Ride-sharing service Uber is raising a new funding round at a valuation of $1 billion, according to a person familiar with the situation.
If the company succeeds, it will join an elite group of start-ups that command 10-figure valuations. The situation underscores investors' desire to pay premiums for any company they think might become the type of outsized success story along the lines of business network LinkedIn or software company Workday.
Uber allows customers to quickly find rides among for-hire car services, such as limousines, by using an app on their phone. It has proven popular in areas where cabs can be hard to hail, such as its home base of San Francisco.
The service, which launched in 2010, has grown rapidly on word of mouth. At the Disrupt NY technology conference on Monday, existing investor Bill Gurley of Benchmark Capital called Uber "probably the fastest-growing company that we've ever had," saying Uber was growing faster than eBay - another Benchmark portfolio company - did in its early days.
The company got some good news last week when it won approval to operate in New York City. Besides major U.S. cities, it operates in some international hubs such as London, Paris and Singapore.
But Uber faces several challenges, including needing to win regulatory approval, build customers, and build supply on a market-by-market basis.
And for traditional venture investors, who seek to win back at least three times their money, a valuation of more than $1 billion now means they must believe the company will eventually be worth more than $3 billion.
Many companies that have won valuations of more than $1 billion recently have turned at least in part to nontraditional backers such as private equity.
They include SurveyMonkey, recently valued at $1.35 billion; online bulletin board Pinterest, recently valued at $2.5 billion; and payments company Square, recently valued at $3.25 billion.
Uber did not immediately respond to a request for comment.