2. After getting into an argument over the fare with a local cab driver in Mexico, Travis Kalanick jumped out
of the moving cab. The incident would leave him with a dislike for conventional cabs. A few years later, he
founded Uber. Under him, Uber – went from 3 drivers to 3.9 million drivers, became the highest valued
private company in the world and made him a famous billionaire, all within seven years. Then, he was
fired. The Uber Story offers inspiration, but also warns about the consequences of pushing the limits too
far.
The Uber Story formally began in 2008, when Travis Kalanick and Garrett Camp met at LeWeb, a tech
conference in Paris. Like all seasoned entrepreneurs, both had founded a string of failed start-ups, before
hitting pay-dirt with Red Swoosh (acquired for $19 million) and StumbleUpon (acquired for $75 million)
respectively. They talked about the idea of people hailing rides using their phones. After this brief
discussion, both of them returned to California.
3. In 2009, Camp began working on the ride hailing service as a side project and roped in Kalanick as a partner. They
bought the domain UberCabs.com. After creating a working platform to hail rides, UberCabs had a beta launch in
San Francisco with 3 luxury cars, in 2010. Platform businesses have a very interesting phenomenon called Network
Effects. As the number of users on a platform increases, sellers flock onto that platform in order to sell their products
and vice versa. Amazon is a prime example (no puns intended) of such a phenomenon. These businesses manage
to corner 70-80% of the market without using any predatory tactics. Uber became one such “natural monopoly” in
San Francisco. The timing for Uber couldn’t have been better, smartphone usage was increasing rapidly. People
found Uber to be very convenient. Word-of-mouth helped Uber grow immensely. Drivers and users, flicked to Uber.
However, it soon received a cease and desist order in San Francisco, for using the word “cab” in its name. The
solution was simple; it went from UberCabs.com to Uber.com.
4. With Kalanick as CEO, Uber grew, and it grew exponentially. To fund its hunger for growth, Uber raised $11
million from Benchmark Capital in 2011. The money was used to fund operations in new cities. The business
model of outsourcing cars and drivers through contracts, helped keep investments and costs low. Unlike
traditional cab firms, it did not have to pay any employee benefits to its drivers. Cab firms have to pay hefty
license fees to run cabs in a city. Since Uber did not register itself as a Cab Company, it was free of these
shackles. Legal loopholes helped Uber push through these issues.
By 2012, Uber had launched a new product called UberX for low cost rides. Uber got into the relatively less
affluent market segment. In the same year it expanded to Canada and the UK. By 2013, people could use
their personal cars for sharing rides on UberX. It became a great combination of the gig economy and the
sharing economy. By the end of 2013, Uber raised $258 million, which valued it at $3.5 billion. This was 22x
the original amount it had raised just two years back in its first round of funding.
5. This blistering growth came at a cost. Journalists wrote articles about the extremely aggressive culture
fuelled by Travis Kalanick. The culture was called “toxic”. Despite these rumours, Uber raised $1.2
billion at a valuation of $40 billion in the same year. It also launched UberFRESH, which would later
pivot to become the famous food delivery platform UberEats.
By 2015, even though Uber was still growing at a fast pace, the tide had started turning against Uber
and Kalanick. Protests against Uber became common. Cab unions protested against Uber for
disrupting their business. Uber drivers protest against Uber for not offering any employee benefits and
a minimum wage. Uber’s rivals like Lyft, Ola, Didi Chuxing and Grab Taxi, formed an alliance as a
means to confront Uber. Despite these issues, Uber again raised $2.1 billion at a valuation of $65
billion. It had become the highest valued private company in the world.
6.
7. Despite the investor optimism, Uber did not have a single profitable year since its inception. The
continuous expansion, high rebates for customers and incentives to attract drivers ensured that
costs remained high. While some markets matured, other markets continually needed large
investments. Investors expected Uber to spend money and capture the market. Once captured,
the market could be capitalised on. However, in the real world, with similarly well-funded
competitors, this was an incredibly difficult task. All competitors kept taking losses to keep the
prices low and the customers happy. Uber finally decided to exit a few businesses. It sold its
South East Asia Kinseller to Grab. The China business was sold to its rival Didi Chuxing.
8. Another controversial issue that Uber faced since its beginnings is Surge Pricing. Surge pricing jacks up ride prices during periods of high
demand. Prices sometimes move up to 2-3x of the normal price range. In recent years, Uber has capped its surge pricing during blizzards
as a means to appease customers.
The year 2017, would prove to be the worst for Uber. It was fighting lawsuits filed by cab companies and Uber drivers. At the same time,
the continuous allegations of a “toxic culture” at Uber led to a federal level investigation into Uber. The resultant reports accused CEO
Kalanick of fuelling the hyper aggressive culture in order to increase productivity. Kalanick took a sabbatical leave to understand these
issues. Two weeks later, he resigned as CEO of Uber.
Under its new CEO Dara Khosrowshahi, Uber has gone into clean up mode. This is necessary for Uber. It has become a public company
with an IPO in 2019. With public shareholders and 22000 employees, Uber cannot continue with its upstart image and growth-at-all-costs
mind set.As of 2020, neither Uber, nor its competitors are profitable. Travis Kalanick has moved onto other projects. While he is still hated
by some, Uber certainly wouldn’t have achieved such scale without someone as intense as him. Uber says it plans to become profitable
quite soon and has been cutting losses by selling some of its businesses to competitors. We all hope that this iconic company does well.
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