Startups are like child stars; they’re ill tempered, full of potential, and nobody really knows how all this attention is actually going to affect their development down the road. So…if startups are like child stars, Uber is the biggest diva of them all.
The Rise of Uber
I’m sure you’re all familiar with Uber. But in case you’ve been living under a rock for the past 4 years, let us refresh your memory.
They basically pioneered the concept of a “public personal driver.” Instead of the hassle of a taxi, you use the app and Uber comes to you; no more running after taxis, no more wondering how much your fare is going to be. The app took the guesswork out of rides.
Not only that, Uber is literally the gold standard; it’s the highest valued, non-public tech startup to date.
But it hasn’t always been easy. They had to start somewhere.
After an initial first round investment of $1.5 million, they were valued at a measly $4 million. By their fourth round, they were valued at $3.5 billion.
That’s billion, with a b.
Their valuation increased almost a thousand fold.
That kind of inflation and widespread claim by financial investors was almost unheard of. Some would even say mythical.
And that’s exactly what Uber was: a unicorn. The term, first coined by Aileen Lee in 2013, is a term for a company with no proven track record and a valuation over $1 billion.
Uber had finally made it; the cream had risen to the top. They were on top of the world, they were the Kings of Silicon Valley.
Everybody wanted a piece of Uber; hell, even Google Ventures became one of their biggest investors.
They were at the top, and nothing could bring them down.
Or so it seemed.
The Bigger they Are…
Uber was thriving. They were pulling in monster numbers and growing at a staggering pace. It was impossible to keep up.
But in the flurry of financial statements, numbers, and percentages, trouble was brewing.
It didn’t matter that they were going to net $2 billion from $10 billion in sales (they keep a cool 20%), or that they were expected to grow by 300% in the year 2014.
There was blood in the water, and the sharks were coming.
First came Lyft, another ride sharing app founded on the model of a cheaper ride; Lyft was biting into the market with great success.
Then came the lawsuits. Taxi drivers, who have historically been the only ride sharing service of any kind, suddenly found their livelihoods at stake; Uber was beating them at their own game.
Not only that, but taxis are regulated by the city and state, while Uber is not. They claim that Uber is an illegal taxicab operation.
And for a while, the states seemed to agree. Both New York and California served Uber with cease and desist letters on the grounds stated above. But luckily, Uber and other ride sharing companies were able to find a middle ground with the State and the cabbies (this is why you sometimes won’t get Uber availability at airports and other places).
But it didn’t end there.
Uber’s surge pricing proved to be the next issue. With surge multipliers as high as 10.0x and even 12.0x, a normal $10 ride suddenly turned into something much more than they bargained for.
People were claiming that Uber was taking advantage of the intoxicated, as well as people who were just trying to get home in poor weather conditions or odd hours.
Uber immediately implemented new changes in their algorithm, as well as a “tap to confirm” button to help prevent the drunk from getting into the most expensive ride of their lives during peak surges.
It seemed as if Uber had navigated the rough waters, right?
…The Harder they Fall
Fast forward a couple of years, and Uber seems to have worked out the kinks; they’re operating smoothly globally and even had special legislation passed to ensure there would be a distinction between ride sharing and cabs; they even created a new entity with UberEats.
But amidst all this growth, there was something that no company can survive: a negative cashflow.
According to reports, Uber is hemorrhaging money. Badly.
But that comes with the territory, right? I mean, after all, Uber still is a startup.
Yes, but not to the tune of $2 BILLION. And that was in the first 9 months of 2016.
Not only are they not running a profitable business, it seems as if their leadership isn’t doing a good job leading.
There’s even been recent outcry over Uber CEO Travis Kalanick, as he was:
1) On Trump’s Economic Council
2) His public meltdown, captured on tape by an UberX driver
While he vehemently apologized, the damage had already been done. He claimed he “needed leadership help”…not something you want to hear from the LEADER of your company.
Not only that, they’re in legal trouble once again. Uber is now claiming that their drivers are not employees per say, but rather they’re independent contractors who teamed up with Uber.
This could be disastrous, as this means that all uber drivers are entitled to minimum wage, overtime pay, and expense reimbursement. This would mean even more operational costs for a company that’s already extremely unprofitable.
But wait, there’s more: the lawsuit claims that the current model, if Uber declares that their drivers are, in fact, contractors, breaks antitrust laws by allowing different contractors to fix prices.
And we don’t even need to get into the recent reports of widespread sexual harassment at all levels of the company.
It seems as if the transportation titan is stuck between a rock and a hard place; valuation and money don’t mean a thing when a company struggles to be profitable and has myriad public relations blunders.
It seems as if Uber’s meteoric rise was nothing more than mediocre.
As of right now, the only way for Uber to actually thrive is with the advent of self driving cars–though Google-owned Waymo did recently accuse Uber-owned Otto of stealing classified trade secrets.
In case you hadn’t heard, Uber’s self driving cars have also attracted negative attention from the California state government. The California DMV refused to grant registration to the self driving cars after the company ignored repeated warnings from the DMV about basic autonomous vehicle regulations.
So what did they do?
What any other self respecting company would do; ignore it and move to Arizona, where no such regulations exist. But, in an ironic twist of fate, one of Uber’s self driving cars was recently involved in a car accident there, which luckily claimed no lives.
It may seem as if Uber can’t catch a break, but really, the underlying problem is the leadership. The infrastructure is there, and the people love Uber; but it seems like their leadership fails again and again during crucial times.
So what’s going to happen? Nobody really knows; they’re not public, and they still have one of the highest valuations ever. But Uber’s going to have to do some real soul searching if they want to prevent their bubble from popping.
Thanks for Reading!
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