Uber Technologies

The boom in the Uber company’s growth and its ability to stay in controversial light have made it very well-known and one of the most fascinating companies that have emerged in the past decade. Uber, established in 2009 grew rapidly to become the most valued setup corporation in the whole world.

The Boom in Uber’s Growth:

With the sudden boom in the company’s growth came several controversies that ended up in reducing the firm’s valuation from a hefty $70 billion to just $48 billion, as was seen in Jan’18. However, now that the company has announced a new tender, this amount is foreseen to be increased to $62 billion.

At the beginning of 2018, the Dragoneer Investment Group and the Japanese conglomerate Softbank group made their bid for the shares of 20%, which was a 30% discount on the last valuation. This deal is reported to have given Softbank 15% shares in the company whereas Uber in return has got an ally in Asian countries. This entails that Uber is now in power to change the whole environment if any public missteps are taken. The other remaining 5% of the shares were allocated to the remaining investors in the group. This year has not proven to be a very great year for Uber, what with an Uber vehicle getting involved in a fatal car accident. Also, the New York City Council voted against Uber to pause the new licenses being issued to services such as Lyft and Uber on 8 August’18.

Despite the fall in their valuation, Uber is still valued in the market more than General Motors Company and Ford Motor Company. Now we all are very intrinsic to see how Uber’s plan of going public by 2009 is going to work out.

How Did Their Founders Meet?

This company’s story began in 2008, Paris. Garrett Camp and Travis Kalanick, both very good friends, were attending the annual ‘LeWeb’ conference. This conference is described by The Economist as “where revolutionaries gather to plot the future”.

Back in 2007, both of these friends had sold their business they co-founded for a large amount. StumbleUpon was sold for $75 million to eBay by Camp and Red Swoosh was sold to Akamai Technologies for $19 million by Kalanick.

We have it in the rumor that they both decided to do something similar to this when they couldn’t get a cab one winter night after the conference. In the beginning, the concept was just to be able to order a Limo through an app. After the conference in Paris was over, both friends went their separate ways but Camp stuck to the idea even back in San Francisco and purchased the domain name UberCab.com.

Ubercab Coming into Existence

In 2009, Camp started to work on a prototype of UberCab as a part-time project while he was still the CEO of StumbleUpon. By the summer of 2009, Camp had already convinced Kalanick to play a part in this company as a ‘Chief Incubator’. In early 2010, the service of Ubercab was tested only on three cars in New York and later on in May it was launched in San Francisco.

Ryan Graves was the GM in the early life of the firm and a very important person too. Later on, in August 2010 he became the CEO of Uber. However, in December 2010, Kalanick was back as the CEO and Graves were given the role of COO and a member of the board.

What gave the sudden rise to its popularity is the ease of ordering a cab no matter wherever you are. With just a touch on the screen, a ride can be ordered. GPS systems identify the location and calculate the cost automatically on the user’s account. It was in October 2010 that the company received its major funding of 1.25 million by First Round Capital.

Order of Cease-and-Desist

San Francisco Municipal Transportation Agency sent a cease-and-desist order to the company in October 2010. The main issue identified was the word “cab” in its name. The company immediately responded to it by changing the name to only Uber and buying this domain name from the Universal Music Group.

Uber Reports Losses

2011 proved to be a very critical year for the growth in Uber. Early in 2011, Uber raised funds of $11 million Series A round of funding through Benchmark capital extending to Paris, Washington DC, Chicago, Boston, Seattle, and New York. It was announced by Kalanick in the 2011 LeWeb conference that the company raised from Series B $37 million from Goldman Sachs, Jeff Bezos, Menlo Ventures. It was in 2012 that Uber announced UberX, which is a hybrid car and is comparatively less expensive and the best alternative to black car service. Uber received $3.5 billion’s funds from Saudi Arabia’s Wealth Fund.

As Uber is not a public company yet, therefore it does not have to report the earnings publicly. But on its own choice, the company opened up in April 2017 for the first time to Bloomberg where it announced a global loss of $3.8 billion in 2016. This figure includes losses from China when it sold in summer 2016—-. Not keeping this in an account, the net losses $2.8 billion. It was also discussed with Bloomberg that the more they shift to the Uberpool—-the faster their income is likely to grow. Due to this, the last quarter of 2016 was seen to be a bit brighter with an increase in revenue of 76% and losses only rose by 5%.

Uber Faces Opposition

In its journey to expand, Uber has made its way through many resistances from the government regulators and taxi industry. To come over this dilemma, the company hired David Plouffe; who is a very high profile corporate and political strategist and has also worked on Obama’s presidential campaign in 2008.

Taxi drivers in Madrid, Paris, Berlin, and London hosted a huge protest in 2014 against Uber for having such low rates as they do not follow the local laws and does not pay the license fees they are making an unfair competition in the market which the taxi drivers can’t compete with.

In December 2016, this case went to Europe’s top court and Uber’s license to operate the business in London was canceled arguing that Uber was unfit for holding the license. In 2017, at the time of the cancellation, the registered drivers with Uber in London were 40,000. Uber positively called this the way of Mayor taking the side of the minority who does not give any care to what the consumer wants. Later on, on 26 June 2018 made some changes to the ban, saying they could work in London under a license of 15 months following certain conditions.

A case appeared in New York about the drivers being charged their commissions on the earnings before the tax is paid instead of vice versa. It was said to have cost the drivers of Uber tens of millions of dollars. Although Uber promised to pay this amount back in full, the question that arises is that in the end, who pays the taxes. Drivers’ lawyer group claimed that Uber is avoiding its taxes at the expense of their drivers supporting it with proves found by The New York Times. According to this, it could have caused drivers hundreds of millions of dollars.

A New York judge on 13 June 2017 stated that the drivers of Uber should not be considered as independent contractors, and rather employees. In this way, Uber’s drivers can claim for employee benefits which would have many positive impacts on the drivers.

Bad news for Uber is that there is a restriction since August 2018 on the new licenses for the sharing of ride services for 12 months.

Retaliation for Surge-Pricing

The surge pricing is not self-calculated but it is automatically calculated through the system using the algorithm which works according to the demand and supply rule. The prices were seen to surge as much as even seven times on New Year’s Eve 2011. Once again, in a snowstorm, the prices triggered so much that it upset the customer. However, recently Uber has committed itself to cap the surging price to satisfy the customer.

Lyft as Uber’s Rivalry

The rivalry between the two has been very fierce. They both claimed that their drivers and their employees both vandalize by hailing and then canceling on the rides between the two. In a Vanity Fair article, Kalanick admitted that they plot ways against Lyft to undermine their efforts in fundraising. (For more, see: Key Differences Between Uber and Lyft)

Added Services

It has a food delivery program with the name of Uber Eats. It also offers its customers and drivers the option of Uberpool, which makes it cheap and easy for the customers and drivers to use the service respectively compare with UberBlack and UberX.

In 2017 Uber introduced a co-branded gift credit card being in partnership with Barclays. It is said that the Uber visa card would be free of charge and would have a balance of $100 as a bonus. This card would offer the cardholder cashback on several online transactions, airfares, and dining expenses.

On July 9, 2018, Uber have announced to be in collaboration with Alphabet Inc.’s Google Ventures (GOOG) for the investment in Lime, to get scooters from them on rent and make it available for public use; using it, paying their fares and finally leaving it on the sidewalk for the next rider. This would make up for a very convenient and neat clean energy-based business model. Lime was established in 2017 and succeeded to raise $467 million till now. Out of Uber’s worth of $1.1 billion, this deal is an investment round of $335 million. The company has plans on promoting this business through apps and tag the scooters with Uber’s logo. Similarly, its investment in Jump Bikes cost Uber $200 million in April’18.

Khosrowshahi Replaced Kalanick

2017 was a dry and tough year for Uber. The chaos began when a female employee of Uber reported the company to have a very adverse and bitter environment as well as a sexist culture in a blog of about 3000 words. She talked about how the working environment is quite offensive to most of the employees there. This blog became very viral in a few time and Uber lost most of its valued employees due to the allegations imposed on them. The board also decided to host an investigation called “Holder investigation” The result of this investigation was that there were 47 points to improve for Uber and 20 staff members firing necessary. This investigation was led by Attorney General Eric Holder.

This scandal haunted the CEO and the company for many months as it was said that this sexist attitude was a top-down, and Kalanick was involved in it himself. A leaked video showing him arguing with a driver to lower the shares did not help to prevent the scattering of his image in the eyes of the public.

On the other hand, the company was being sued as discussed earlier, by Alphabet’s (GOOGL), Waymo that their former employee has stolen the secrets of self-driving technology. However, this case was settled in 2018. The New York Times also claimed that Uber has used a certain feature that would allow Uber to operate in illegal areas, thus it has committed a criminal crime and it should be followed by an investigation.

On June 21, 2017, there was a shareholder revolt and Kalanick had to resign. In less than a period of two months, Dara Khosrowshahi, CEO of Expedia (EXPE) at that time took over. Dara Khosrowshahi is said to have escaped the Iranian revolution and migrated to New York along with his parents in 1978. He started working initially in the finance department in an investment bank and later on became CFO of IAC/InterActiveCorp (IAC). He stayed in this position for 7 years before he was appointed as the CEO of Expedia. (Editor’s note: Investopedia is an IAC owned company)

To Conclude

Just like Tesla Motors (TSLA), Apple Inc. and Google, Uber is also working to make its service driver-less cars. Currently, Uber is working to make its way to get a permit in California for self-driving cars. So far, it seems to be difficult as Uber has been sued by Alphabet Inc’s (GOOG) Waymo for stealing it’s self-driving technology and expelling its own founder and CEO. The worst-hit was in March’2018 when in an accident of a self-driving car hitting a pedestrian and is proving to be fatal. Also, it’ testing has been suspended for a short time. It was in May’18 that Uber announced it would stop the testing done in Arizona and conduct it somewhere else. Uber’s self-driving car returned to Pittsburgh in July’18. Now only time can tell if Khosrowshahi can play things differently on the cars.

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