The UBER Story

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.
 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.

4.  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.
 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.  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 business
to Grab. The China business was sold to its rival Didi Chuxing.
 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.

8.  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. For more amazing insights and updates follow Insellers. With
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