How Uber Became The World’s Most Valuable Startup #scottsthoughts

Welcome to success story the most useful podcasts in the world. I'm your host Scotty Cleary. The success story podcast is part of the HubSpot podcast network. The HubSpot podcast network is the audio destination for business professionals who seek the best education and inspiration on how to start and grow a business. HubSpot podcast network hosts act as on demand mentors to entrepreneurs startups and scale ups through practical tips and inspirational stories. Listen, learn and grow with the HubSpot podcast network at HubSpot.com slash podcast network. Today, I'm going to walk you through the story of Uber. We're going to go through their origin story where the idea came from how they grew, how they became the largest evaluation highest valued startup in history at roughly $70 billion. And also how they fell from that $70 billion valuation, what happened, but also some of the strategies that they've used to grow over the years, some of the growth strategies, marketing strategies, product strategies. This is a business case study. This is Uber's growth story. So this took place over a 10 year span. As of 2020, Uber became the world's most valuable startup with a $78 billion valuation. But what made Uber so successful is it just because they offer an app that connects riders and drivers as a novel or is there more to it than meets the eye. So I'm going to walk you through what made Uber such a successful company. I'm going to look at three key factors, innovative solutions, their marketing strategy, and in their profitability and why that was so important for them achieving the $78 billion valuation. The Uber business model is very straightforward. I'm sure most of us have taken an Uber at some point. It matches people who need rides with drivers who are willing to provide them. If you think that sounds pretty much like a traditional cab or taxi company, you're right. There is 100% direct competition between Uber and traditional taxi services. We have seen this in the news again and again and again. Taxis lobbying to stop Uber from growing as a company to stop Uber from stealing their customers. We've seen it at the airports when the Uber stand is a 100 feet away and cabs are right outside the front door of the airport. It's a non-stop battle, but Uber is very, very popular. Taxis are unfortunately a little bit of a dying breed in most parts of the world, except where taxi organizations, unions have really strong footholds and perhaps they swayed the government. But for most parts of the world, Uber is very strong and they have huge, huge market share. But let's bring it back to 2008 when it all started. So the idea of Uber was born in Paris. In 2008 when Travis, Kalanik and Garrett Camp were both at an annual tech conference low web. After the event, they were left without transportation when they were standing outside in the cold waiting for a cab. So an idea came. What if you could request a ride from your phone? And the answer to that would be the service that we know as Uber. That was the big idea. Kalanik and Camp originally wanted their idea to be a time share limouservice. Then one could access with an app, but obviously that's not how it eventually manifested. After waiting in the cold, two went their separate ways, but Camp was so fascinated with this idea, he went ahead and purchased the domain ubercab.com. So in 2009, Camp started working on a prototype for Uber cab while being the CEO of stumble upon. In the same year's summer, Kalanik was finally persuaded to join as the quote unquote chief incubator of Uber cab by Camp. Uber cab was tested with only three cars in New York and the following year they officially launched in May. So they went through their ups and downs, grew as a company, nothing too incredible to really discuss between then and 2015. 2015, obviously at this point, they have significant, significant brand recognition. They have significant market share. In July of 2015, Uber became the most valued startup when it was valued at $51 billion after a funding round. In 2016, Uber raised another $3.5 billion from Saudi Arabia's wealth fund. However, 2017 was the year when shit hit the proverbial fan for Uber and it was a difficult year. So controversies for Uber up until 2017, it was a pretty smooth ride. It was a great startup idea. They were growing significantly. Of course, their competition was legacy cabs and taxis, which really were not priced to compete at all because up until now in history, there was no competition for taxis or cabs. So Uber had a pretty easy run to start. Of course, traditional startup growing pains, there was some, but still until 2017, they were doing pretty good. 2017 is when controversies started. So in 2017, a female engineer called out the sexist culture in Uber in a blog post. Reportedly, Uber's corporate culture was hostile and sexist to people. The post went viral. It caused many people to be laid off as a result. Uber then held an internal investigation known as the holder investigation. Meanwhile, Klanik resigned as CEO. He was CEO at the time due to shareholder revolt, shareholder pushback. This directly impacted the valuation of Uber. In January 2018, Uber's value was reduced from $70 billion to $48 billion. Almost $30 billion wiped off the face of their organization because of stuff that has happened in the organization that wasn't good, that was sexist, that was not conducive to a positive culture except in culture. This lost them a $30 billion valuation, but it was after Klanik resigned that things started to turn around again. Of course, I want to point this out. Klanik was not directly at fault for the things that were discussed in this blog post, but it was generally felt amongst the shareholders that there was not enough done to get rid of this sexist culture at Uber. So in steps, Dara Kostrovshahi, he was announced a CEO in May of 2018. In 2018, that was also the year that Softbank invested in Uber. Softbank investing in Uber, Uber gaining a powerful ally in APAC in Indonesia, as well as the fact that the old CEO Klanik resigned. Dara, new CEO stepped in. This bumped Uber's valuation back up to $62 billion in 2018. Not securing the previous run that they had had before all of this 2017 turmoil occurred, but it still is one of the most valuable companies in the world, and to this day still holds that title. So now let's break down the secret to Uber's growth and why they were able to even hit that $70 billion valuation so quickly. So how did Uber do it all? Well, Uber began as an idea, and from that idea, it grew into a billion dollar company that has survived adversity and scandal, and that's not easy because some scandal can kill and destroy a company, and $30 billion was wiped out, but they're still doing okay. So what actually led to Uber being able to weather the storm to grow to that billion dollar valuation, multi-billion dollar valuation, and also spawn a whole slew of gig economy services based on that same concept? Well, the main differentiator was an innovative solution. So the design of the app and service is the most important reason why customers love Uber. Product led growth product led marketing focus on building a great product and your customers will come and they will evangelize you. You can order a ride by simply pulling out your phone and tapping a button. The GPS on your phone shows you exactly where you are. The driver knows where you're headed since you're entering the address into the app ahead of time, so the driver can calculate their trip, their route. In addition, it already has your credit card information, so there's no need for financial exchange between you and the driver. Compared to the traditional taxi industry, just think about all the steps that have been removed, all the friction. So for example, having to find the phone number for a taxi company was already an obstacle. Afterwards, you had to speak to an operator and provide your address. The taxi would pick you up, but they wouldn't know exactly where you're standing. You wouldn't know when the taxi had arrived. You had to be waiting outside because if you weren't waiting outside as a good chance, you could miss the taxi. Additionally, you had to use a payment method that you had on you at the end of your ride. So that meant you had to have cash on you or you had to have a credit card on you, which are not huge issues, but it's an extra step. To provide the best possible service, every company should minimize the amount of steps their customers have to take. With its technology, Uber offers basic services of connecting people and payment on demand to many. The technology represents the gig economy and technology mediated by on demand services. This is what Uber innovated. They weren't just a ride sharing company. They were innovating the way that consumers and service providers can connect by eliminating friction. That was really what the Uber difference was. How did Uber actually grow as a company because it's great if you have a good product? Of course, it's important to actually grow and market yourself. Uber didn't focus on traditional marketing because their product was so good and so innovative. They focused on word of mouth and there is no better advertising than word of mouth. It is one of the main reasons why you don't see ads for Starbucks everywhere. Word of mouth is more than enough to work for them to grow their brand. Of course, there's some advertising, but realistically, if you do have an incredible product or service or brand, people talk about you. With Uber being a new startup, it didn't have any awareness, any brand awareness. It encouraged its initial customers to spread the word by giving them a referral bonus. So their friends got their first ride free while they get credit for the referral as well. So by creating a great product and aligning that with a referral system or an affiliate system, if you want to call it that, that's how Uber really spread word about their service. And lastly, they had an incredible model setup so that they partnered with drivers. Now, this is a point of contention because a lot of people think that drivers on Uber should be considered employees. But it would be silly to think that this wasn't part of their success. So their strategy was labeling themselves as a technology company, not a transportation service. Because of this, their drivers are treated as independent contractors. Accordingly, Uber drivers are not considered key resources and Uber's internal processes like employees rather key partners. Uber drivers would need to pay more taxes if they were Uber employees. Uber would have to pay more tax on the fact that they had hired all these people. And it would be less profitable for Uber since their clients would also have to pay a higher price to cover all of these taxes and all of the things that come when you hire an employee. So they thought if they can have independent contractors not pay as many costs and actually hiring these employees, they could pass those savings onto the customer. That could give them a competitive advantage, which it did. And one more point that I wanted to bring up, Uber did include some quote-unquote stunt marketing as they grew. So it wasn't like they didn't do any marketing at all. Uber introduces a new service. For example, they want to introduce Uber eats or they want to introduce a new level of luxury car to their fleet. They often include some gimmicks when they launch a new product or a new service on their app. They constantly pull off quirky stunts, viral stunts. For example, they've done kitten delivery via Uber. They've raffled off chances for passengers to get a ride with celebrity drivers. These are all viral stunts that Uber does whenever they revamp some part of their platform. And these tactics work especially well in the age of social media where these types of things create buzz. There's a viral factor and these things are shared internationally. And this is also given Uber massive exposure for new launches within the existing product. So those are some of the ways that Uber has achieved this multi-billion dollar valuation. Of course, they were innovative. They had an innovative solution. They reduced friction. They made it easier for the customer. They focused on having a great product that led to word of mouth evangelism. And then of course, they pulled a few stunts and tapped into viral marketing tactics that allowed people to share fun things that they were doing to reinforce the cool new product launches that they were implementing. And just a few final words on Uber. Uber has grown much more quickly than a traditional taxi service due to mainly its use of technology. But the company's rapid success is rooted in the fact that it was the first to develop a quote-unquote disruptive business model that took advantage of emerging technologies and completely restructured how we approached an entire industry like the taxi and cab industry.