Uber Technologies may not be profitable, but it’s growing and one of the world’s largest sovereign wealth funds has taken notice.
The increasingly ubiquitous Silicon Valley ride-hailing service said Wednesday the Saudi Arabian Public Investment Fund has kicked in $3.5 billion in venture capital investment, an amount so high that it wins the fund’s managing director, Yasir Al Rumayyan, a seat on Uber’s board of directors.
The investment was part of Uber’s latest fundraising round that values the company at $62.5 billion, according to a company statement to Reuters. The makes Uber more valuable than some of the world’s largest automakers, including Honda, Ford, General Motors and BMW.
Saudi Arabia’s $160 billion public investment fund uses a portion of the country’s oil revenue to build a social nest egg by investing in non-oil assets globally. The move comes about five weeks after Saudi Arabia announced a historic plan to broaden the country’s economy. The fund, established in 2008, will eventually hold about $2 trillion in assets, the kingdom has said.
For Uber, this is more than just a welcome infusion of much-needed capital to fund its global growth aspirations. It gives the company considerable clout as it expands its operations in the Middle East. Egypt is a key growth market where Riyadh holds considerable commercial and political influence. And the Gulf region appears to be embracing the concept of ride-hailing services, especially in Saudi Arabia where half the population (women) are prohibited from driving. Uber’s services cost less than hiring full-time drivers, which eat into Saudi family budgets, and the service is viewed as safer than using taxis.
Uber has risen quickly to become the world’s biggest ride-hailing service, but the company faces hurdles anywhere unions hold clout for the way it classifies drivers as benefit-less independent contractors at the mercy of the company’s pricing decisions. The company is also facing increasing competition among Chinese startups.