Last week, Uber confirmed that it had raised $1.2 billion at a $40 billion valuation. Shortly thereafter, a debate began over whether or not Uber could possibly be worth the price tag.

While it’s difficult for anyone outside the fundraising to know one way or another — we’re not privy to the deal, the inside information about the company, or plans for growth — it is important to understand how the 6-year old company on-demand car service could be worth $40 billion.

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