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Competitor questions Uber’s burn rate after $US1.2 billion capital raise

Friday, 5 December 2014 | By Andrew Sadauskas

Uber has announced it has completed a financing round of $US1.2 billion, valuing the company at a total of $US40 billion, as competitors point out the service continues to face substantial challenges.


In a post on the company blog, Uber founder and chief executive Travis Kalanick says the funds will be directed at expansion in the Asia-Pacific region.


Kalanick’s post claims Uber is now six times larger than it was a year ago – growing from 60 cities and 21 countries to 250 cities in 50 countries. It also alludes to some of the cultural challenges Uber faces, including accusations of spying on customer data and hiring investigators to spy on critical journalists.


“The events of the recent weeks have shown us that we also need to invest in internal growth and change. Acknowledging mistakes and learning from them are the first steps,” Kalanick says.


“It will lead to a smarter and more humble company that sets new standards in data privacy, gives back more to the cities we serve and defines and refines our company culture effectively.”


Recently, the chief executive and co-founder of taxi-booking app goCatch, Ned Moorfield, called for an urgent summit of transport ministers over the UberX ride-sharing service.


Moorfield says that while there is a possibility it will become a near-monopoly, the company’s future prospects are far from clear in a number of markets.


“It’s a clear risk – they want to dominate transport like Google dominates search in every market. But they’re still far from that position and it’s far from clear they’ll get there,” he says.


“[The latest funding round is] pretty eye-catching – they’re now in 250 cities and 50 countries. But the amount of money they’re burning – their burn rate – is substantial.


“When they give away $50 vouchers to existing customers and give 40% off – as they did recently in Israel – they must be burning a lot of cash.


Aside from the burn rate, Moorfield points to a number of other key issues the company faces.


“There’s clearly regulatory questions in the Australian market and questions about whether their strategy will work in a number of countries. Their strategy is to push through regulatory barriers, but regulators are pushing back hard now and becoming more active in punishing UberX drivers,” he says.


“And there are serious customer issues – including spying on journalists – that exist no matter how much money they raise.”


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