by Isaac, Mike
The tactic worked. New UberCab drivers flooded the market in San Francisco as the handful of early employees began to promote the app to anyone who would listen. The app shot up in the App Store rankings, especially after it began receiving glowing initial reviews from the press. TechCrunch, now the company’s favorite industry blog, hailed UberCab’s model as innovative and disruptive, something akin to “Airbnb for cars.” Ironically, in just a few years startups would begin to describe themselves as the “Uber for x.”
“Choose your car, driver and price and get exactly what you pay for,” as one TechCrunch article by Arrington said. “Help break the back of the taxi medallion evil empire.” Uber couldn’t have phrased it better itself.
Word of mouth spread across San Francisco. Those who tried UberCab swore by it. For everyone who had ever been stranded in Potrero Hill beyond the reach of Muni, or stuck out in the Sunset district; for people who got stuck in the city after BART stopped running at midnight—UberCab was exactly the thing San Franciscans had been waiting for.
The app pleased its users because Kalanick and Camp had spent a great deal of time thinking about user experience, “UX” in tech industry parlance. They believed every part of an UberCab ride, from hailing the driver to exiting the car, should be as easy and enjoyable as possible. A “frictionless” experience, as Kalanick put it, was crucial to making the “UX sing.”
For instance, often when people called for a traditional taxi, they didn’t know whether it’d be there in a matter of minutes or if it wouldn’t show up at all. When a user ordered an UberCab, she could watch the car’s journey, pixel by pixel, across the map on the screen of their iPhone. San Francisco’s aging taxicabs were grimy, their seats sticky and torn. UberCab’s private black cars would show up spotless, with slick black leather interiors and comfortable air conditioning, replete with wintergreen breath mints and chilled bottles of Aquafina.
One of the most important parts of the UberCab experience was paying for the ride. Kalanick was insistent that payment was something people shouldn’t even have to think about. With UberCab, the ride would simply be charged to a credit card stored on your account. Ending the trip was as simple as opening the door and stepping out onto the curb. No tips, no change, no hassles.
Soon enough, startup CEOs and venture capitalists started expensing their UberCab rides. Having the Uber app—knowing to order an Uber rather than take your chances with a taxi—became a status symbol. UberCab employees printed out dozens of promotional gift cards, handing them out to influential Twitter users and other high-profile members of the Bay Area’s tech elite, encouraging them to talk and Tweet about it.
Within months, Kalanick and Camp’s startup was the talk of Silicon Valley.
To prove the company could scale, however, Kalanick needed to replicate UberCab’s success outside the Bay Area. San Francisco felt like kind of a “gimme,” a tech-friendly haven where a sizeable population of young people with money to blow enjoyed early-adopting new ideas. If your consumer-tech iPhone app doesn’t flourish in San Francisco, you might as well pack up and go home.
Twenty-four-year-old Austin Geidt was tasked with figuring this out. In 2010, Geidt had just graduated with a degree in English from the University of California, Berkeley, and no idea what to do with her life. She had never worked a full-time job outside of the retail industry. The day Geidt applied for an intern position at UberCab, she had been turned down for a barista gig at a Peet’s Coffee shop in downtown Mill Valley, one of the richest parts of Northern California per capita—home to many of the people Uber would eventually wish to court for its service.
Geidt scored an internship with UberCab before it had a real office or much of a customer base. With no marketable skills and very little idea of what she was doing, she ended up doing some of everything. She’d ring up limo companies across San Francisco, convincing them to join the service. She’d post countless Craigslist ads and blanket the city sidewalks with want ads and flyers. It was scut work, but Geidt was grateful for the job, and exhibited “hustle,” a favorite characteristic of Kalanick’s.
She was Uber’s first city launcher, a made-up job that involved parachuting into new markets, setting up shop, and launching the service. She planned the earliest city launches meticulously, from finding office space and forging relationships with local black car companies, to items as granular as “buy a sheet cake for our team’s launch party.”
She quickly found that major metropolitan areas are filled with small businesses that provide black car and limousine rides, mostly for occasions like bachelor parties, weekend charters to tourist destinations, or ferrying rich customers to the airport. But drivers suffered through long lax periods, waiting around in garages or on side streets for the next call from the radio dispatcher.
Geidt would offer a solution. “We’re going to give your drivers a free iPhone with an app on it, courtesy of our company,” Geidt said. “When they have a bit of downtime between their usual gigs, they can turn on the app and make a chunk of extra change on the side.” Meanwhile, Uber takes a 20 to 30 percent cut of every ride for providing the network that connects riders to drivers.
“Everybody wins,” Geidt said.
“It was honestly pretty much a no-brainer for the livery company operators, since the cars were just sitting there otherwise,” one early employee said. To kickstart demand, UberCab would dole out incentives to both drivers and riders, a method that proved to be one of the company’s most enduring marketing techniques. Riders, for instance, would get a free first trip upon signing up for the app. Drivers were promised hundreds of dollars in bonuses if they completed a minimum number of trips during the week. And to incentivize customers to return, future fares would be discounted anywhere from 20 to 50 percent, and sometimes given away completely—UberCab footed the bill, paying drivers the difference for those rides.
The strategy was pricey, since the company lost money on each subsidized ride. But it paid off after people started using the service more and more. “As the company operators saw how much business they got from Uber, they eventually started buying new cars and hiring more full-time drivers to handle all the extra business,” one employee said.
In each new city, Geidt established a team to continue operations after she moved on. Communications managers handled marketing, messaging, and drumming up rider and driver interest. She would hire a few MBA types to handle what they called “driver operations,” which meant spreadsheet work managing supply and demand among a population of riders and drivers in continuous flux. General managers were at the top, and acted as the boss of the individual city.
Geidt finally felt like she had found her professional footing. Bringing UberCab into new cities became a routine. She systematized the approach on an internal company Wikipedia-like page, creating a playbook for city launches. Send in a launch team to Seattle, San Antonio, Chicago—wherever—have them follow the playbook, and watch the demand flywheel begin to spin. She became extremely efficient at launching local operations, and would spend the next eight years of her life on airplanes, replicating what she had done in San Francisco in other cities all over the world.
As Geidt was perfecting the playbook in the United States, the idea of launching UberCab in foreign countries seemed unimaginable. But before they could even spread outside of California, the group faced an existential crisis.
On October 20, 2010, just days after Graves had agreed to officially step aside as Uber’s CEO, transportation officials showed up at the offices of the young startup. They hadn’t read TechCrunch and asked to see Graves. UberCab, they said, had been served with a cease and desist order; the company was breaking the law by skirting existing transportation regulations, the San Francisco Municipal Transportation Agency said. Every day UberCab was in operation, the company faced fines of up to $5,000 per trip.
The potential fines were enough to put the company out
of business. UberCab was already completing hundreds of trips per day in San Francisco. Moreover, Graves, Kalanick, and other employees faced up to ninety days in jail for each day the company remained in operation beyond October 20.
Graves, Geidt, Kalanick, and board member Rob Hayes were in a cramped room together at their shared workspace office when they got the cease and desist order. They scanned the letter in disbelief.
Graves was scared. “What are we supposed to do here?” he said aloud, reading his name on a piece of paper that said he could be going to jail. Hayes, the venture capitalist, wasn’t sure what to say. He was used to investing in consumer tech companies, but rarely (if ever) did they run afoul of the law. Geidt, just a few months out of college, stood quiet and nervous, too. This was her first foray into the professional world. Now she was looking at jail time.
Kalanick didn’t miss a beat. “We ignore it,” he said to the room.
The others looked at Kalanick like he had grown horns. “What do you mean ‘ignore it?’ ” Graves said. The ex-CEO looked at Hayes for advice, since the VC at least had some experience managing startups. Hayes shrugged back at him.
“We ignore it,” Kalanick repeated. “We’ll drop ‘Cab’ from our name,” he said, something his lawyers claimed gave the company greater legal exposure to false advertising claims.
UberCab was now known as “Uber,” and it was staying open for business.
Chapter 7
THE TALLEST MAN IN VENTURE CAPITAL
Bill Gurley needed to get in on this deal.
Over his decade-plus of venture investing, Gurley had watched enough startups succeed and fail to know that this one—Uber, “everyone’s private driver”—was special. Not only was the company growing fast, but it was perfect for the iPhone, the device that was changing the world.
Unlike Camp and Kalanick, Gurley wasn’t drawn to visions of luxury or the idea of being a “baller.” Nor did he have much difficulty getting around; Gurley owned a car and lived in a suburb near Woodside, an extremely wealthy area between San Francisco and Silicon Valley.
What Gurley admired was the potential for scale. Most startups took a business that already existed and tried to make it slightly better or more efficient. Uber promised to upend an entire industry, one that had seen little innovation in decades. The sheer size of the taxi market could make Uber worth billions if the company continued its growth trajectory. And best of all, this new entity, potentially worth billions, had been created out of thin air. It could theoretically drag the entire transportation industry out of the analog world and into the digital one practically overnight. Best of all, whoever did the dragging would set the terms for the entire marketplace.
By downloading the Uber app, riders gave themselves the power and freedom to summon a car instantly, to any location, at any time. And drivers didn’t need to spend hundreds of dollars installing some cumbersome box in their dashboard to connect to these customers. Maybe they’d have to spend ten bucks on a dashboard smartphone caddy—Uber would give them the phone for free.
“It’s magic,” Gurley said.
Uber popped up on Gurley’s radar at the exact right time. Throughout his career Gurley had been enamored with what he called “marketplaces,” a category of business that neither made new products nor sold others, but merely matched the desires of one side of a market with the products of the other side, and took a cut as the middleman.
By the time Gurley arrived at Benchmark, the venture capital firm where he had worked for the past seven years, marketplaces had consumed him. eBay, one of Benchmark’s most successful investments, was a natural marketplace, matching millions of buyers to sellers, all enabled by the rising power of the internet. So was Zillow, an eBay for real estate. OpenTable, one of Gurley’s earliest investments, matched people to restaurant reservations. Grubhub, similarly, connected people to food delivery. DogVacay—Airbnb for pooches—was self-explanatory.
Nearly every one of Gurley’s investments relied on one basic thesis: the internet had brought with it a profound capability to meet the desires of existing, real-world people for experiences, places, and things. Whereas before a Beanie Baby enthusiast might have had to search high and low for a particular plush giraffe, the web could put that person in touch with someone who had stockpiled a warehouse of them. There were endless combinations of buyers and sellers, and hundreds of potential marketplaces bubbling up from the minds of young entrepreneurs, waiting to be brought to life with Benchmark’s blessing—and capital.
Before Gurley arrived, eBay was Benchmark’s crown jewel investment. In 1997, the small, tight-knit VC firm had invested $6.7 million in eBay. Two years later, Benchmark’s position was valued at more than $5 billion.
Gurley came to Benchmark with a good track record. At Hummer Winblad Venture Partners, his home before joining Benchmark, the firm’s first $50-million fund returned $250 million to its institutional investors. And after he joined Benchmark in the middle of ’99—a few years shy of the impending tech bubble burst—Gurley had done a number of very successful investments.
But he still wanted a home run of his own. He needed to get into this deal.
John William “Bill” Gurley was born on May 10, 1966, in the small town of Dickinson, Texas, population 7,000. Tourists would pass through the Houston suburb on their way to Galveston on the East Texas shore. In the 1920s, Dickinson was known best for gambling establishments run by the Maceo crime family. Today Dickinson is better known for its annual crawfish festival, “Red, White and Bayou.”
John Gurley, Bill’s father, was an early NASA aeronautics engineer who worked at the Johnson Space Center in Houston. John had a particular facility with numbers and analysis, both of which he passed to his son. Bill’s mother, Lucia, was driven as well. Besides her job as a substitute teacher for the town’s schools, she was a city councilwoman for eleven years, volunteered at the local library, and raised thousands in grants for the city’s public schools. Lucia spent her spare time working for Dickinson’s beautification program, helping to clean up the streets. Bill loved his mother, but more than that, he admired her—her work ethic, her loyalty, and sense of duty to her community.
Enrolled in Dickinson’s public school system, Bill soon caught the computing bug; in 1981, Gurley got a Commodore VIC-20 desktop for $299, or about $850 in today’s dollars—one of the first relatively inexpensive home color computers. By ninth grade, Gurley began coding his own programs, working from templates he found at the back of computer magazines.
From a young age Gurley stood out for his height. In grade school and at Dickinson High he towered above his classmates. He was different and knew it—and he didn’t always like it. But his height played to his advantage in college. A few years into college studies in Mississippi, Gurley transferred to the University of Florida at Gainesville, playing as a walk-on to the team and later received a Division 1 scholarship. Though the Gators played in the SEC, Gurley’s time with the team was hardly glamorous; he mostly rode the bench. He played for one minute of one game, missing the only shot he took, during the Gators’ blowout loss to Michigan in the NCAA tournament. Still, he managed to pick up a degree in computer engineering.
Gurley continued with computers after college and landed a job at Compaq in Houston, down the road from his hometown. In 1989, Compaq was a growing powerhouse of computer manufacturing, and Gurley was lucky to score a job debugging software for the company. It helped that his sister, an electrical engineering major, was employee number 63.
When he wasn’t spotting problems with software at work, he tracked technological advancements closely. He traded stocks on his Prodigy internet personal account. He devoured tech magazines and plowed through dense, finance-heavy analyst reports on up-and-coming tech companies. He couldn’t help himself; he was infatuated. Gurley saw an intoxicating, transformative power in technology. He wanted to get closer.
After a stin
t at the University of Texas at Austin, where he earned his MBA, Gurley found a marketing position with Advanced Micro Devices—a computer chip company—but he quickly grew dissatisfied with the job. He wanted to do something bigger, something in emerging tech that employed his facility with analysis and numbers.
In business school he had caught a glimpse of a field that attracted him: venture capital. The enterprise made perfect sense to him. Crunching numbers and picking emerging tech trends was what Gurley already did for fun. Getting paid to do it—that was the dream. But it wasn’t as simple as walking into a venture firm with a resume; several venture investors in Austin turned him down for being too young and inexperienced. So Gurley decided to try his luck on Wall Street instead.
The Wall Street mindset of the 1990s was the photonegative of the one in Silicon Valley. In the Valley, VCs were looking for moonshots—the big, dent-in-the-universe ideas that founders spent years chasing for low or little upfront pay. Wall Street thought in three-month increments.
As a Texan, sitting dead center in between the coasts, Gurley took aspects of both mindsets to heart. He appreciated the audacity of tech founders and their brazen disregard for short-term profits. But Gurley was also a pragmatist; companies that spent all their time dreaming of projects of the future rather than watching their balance sheet could find themselves out of luck—and cash—long before realizing those dreams.
The newly minted MBA started cold-calling brand name firms. Preppy East Coast businessmen found themselves interviewing a giant Texan, wide-eyed and awkward, asking for a job picking tech companies. But in 1993, Gurley finally got his wish. He scored a job at Credit Suisse First Boston as a sell-side analyst, a big break for a twenty-seven-year-old kid with no real analyst or trading experience. Still, the job was perfect for him; Gurley was responsible for synthesizing research and analyzing the personal computing industry. Other firms would use Gurley’s reports to decide whether to buy and sell millions of dollars in equities. He saw older, experienced analysts at his firm—Charlie Wolf, David Course, Dan Benton, smart thinkers on the PC industry at the time—being quoted by newspaper reporters and doing stand-up interviews on television. He wanted that glory, and that wealth, too. It was challenging work, but more than that, to Gurley it was fun. The idea of being asked to opine on tech—to be paid for it, even—thrilled him.
