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TABLE OF CONTENTS INTRODUCTION
3
COMPANY OVERVIEW
4
FUNDING
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MARKET
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THE FUTURE OF UBER
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Introduction Having hubs in over 200 cities worldwide, the San Francisco startup, Uber, has recently become a staple in the transportation industry. After years of entrepreneurial problem solving, Garrett Camp and Travis Kalanick, set their sights on public transportation and the opportunities it may hold for them. Their goal was to create a community that is able to serve itself through ride sharing. A quick touch of a button has revolutionized transportation and disrupted the industry, as we know it. In 2009 Garrett Camp created the first prototype for his UberCab application. Camp, former co-founder of StumbleUpon, approached Travis Kalanick about joining him in his new venture. Kalanick had previously invented the first peer-to-peer file sharing company called Red Swoosh. After agreeing to join forces, Camp and Kalanick officially launched UberCab in 2010 in San Francisco. The mobile application was created as an alternative to common taxi and black car services. The company’s target market is the middle ground between these two contemporary options. Camp and Kalanick’s intention is to provide transportation for people in urban areas while hiring drivers from within the community. In 2010, the name UberCab was shortened to just Uber. Through this service, Camp and Kalanick are looking to create a community in which transportation is openly shared in a comfortable humane way. The application is arranged in a way so that both the driver and rider feel comfortable throughout the
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transaction. The company uses several different techniques that allow both the rider and the driver to have a cordial interaction. Having customer credit cards registered with the application eliminates any uncomfortable exchange throughout the ride; no tips are expected, resulting in less tension between the rider and the driver. Another added benefit for the rider is being able to see a picture of the driver and their name prior to pick up. This instills a feeling of security when stepping into the driver’s vehicle and in having knowledge that Uber has this driver’s information documented. Riders are able to drop a pin on their smartphone at the location where they would like to be picked up. This ability enables riders to feel in control and comfortable at all times. These are just several ways that Uber caters toward their customers. The four and a half year old company is taking the transportation industry by storm. Uber is spreading to cities around the world and it is being more regularly used in those cities in which it already has hubs. Company Overview In 2010, Travis Kalanick and Garrett Camp spawned the idea of mobile ridesharing and implemented the idea in their new application, Uber Cab, now known as Uber. It was launched in San Francisco originally but has since expanded to 45 countries and 100 cities. This idea was unlike anything in the marketplace and was destined to cause a multitude of disruptions. Users would log onto their app and using GPS location look for drivers in the area who are available for hire. From there, the user
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enters their destination and immediately receive a cost estimate depending on which service they want to use. There are five different options for customers to choose from: UberX, UberTaxi, UberBlack, UberSUV, and UberLux. Each one has a different pricing structure and empowers the customer to choose which kind of experience they want to have. UberX is the most affordable option which uses entry level cars, but still offers a more affordable rate than most taxis. UberTaxi allows customers to hail cabs from their phone, removing many of the inconveniences associated with taxis in large cities. UberBlack is for those customers wanting to travel in style. This service offers black, higher-end sedans with shorter wait times, but also comes at a higher cost. UberSUV is intended for those larger parties who need the extra space of an SUV and would rather not hire two or even three additional cars. UberLux is the pinnacle of the Uber experience, with cars ranging from Mercedes S-classes to Bentleys and Hummers. Those who pay for these rides are treated to professional drivers, prompt service, along with a host of other “goodies� included in the ride. Uber handles all of the payment within the app and runs on base fee, followed by a per mile and passenger charge. The main advantage they hold over the traditional systems in place is the use of mobile technology to streamline every aspect of the user’s experience. The customer is able to request a ride, track its location, pay for the ride, and then leave feedback for the driver all from the comfort of their mobile device. Two of their latest features added to the app allow multiple people to split a fare as long as they have the app too. The most
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recent feature added to incentivise drivers to work for Uber is Dynamic Pricing. Using an algorithm, the application adjusts prices in correlation to increases in demand. This means at peak hours an Uber will cost more, but at slower times you’ll get a better rate. With more people downloading the application and becoming Uber drivers, the company has taken off and shows no signs of slowing down. Since their massive global expansion, Uber has been met with controversy and resistance from many different parties. Governmental agencies and taxi cab unions are attempting to pacify this disruptive technology as it threatens their established structures and systems. This may seem like trouble for Uber, but this kind of response is indicative of an extremely innovative service that has seen so much popularity, these agencies have been forced to confront them. Many opponents to the service argue that it is essentially unlicensed or illegal taxi drivers. Luckily, Uber has been able to avoid these allegations unscathed with their business model in tact. Recently Uber cut their rates which caused many drivers to go on strike. Uber stated that the decrease in fares will cause the number of rides to go up, but the drivers have been seeing the adverse effect. They have been losing money and now Uber’s commission is an even greater percentage of the total fare. The drivers have formed their own union called The Uber Drivers Network and have demanded that their pay be reinstated. As a platform between the drivers and customers, Uber is in a tough predicament to decide who is more important. As competitors such as Lyft and Gett encroach on their
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business, the decision becomes even more crutial to the future success or failure of Uber. Funding Recently valued at 18.2 billion dollars, Uber was originally started with 200 thousand dollars raised through seed funding and a secondary angel investment of 1.3 million in October of 2010. Camp and Kalanick raised the angel investment of 1.3 million through 15 separate angel investors in order to move forward with the new venture. At the time of this investment, Uber was valued at 4 million dollars. Notably, Chris Sacca, a proclaimed “super angel,” was strongly supporting Kalanick’s idea back in 2010 when it originally launched. Sacca earned his fortune as Head of Special Initiatives at Google. The attention from such a name quickly placed Uber on the map to more than just the investors Kalanick had pitched to. A tweet by Sacca about “Rolling in an @ubercab” was a big step in having a prominent figure endorse Camp and Kalanick’s new application. Kalanick currently sits as the CEO of Uber while Camp is no longer involved with the company’s daily operations. In some cases, this angel investment was given in exchange for seats on the board of directors but in all of these cases, the angel’s shares are currently worth 2000 times their initial investment. To place those figures into perspective, an original investment of 20,000 dollars in the application is now valued at 40 million dollars. These types of figures are ones that could have only been dreamed
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about by Camp and Kalanick when they set out to advance their idea. As of June 6, 2014, Uber has raised an additional 1.4 billion dollars including a notable investment of 258 million from Google Ventures. After this investment is when the 18.2 billion dollar figure was boasted as their valuation. Thus far, Facebook is the only company with a higher valuation. Investors believe that the Uber Taxi service is setting the framework for what the future of Uber will be. Nothing is stopping Uber, its network and its drivers from not only moving people, but also things. UberRush and UberFamily are currently being experimented with as Kalanick starts to grasp the ceiling of his incredible venture is. These two experiments are testing his Uber model as a courier service and as a family friendly transportation service offering car seats. Many believe that services like these will thrive in the urban settings that Uber is targeting. Market Uber operates in a highly competitive market filled with lower cost competitors and the traditional taxi cab services. As pioneers in the industry, Uber had a competitive advantage as first movers but now face tough competition to other companies such as, Lyft, Sidecar, and Gett. Currently, Uber has the largest reach compared to its’ competitors but given enough time their advantage will become obsolete. All of these companies face tough barriers to entry as each one must battle with the legislation in each state and/or country to get this ride-sharing model
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approved. Instead of being dormant and hoping that legislative bodies side with them, many taxi companies have invested in creating their own app to rival the newer alternatives. Its too early to gauge their success but Uber has created a large barrier to entry that will be nearly impossible to overcome. However, Gett may have just found a solution. The CEO, Ron Srebro, recently implement a new rate system for their drivers and had this to say about it; “Drivers are crucial, obviously, to this equation.You have nothing without customers, but you have nothing without drivers.” The new fare is a flat rate of $0.70 per minute. This is over double what Uber and Lyft are offering their employees. Although the incentive is there, Gett will need to expand in order to pose a real threat to Uber. As of now, Lyft and Gett are start-ups compared to the corporation Uber has become. It’s not clear which model will prevail over time, but Uber will look to capitalize on their distinct advantage and reputation for as long as possible. Uber’s attempt to lower fares in order to gain market share has left drivers out in the cold and they may seek employment elsewhere when push comes to shove. The number of jobs these companies create is staggering. Uber’s head of communications in North America, Lane Kasselman, claims these figures; “We’re creating 50,000 new jobs through our platform every month,” Its not hard to believe at the rate they have expanded and the ease at which anyone can become an Uber driver. The market for ridesharing is emerging with Uber leading the charge. This model will be around for many years to come as it is the new age of the taxi service.
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The Future of Uber The transportation industry has, over the past five years, changed immensely since the introduction of Uber. Their pioneering business model has inspired businesses like Lyft and Hailo to launch, and the existing transportation industry to evolve. Though many businesses have tried to find a niche in the transportation market, the team behind Uber has managed to do so within a very short period of time. Overall, this is a company that has its focussed its efforts on building a prospective future. It has continuously committed to receiving large investments over the life of the company, and it hopes to use those investments for major progressions in the company. Uber has launched pilot programs over the years that have explored new markets and potential. These pilots include hiring ice cream trucks to deliver ice cream, offering rides in DeLorean DMC-12s to Back to the Future fans, offering helicopter service from New York City to the Hamptons during the July 4 weekend, a National Cat Day promotion in which Uber drivers delivered kittens, and a Christmas tree delivery service. These all prove that Uber is testing out new markets and expanding its product base. Separately from product advancements, Uber has been the subject of rumors regarding an initial public offering. Making the company public is a major step that many believe to be one of Uber’s next moves. One interesting development that Uber
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has made in the past couple of years is the development of its business purpose. As always, Uber will be known as a car service on a smartphone. However, it has become much more of a transportation and local delivery company. This means that over the development of its network of drivers, Uber has tried to turn some of its drivers into delivery drivers. This new business development has been proven effective by programs from Google and eBay. Local delivery businesses such as those run by Google and eBay are hopefully showing Uber how to perform in a new market. Additionally, one of the most underrated benefits that Uber possesses is its existing logistics framework. This is one of the things that has prevented many companies from truly being competitors with Uber. In statements made by Uber spokespeople, as well as researchers in the technology field, its clear that the company has been looking into expanding its market. Though legality and regulation is a challenge for Uber, current court standings, from cases across the world, suggest that these challenges will not severely effect the company. Amongst other examples, a highly publicized court case in Germany ended in the business of Uber across the European state. However, the decision of the Frankfurt court in September 2014 said that the ban was to be overturned. Developing new markets, expanding on their current market, as well as the legal progression and success of the company seem to suggest that Uber will be a continual
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success in the future. Though the company’s future is entirely un certain, the signs point to a more positive future. Officially, Uber has plans to launch programs in new cities and regions of the world. The suspicion surrounding the future of Uber has created an allure and mystery surrounding the private company.
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