Super Pumped : The Battle for Uber (9780393652253)

by Isaac, Mike

  Facebook was followed by Internet 2.0 companies like LinkedIn, Zynga, and Groupon, all of which mimicked the dual-class structure. Snap Inc., helmed by another tech wunderkind, Evan Spiegel, famously declined a $3.5-billion acquisition from Facebook in 2013. When the company went public, in 2015, the twenty-six-year-old Spiegel became the world’s youngest billionaire.

  Only in a place like Silicon Valley, where founders are celebrated above all, could an executive like Spiegel spurn such an offer and be celebrated for his bravery. Where nonbelievers might consider such a choice irrational, the “cult of the founder” suggests that no matter what the chief executive may decide, he was probably right because he was the right guy to begin with.

  As the balance of power shifted to founders in 2010, venture capitalists had to fight—hard—to beat out their competitors to invest in the best young companies. They hosted parties for entrepreneurs, wined and dined them at chic eateries like Nopa, Bar Crudo, and Spruce. Sometimes a flashier approach worked; chartering a Learjet 31 to bring a group of twentysomething techies to SXSW showed founders that a VC firm could travel in class. Nothing was more “baller” than a private jet.

  Gurley didn’t rely on expensive gimmicks alone. He gave impeccable guidance, answering calls from a founder at 11:30 at night, after his kids were asleep and he was near dozing himself, to talk strategy or walk a young entrepreneur off some panicked ledge. Gurley competed for the most important deals. And more often than not, he won.

  Benchmark had been looking for a ride-hailing or taxi-based business to invest in for some time. Gurley had already been meeting with companies like Cabulous, Taxi Magic, and a handful of other San Francisco–based ride-hailing companies. A popular ride-hailing company could quickly produce what technologists call a “network effect”—a shorter way of saying “the more people that use a service, the more beneficial it is to everyone else over time.” And Uber’s growing popularity in San Francisco meant it was creating strong network effects among its two-sided marketplace of both riders and drivers.

  Just a few months after Uber had raised its seed round with investors like Chris Sacca and Rob Hayes, Kalanick was already out hunting for investors for Uber’s Series A. The next round of funding would supply millions for new growth. Gurley had approached his partners about investing in Uber’s seed round, but wasn’t able to win over everyone at the firm. He wouldn’t let it happen again; he had to invest in Uber. The opportunity was too big to pass up.

  What Gurley didn’t know is that Kalanick wanted to strike a deal with Benchmark as much as Benchmark wanted Uber. (Benchmark’s reputation preceded it.) He also liked the idea of adding a coveted figure like Gurley to Uber’s board, where he could open doors for the company while participating in key decisions. And Kalanick knew Benchmark had made great bets on companies for years.

  Benchmark was a blue-chip firm, venerable, even, among the glut of venture capitalists entering the valley after the crash. Kalanick wanted the best, but the right kind of “best.” Sequoia Capital, for example, was one of the most prestigious firms in tech investing. Kalanick had made repeated overtures to Sequoia for funding, but was repeatedly rebuffed over multiple early rounds.

  Gurley had grown famous for his personal blog, Above the Crowd, where he would occasionally post investment treatises and thoughts on the state of technology investing. (Aside from the grandiosity of the title, it was also a sly recognition of Gurley’s height.) He started it as a fax newsletter during his analyst days, long before the ubiquity of the consumer internet. It grew much larger when Gurley launched it as a public blog in 1996. He would mull over the content of a single 3,000-word blog post for months, vetting his thoughts with friends and colleagues, before putting it out into the world. And when Gurley updated his blog, people read it. A single post could lead Valley chatter for weeks—something Kalanick appreciated.

  As the two courted each other, Kalanick—who was living at his hilltop home in the Castro—called Gurley on a Sunday night in 2011 at around eleven o’clock, wanting the VC to make the forty-minute drive from Gurley’s home in the suburbs to meet Kalanick and talk through some ideas.

  Gurley didn’t think twice. He jumped into his car and drove the thirty miles north to meet Kalanick at the W Hotel, one of the only upscale bars in the city that stayed open late on a Sunday evening. The two “jammed” together on ideas for Uber over cold beers at the bar, batting product thoughts and long-term strategic goals back and forth for hours. In the early morning hours, as Gurley’s family was asleep in their beds, the VC and the founder sealed an investment in Uber. In a handshake deal, the two valued Uber at about $50 million, and Benchmark would own just under 20 percent of the young company.

  The next day, Benchmark got going on the paperwork, and shortly thereafter, the venture capital firm delivered the $11 million investment to Kalanick. Gurley also took a seat on Uber’s board, which at the moment had only three members: Garrett Camp, Ryan Graves, and Travis himself. In Kalanick, Gurley knew he was investing in a dogged CEO; though just ten years Gurley’s junior, Kalanick was still in his thirties, and as tenacious as any founder Benchmark had invested in. That tenacity would give Kalanick the courage to challenge entrenched transportation interests worldwide. And though neither of them would know it, it would make Kalanick more powerful and uncontrollable than any entrepreneur Gurley had ever met.

  But in that moment, Gurley wasn’t thinking about any of these things. At last, over beers at a bar after last call, Gurley had bagged a transportation networking startup, his wild boar.

  He was in.

  Chapter 8 notes

  †† Not every startup decides to take on venture capital. These companies are said to be “bootstrapped,” or entirely self-funded. Bootstrapping founders keep all the equity in the company and reap all the rewards if the startup succeeds. Their founders also go broke when they fail.

  ‡‡ Google removed the “Don’t be evil” mantra from the preface of its corporate code of conduct in 2018.

  §§ Founder worship of Zuckerberg evaporated after 2016, when news coverage of events ranging from the presidential election in the United States to reported ethnic cleansing in Myanmar suggested that Facebook lacked oversight of its platform. Even the boy genius himself, pundits said, was not aware of how powerful—and vulnerable—his own software could be.

  Chapter 9

  CHAMPION'S MINDSET

  In Kalanick’s view, entrepreneurs were worthy of the praise they received.

  Founders like him spent every day hustling to keep their companies running. They put their reputations, finances, and well-being on the line. Venture capitalists, on the other hand, only risked OPM—“other people’s money.” VCs anticipate company failures in their portfolio of investments; it’s why they diversify their approach and spread cash around to multiple sectors. If a young Uber failed, it was no skin off the investor’s back. It was Kalanick and his staff who would bear the brunt. So Travis Kalanick was suiting up for war.

  As Uber prepared to expand throughout the country, Kalanick swore that this time, things would be different. He had learned from his last two startups. At Scour, he had left far too much control in the hands of investors—investors who, when Scour was under attack, saved themselves and fed him to the wolves. At Red Swoosh, he had survived, but the timing was terrible, and the product less compelling.

  Now, with Uber, Kalanick was selling a winning product that was landing at an ideal time. Above all else, Kalanick was in complete control. Everything about Uber—from the design of the app to the raucous, take-no-prisoners culture—was his. He saw himself locked in an existential battle with corrupt, entrenched taxi operators and the politicians they paid to protect them. Kalanick was the general on the front lines.

  Aware that war metaphors could seem overblown, Kalanick often compared the ongoing battle to a political campaign. “The ca
ndidate is Uber and the opponent is an asshole named Taxi,” Kalanick once said onstage at a tech industry conference. “Nobody likes him, he’s not a nice character, but he’s so woven into the political machinery and fabric that a lot of people owe him favors.”

  But this was window dressing. Kalanick had designed Uber for battle. If government decided to push back in any individual city, Kala­nick quickly weaponized his users against City Hall. Uber would blast emails out to riders, asking them to contact their local representatives and voice their frustration with anti-Uber crackdowns. Uber city teams would send mass text messages to drivers, urging them to stay on the road even if they were ticketed or their cars were towed by law enforcement.

  “There’s been so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask for permission upfront for something that’s already legal, you’ll never get it,” Kala­nick once told a reporter. Kalanick evidently believed there was no way Uber could win if it played by the rules—his competition certainly wouldn’t.

  The founder’s instinct proved correct. Uber’s guerilla tactics far outmatched the resources and technical acumen of government workers or taxi operators. In Seattle, for instance, Austin Geidt dropped in like a paratrooper, quickly hiring ground support staff to drum up interest from riders and drivers. Ryan Graves then swooped in and made the pitch to town car companies: “We’re giving your drivers a way to earn extra money.” In a matter of weeks, Uber was able to grow its ridership before the city even knew what had happened. By the time regulators had arrived, Uber was too popular with citizens to try and shut it down. Once Uber hit critical mass, transportation authorities lacked the manpower to stop the fleet.

  To Kalanick, Uber wasn’t doing anything wrong. After all, these were official limo and town car drivers, operating well-maintained, insured vehicles and using Uber’s service to make extra money during inefficient downtime. Everyone working for Uber was a licensed, professional driver—period. (This was before UberX allowed anyone with a car to become a driver.) As Uber’s footprint spread across the United States—Seattle, New York, Los Angeles, Chicago—it became more popular and thus more difficult for cities to block the company.

  Kalanick never revealed stats, but offered a bro-speak narrative of wild success. “The best metric I can give you is that Uber is killing it in San Francisco and we’re crushing it in New York,” Kalanick told a reporter in the early days after launching in Seattle.

  Kalanick hired throngs of ambitious twentysomethings, fresh out of college and starry-eyed about Kalanick’s pitch. He spun stories of Uber’s eventual ubiquity, providing “transportation as reliable as running water.”¶¶ It wasn’t uncommon for a new hire to enter Uber’s headquarters having never managed anything more than a Starbucks, and be sent out to take over a new city.

  Kalanick trusted his employees with significant power. Each city’s general manager became a quasi-chief executive, given the autonomy to make significant financial decisions. Everyone was responsible for “owning” their position. Empowering his workers, Kalanick believed, was better than trying to micromanage every city. Later, when Uber had billions of dollars in the bank, city managers were given the latitude to spend millions of dollars in driver and rider “incentives”—freebies to get people to use the service—in order to spur demand and, later, to lure riders away from other ride-hailing competitors. Those employees rarely had to check in with headquarters. Top managers in Uber’s San Francisco office barely knew employees in, say, Chicago or Philadelphia. And they had little oversight over the money. Local managers were greenlighting seven-figure promotional campaigns based on little more than a hunch and data from their personal spreadsheets.

  In many ways, Kalanick’s approach was brilliant. A local employee in Miami would be better prepared to fit Uber to their own city than, say, a new hire from San Francisco who knew nothing about the people and institutions that make up a locale.

  There were drawbacks. Give too much autonomy to a legion of twentysomethings, and you’ll occasionally empower a battalion of douchebags. In France, one local promotion boasted “free rides from incredibly hot chicks.” The New York office was infamous for its bro-culture. Helmed by Josh Mohrer, a former frat boy turned MBA graduate, the bravado and aggression of management led to resignations and allegations of harassment. Every city office had its own cultural microclimate, for better or worse.

  But that sense of freewheeling autonomy made employees lionize Kalanick’s leadership. It was as if Kalanick had hired a private army of mini-entrepreneurs and given them one mandate: Conquer. Everyone was a founder of their own city-level fiefdom. Everyone got to live the startup, hacker ethos, something Kalanick cherished and never wanted his company to lose, even as Uber spread like wildfire. With a slap on the back, Kalanick would send his officers out into the field to build their own infantry and fight for Uber. “Always be hustlin’,” he’d say.

  Kalanick envisioned his company becoming a new Silicon Valley institution, a juggernaut that encouraged a spirit of entrepreneurialism. He wanted “ex-Uber” to carry a certain Valley cultural capital, much like being ex-Facebook or ex-Google. After their time at Uber, Kala­nick wanted his troops to go off and start their own companies. He saw the very act of founding a company as a virtue unto itself.

  Kalanick may have been an Ayn Rand–esque libertarian spouting cheesy startup platitudes. He may have pushed his team to work to the brink of exhaustion. But it mattered to employees that Kalanick had their backs. They were in this fight together.

  They couldn’t have asked for a better founder.

  Uber had perfected viral growth.

  After Seattle and New York came Chicago, Washington DC, Los Angeles. But Kalanick’s ambitions were much larger; he wanted to go global. By 2012 they were in Paris, with expansion to London, Sydney, Melbourne, Milan, and dozens of other cities to follow. Guerilla marketing campaigns spread notice of Uber to new passengers, and word of mouth from users brought others flocking organically to the service.

  Kalanick’s and Camp’s vision of on-demand black cars—the baller vision—was lucrative. Uber was already minting money in San Francisco, where every VC and startup founder delighted in having a private car service you called with your phone. But what flipped the switch to enormous growth was moving beyond the luxury model.

  Sunil Paul, a serial entrepreneur and longtime transportation geek, was experimenting with a different way of offering rides to people with his San Francisco–based startup, Sidecar. Paul saw what Uber was doing and appreciated their intensity and aggression. But Paul realized there was a much larger market opportunity in what he called “peer-to-peer ride-sharing.” That is, instead of focusing on professional limo drivers, Paul wanted to convince normal, everyday people who owned cars to become part-time drivers themselves. The way Paul saw it, the roads were already packed with underutilized vehicles, four- and six-seated vehicles that only contained one person driving the car. It was a glut of capacity, otherwise wasted space.

  Paul was first to the thought, and more prescient than he could have known at the time. But in Silicon Valley, being first doesn’t matter—being the best does.

  As Paul tried to transform his peer-to-peer vision into a reality, another startup was mulling the same approach. Zimride, a carpooling startup co-founded in the Bay Area by a transportation enthusiast and an ex-Lehman Brothers employee (who escaped the firm just three months before its 2008 bankruptcy), was considering a pivot of its own. Until then, Zimride focused mostly on long-distance carpooling between college campuses, something co-founder Logan Green had been obsessed with since his days at UC Santa Barbara. But despite working long hours with his partner, John Zimmer, Zimride was mired in the doldrums. Peer-to-peer sharing—the kind Sunil Paul was pursuing at Sidecar—presented an interesting opportunity.

  Kalanick was growing nervous. Across town at Uber’s headqu
arters, he had heard about Zimride’s plans, and he had heard whispers about Sunil Paul’s escapades, too. Kalanick considered Mark Zuckerberg a friend—or at least a familiar acquaintance—and the Facebook CEO had given Kalanick a heads up. Facebook employees were going crazy for Sidecar, Zuckerberg told him. Zuckerberg warned Kalanick that he might want to keep an eye on the company.

  Soon after, Green and Zimmer announced their pivot. Zimride would abandon its long-distance carpooling program and launch a new service called Lyft; the plan was to make casual ride-sharing a fun, friendly experience, asking passengers to ride shotgun next to their drivers and strike up friendships while joyriding to their destination. The cherry on top was a cutesy pink mustache. Lyft sent all of its drivers giant, whimsical, plush hood ornaments to affix to the front of their cars.*** It was an instant hit.

  Kalanick sprang into action. He told his lieutenants, Ryan Graves and Austin Geidt, to take care of Lyft before it grew into a real threat.

  Graves, Geidt, and especially Kalanick weren’t above playing dirty. They started booking secret meetings with regulators in San Francisco and encouraging them to go after Lyft and Sidecar. Where once Uber had scoffed at City Hall, now they implored city officials to shut the other companies down. “They’re breaking the law!” Geidt and Graves said to the indifferent regulators. Though Sunil Paul’s efforts with Sidecar weren’t taking off, Lyft was gaining traction quickly. People loved the stupid pink mustaches.

  In theory, regulators were against Lyft’s antics; after all, the company was breaking rules. Uber had been recruiting drivers for some time, but within limits; all of Uber’s drivers were licensed livery vehicle operators registered with local transportation offices. Lyft turned that on its head. The mustachioed startup invited anyone with a car and an ordinary Class C driver’s license to start driving for Lyft.