the U.S. company.
The move is part of a larger fundraising round which is expected to help Uber raise $5 billion. Uber’s valuation is nearly $68 billion, which is larger than GM’s valuation of $48 billion.
Uber managed to reach such astronomical valuation over just six years. The company currently needs more cash to stifle domestic competition and battle Google Inc and Apple which are working on driverless vehicles that may leave Uber drivers without a job.
Nevertheless, the money may allow the taxi app firm also invest more in its R&D arm which is reportedly developing a fleet of autonomous cars as well.
Yet, the Saudis are not the only ones to invest in the U.S. company. Japan-based Toyota Motor Corp also invested in it. In the meantime, Apple bought a large stake in the Chinese dopplegänger of Uber, Didi Chuxing Technology Co., while Volkswagen made a $300 million investment in Uber’s Jewish rival Gett.
General Motors is interested in Uber’s U.S. rival Lyft, and plans to deploy together a fleet of driverless electric cabs by next year.
With the latest investment, Uber has smashed its previous fundraising record of $2.8 billion and the global record of $4.5 billion set by the Chinese-based e-commerce giant Alibaba Group.
Saudi Arabia is interested in startups such as Uber because it tries to find other sources of revenue and cut the nation’s reliance on crude oil. The Kingdom’s government announced in April that it plans to sell 5 percent of a state-owned oil behemoth by the end of the year.
The Saudi sovereign-wealth fund recently said that its chairman Yasir Al Rumayyan will now join Uber’s board of directors. Al Rumayyan will run the business alongside the company’s founders Garrett Camp and Travis Kalanick, Huffington Post’s owner Arianna Huffington, and Google’s David Drummond among others.
Uber also needs more cash to lure in new drivers and subsidize promotional rides when entering new markets. Its Chinese rival Didi Chuxing also uses subsidies to keep its business going. Alibaba, Tencent and Apple have helped the Chinese startup raise $5 billion in equities this year.
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