Philly venture capital firm sees massive return as Uber goes public

On June 15, 2010, Rob Hayes, partner at First Round Capital, sent "the most valuable outreach email” in the firm’s history.

A six-word email to a start-up called UberCab.

Back then, First Round Capital, a Philadelphia-based venture capital fund, decided to invest $510,000 in the ride-share company’s early-stage “seed” round, according to investor documents reviewed by the Wall Street Journal.

That investment was valued at about $2.5 billion, according to the Journal — a nearly 5,000 times return — as the company we now know as Uber listed on the New York Stock Exchange for $45 a share.

After the initial public offering, First Round held 37.7 million shares, worth about $1.4 billion based on Monday’s closing price of $37.10 per share, according to Uber’s latest regulatory filing.

In such risky investments, investors ideally want a 30-times return but often are looking for at least a 10-times return, depending on whether it’s an early- or late-stage investment.

That makes Uber, the Journal wrote, one of the “greatest start-up investments of all time." Uber was valued at $75.5 billion when it went public Friday; its stock has dropped 18 percent since.

Josh Kopelman, partner and cofounder of First Round Capital, is the chair of the board of the Philadelphia Media Network, which owns The Inquirer. He did not immediately return a request for comment.

Early-stage investing, which First Round Capital specializes in, is risky: The majority of start-ups fail. There are not many surefire ways to predict the likelihood of success.

In 2009, New York venture capitalist Fred Wilson said his firm, Union Square Ventures, expected to make money on one-third of its investments. On another third, it would break even. On the last third, it would lose money.

But that also means early investors stand to make a lot on the right bet, as did the 18 venture funds and individuals who invested in Uber’s seed round. Some of those funds include Lowercase Capital of San Francisco, and Bullet Time Ventures in Boulder, Colo.

The early investors’ massive returns come at a time when Uber is losing about $800 million a quarter. Its drivers have organized protests across the globe in response to pay cuts and working conditions, and governments are imposing regulations on ride-sharing services, such as a minimum wage and temporary caps on the number of vehicles on the street.