They didn't, though. They closed their Series A in Feb 2011. They got their first cease & desist in October 2010 [2], 4 days after closing angel financing. [3]
IMHO, the key success factor for Uber is their ability to spin every setback into an advantage. So, the fact that they were sued for operating like a taxi cab company means that the taxi cab industry views them as a threat. They could then take this to investors and say "We're about to disrupt a $16B market. The market opportunity is there, and the lawsuit against us is proof of that. The product is there. People are choosing our product over the competition. We need your help to roll back protectionist legislation that is hurting consumers. Are you in?"
And then many investors won't be, but they just keep trying new ones until they find folks who buy in.
IMHO, the key success factor for Uber is their ability to spin every setback into an advantage. So, the fact that they were sued for operating like a taxi cab company means that the taxi cab industry views them as a threat. They could then take this to investors and say "We're about to disrupt a $16B market. The market opportunity is there, and the lawsuit against us is proof of that. The product is there. People are choosing our product over the competition. We need your help to roll back protectionist legislation that is hurting consumers. Are you in?"
And then many investors won't be, but they just keep trying new ones until they find folks who buy in.
[1] https://www.crunchbase.com/organization/uber/funding-rounds
[2] http://techcrunch.com/gallery/a-brief-history-of-uber/slide/...
[3] http://techcrunch.com/2010/10/15/ubercab-closes-uber-angel-r...