How A Curious VC Found Uber Before Anyone Else, Back When It Was Only Worth $4 Million

Rob Hayes' family was not happy with him on July 4, 2010. He spent too much of the holiday on his phone, trying to organize an investment in a new, unproven startup.

Hayes had learned about Uber a few months earlier when he saw a tweet about it from Garett Camp. Camp founded Uber; he also ran StumbleUpon and sold it to eBay. Hayes' firm First Round Capital (FRC) had backed StumbleUpon. Hayes emailed Camp to ask what Uber was.

Uber, Camp told him, was a startup that promised to solve transportation problems in San Francisco. Cabs in the city were scarce but with Uber, you could hail a nearby black car from your iPhone and it would pick you up in minutes. It was an on-demand black car service that only cost 1.5 times more than taxi; it was a luxurious, reliable ride.

If Hayes' family wasn't happy with him then, it should be now. Uber was recently valued at $3.4 billion. When Hayes and First Round Capital invested, Uber was seeking a $1 million seed round at a $4 million pre-money valuation. That means Uber is currently worth 850 times more than when First Round Capital invested.

First Round Capital was the first institutional investor in Uber. It committed about half-a-million dollars; other investors included Napster co-founder Shawn Fanning and Mitch Kapor.

While writing an extensive profile on the founding of Uber and its CEO Travis Kalanick, Business Insider learned how First Round Capital became the car service's first institutional investor.

First, Hayes led the Uber investment, but he wasn't the firm's only point of contact in the startup. Josh Kopelman, Hayes' partner, had heard about Uber from Camp too. They sent Chris Fralic, another First Round Capital partner, to watch Uber pitch later that summer.

Fralic attended an event called Open Angel Forum in San Francisco. The forum was set up by investor and entrepreneur Jason Calacanis; Chris Sacca and Digg's Kevin Rose were its "chapter heads."

Current Uber CEO Travis Kalanick went on stage and pitched the room of investors. Ryan Graves was Uber's CEO at the time and Kalanick served as a "mega advisor." Calacanis announced that he'd be investing in Uber; Chris Sacca's fund, Lowercase Capital, invested too.

Then, Fralic's hand shot up.

"I'm in for $500,000!" First Round Capital's Chris Fralic announced.

A bystander remembers thinking Fralic was crazy. Uber wasn't a relatively hot deal to invest in and it wasn't clear how big the market opportunity would be.

What this person didn't know was how much work First Round Capital had done before that event to find, snuff out and secure the Uber deal. And it all started with a tweet and an investor who was curious enough to follow up.

For more on the founding and growth of Uber, check out: How A Perpetual Underdog Travis Kalanick Became An Expert Salesman And Found $3.4 Billion Success.

Or check out: How Snapchat's First Investor Found Snapchat Before Anyone Else