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Car service Uber raises $1.2 billion

A smartphone is mounted on the glass of an Uber car in India.

Rafiq Maqbool/AP

A smartphone mounted on the glass of an Uber car in India.

Three Boston investment firms have just helped make Uber Technologies Inc., the four-year-old company that uses a smartphone app to hire private drivers, one of the most valuable tech startups in world.

In an investment led by Fidelity Investments that included Wellington Management Co., private equity firm Summit Partners, and a handful of other prominent investment firms, Uber received a $1.2 billion infusion of cash that values the company at $17 billion.

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That makes Uber — on paper at least — more valuable than global aluminum company Alcoa Inc., which has a market cap of $16.82 billion, or the multinational consumer products maker The Clorox Co., valued at $11.5 billion.

Uber chief executive Travis Kalanick has said the company will use the money to continue expanding its service. In Boston, the company recently launched a boat-ferry service around Boston Harbor. The company now operates in 128 cities in 37 countries.

“With our growth and expansion, the company has evolved from being a scrappy Silicon Valley tech startup to being a way of life for millions of people in cities around the world,” said Kalanick in a blog post Friday announcing the investment. “This ‘Uber’ way of life is really a reflection of our mission to turn ground transportation into a seamless service and to enable a transportation alternative in cities that makes car ownership a thing of the past.”

The Uber deal comes as investments into tech are reaching levels reminiscent of the dot com bubble and venture capitalists and other investors are pumping huge amounts of cash into hot startups. The deal is the second-biggest investment in an American venture-backed company, according to the research firm CB Insights. The largest was the $1.5 billion funding of Facebook in 2010.

“Uber is one of the most rapidly growing companies ever,” said Joan Miller, a spokeswoman for Summit Partners, a Boston firm that has invested in other tech companies such as McAfee Inc. and Tivoli Audio. “We think this business is still in its earliest stages and there is opportunity for continued massive growth.”

Fidelity and Wellington declined to comment.

Even though it has earned the adoration of leading investors both here and in Silicon Valley, the company’s business model of using a smartphone app for passengers to hire private livery drivers is being challenged in courts around the country.

A pending lawsuit in Boston filed by local cab companies charges Uber with operating an illegal taxi company. Next week some cabbies in London are planning a 10,000-car protest, following similar protests in Boston, France, and Italy.

“Uber is attempting to operate in a gray area,” said John Boit, spokesman for an anti-Uber campaign called “Who’s Driving You” launched by the taxi and limo industry. “In doing so,” Boit said, “Uber is attempting to avoid the major cost of running a transportation company.”

Moreover cities including Boston are weighing whether to regulate Uber, Lyft, Sidecar, and other services that offer an alternative to the taxicab industry. The outcome of many of those reviews and legal challenges could substantially change Uber’s business prospects. “Uber’s uber-valuation is a stretch given Uber’s numerous legal and regulatory challenges,” said Sam Hamadeh, chief executive of PrivCo, a research firm. “VCs [that] are investing in the ‘sharing economy’ will soon encounter the ‘regulated economy.’ ”

Michael B. Farrell can be reached at michael.farrell@globe.com. Follow him on Twitter @GlobeMBFarrell.
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