Before Facebook debuted on the public markets, fund managers and wealthy individuals were able to buy a piece of the social network through online exchanges like SecondMarket. The system was a boon to early employees and investors looking to cash out, but the secondary capital did little to directly fuel Facebook’s growth.
For primary capital without the more onerous requirements of venture investors, Facebook turned to Goldman Sachs, which raised nearly $1.5 billion for the company through its private wealth clients, each of whom ponied up at least $2 million.
Uber is now charting a similar course. The on-demand taxi service yesterday raised $1.6 billion in convertible debt from wealth management clients at Goldman Sachs, according to Bloomberg, and is looking for an additional $600 million from hedge funds and other investors. The deal signals Uber’s intent to complete an initial public offering within four years; after that point, convertible note holders’ 20% to 30% discount on future Uber equity will steadily increase, via a coupon attached to the debt. As bond holders, Goldman’s clients are virtually guaranteed their money back, plus a return on par with well-performing stock-based investment funds.
As recently as December, Uber raised $1.2 billion on a $40 billion valuation and struck a $600 million deal with Baidu, China’s search giant. To date, Uber has raised $4.9 billion.
The massive cash infusion is a clear indication that Uber’s ambitions have not been tempered by regulatory battles. Indeed, the company is hiring policy and communications staff at a rapid pace and increasingly using data to demonstrate its value to local economies.
“I do think we have had a lot of recent [regulatory] success [and a reason for that] is that people are seeing the economic impact,” David Plouffe, senior vice president for policy and strategy, told BuzzFeed News. Among Uber’s benefits, according to a commissioned report released today that analyzes the company’s 160,000 U.S. drivers: job creation and congestion reduction, through UberPool.
Plouffe hopes the data will persuade city officials to provide the company with a friendlier regulatory environment. “For mayors out there who see this study we’re like, one of the largest—in many cities the largest—new employer,” he says. “I think it’s important for people to understand that’s what this survey says. Uber is really becoming an important part of the city fabric.”