Financially speaking, Uber's new $3.5 billion investment with Saudi Arabia isn't that significant. It is bigger than Uber's previous fundraising rounds. But Uber had previously raised a sequence of $1 billion investments over the past couple of years, so it's hardly a game changer.
But politically speaking, Uber's decision to take money from Saudi Arabia's sovereign wealth fund could become a huge deal. The Saudi government doesn't just get a 5 percent stake in the ride-hailing startup; it also gets a seat on Uber's board. That means the Saudi government will be more than a silent partner — it will have a literal seat as the company discusses big strategic decisions.
And for people worried about issues like gender equality, customer privacy, and human rights, it's hard to imagine a worse choice for Uber's newest board member. The Saudi regime is notorious for its unequal treatment of women — who aren't even allowed to drive in the Saudi kingdom — and for its disrespect for human rights in general. By cozying up with Saudi Arabia, Uber CEO Travis Kalanick is sending a clear signal that he intends to run Uber as an amoral profit-maximizing machine.
And that's a big problem, because Uber's long-term success is going to depend on earning the trust and respect of both regulators and customers. There's a good chance that car sharing will be a winner-take-all market, and Uber is trying to become the dominant player in markets around the world. Monopolies inevitably face public scrutiny and pressure for regulation, and it will be a lot harder to resist that pressure if the public views Uber as a company without a conscience.
Saudi Arabia has a terrible human rights record
Saudi Arabia is nominally a US ally, but the kingdom has a dismal record on human rights. According to Human Rights Watch, "Authorities subjected hundreds of people to unfair trials and arbitrary detention." The Saudi government persecutes human rights activists, subjecting them to decade-long prison sentences for advocating political reforms and talking to foreign reporters.
There's every reason to expect the Saudi government to continue its repressive policies in the coming years. And now when the Saudi government violates human rights, Uber will get bad press for it.
The stickiest issue for Uber will likely be Saudi Arabia's treatment of women. Saudi Arabia is infamous for refusing to allow women to drive and for limiting their ability to go out in public without a male chaperone. Uber is likely to face awkward questions about whether its partnership with the Saudi government amounts to an endorsement of these policies.
Uber has also faced criticism for sexual assaults committed by Uber drivers, and for allegedly downplaying the extent of those assaults. It's not clear how much blame Uber deserves for these assaults — after all, taxi drivers commit assault as well. But Uber needs to convince its women customers that it takes this issue seriously and is doing everything it can to keep passengers safe.
That's going to be harder to do now that Uber has given one of its board seats to a regime that once punished a rape victim for being alone with a male non-relative. Having a Saudi board member isn't going to prevent Uber from improving women's safety, but it does seem like a signal that women's rights are not a top priority for the company.
The Saudi royal family also invested $248 million in Uber's biggest US rival, Lyft, last December. But beyond the smaller cash figure, there were a couple of other significant differences. Lyft didn't give the Saudi royal family a board seat as Uber did. Also, Lyft doesn't have operations in Saudi Arabia. Uber does. So Uber is more directly tied to that nation's misogynistic policies.
Uber needs to think harder about its public image
Uber's deal with Saudi Arabia is the latest in a long line of decisions that seem to have been made without considering their impact on Uber's public image. Over the past few years, Uber has faced accusations that it has spied on its customers and suggested digging up dirt on journalists. It has generated a lot of ill will with massive surge pricing increases on busy nights.
Uber has long cultivated a reputation as a scrappy startup, willing to do whatever it takes to win. That was an appealing image when Uber was actually an underdog. But with a global footprint and billions of dollars in the bank, Uber is no longer an underdog. And when a big, powerful company adopts a take-no-prisoners approach to business, it doesn't seem charming. It seems menacing.
And that matters because the biggest long-term threat to Uber is that a public backlash against the company could lead to much stricter regulation of its business practices. So far, regulators have taken a hands-off approach in the — correct — belief that minimal regulation will allow innovation to flourish. But if Uber continues to grow — and continues to behave in ways that undermine public confidence in the company — it's only a matter of time before the political winds start to shift.