How Uber Became The World’s Most Valuable Startup

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Growth Story is a weekly podcast that breaks down the strategy and tactics utilized by high growth companies, in a short case study format hosted by Scott D. Clary (@scottdclary)

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... host, Scott Dclary. The success story podcast is part of the hub spot podcast network. That's about. PODCAST network is the audio destination for business professionals who seek the best education and inspiration on how to start and grow a business. Hub Spot podcast network costs acts on demand, mentors to entrepreneurs, startups and scale ups through practical tips and inspirational stories. Listen, learn and grow with the hub spot podcast network at hup spotcom 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 start up in history, at roughly seventy billion dollars, and also how they fell from that seventy billion dollar valuation. What happened, but also some of the strategies that they've used to grow over the year, 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 ten year span. As of two thousand and twenty Uber became the world's most valuable start up, with a seventy eight billion dollar 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 then their profitability and why that was so important for them achieving the seventy eight billion dollar 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 cat cab or taxi...

...company, you're right. There is a hundred percent 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 airport's when the UBERSTAND is, you know, a hundred feet away and cabs are right outside the front door of the airport. It's a nonstop 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 two thousand and eight, when it all started to the idea of Uber was born in Paris in two thousand and eight, Wheen Travis Clinic and Garrett camp were both at an annual Tech Conference Low web. After the event, they were left with our 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 is Uber. That was the big idea. clanic and camp originally wanted their idea to be a timeshare limill service. Then one could access with an APP, but obviously that's not how it eventually manifested. After waiting in the cold to went their separate rate ways, but camp was so fascinated with this idea he went ahead and purchase the domain Uber Cabcom. So in two thousand and nine camp started working on a prototype for Uber Cab while being the CEO of stumble upon. In the same year, summer clanic 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 discussed between then and two thousand and fifteen. Two Thousand and fifteen, obviously, at this point they have significant, significant brand recognition. They have significant market share. In July of two thousand and fifteen, Uber became the most valued start up...

...when it was valued at fifty one billion dollars. After a funding round in two thousand and sixteen, Uber raised another three point five billion dollars from Saudi Arabia's wealth fund. However, two thousand and seventeen was the year when shit hit the proverbial fan for Uber, and it was a difficult year. So controversies for Uber. Up until two thousand and seventeen it was a pretty smooth ride. It was a great start up 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 caps. So Uber had a pretty easy run to start. Of course, traditional start up growing pains, there was some, but still till seventy two thousand and seventeen, they were doing pretty good. Two thousand and seventeen is when controversies started. So in two thousand and seventeen 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, clinic resigned as CEO. He was CEO at the time, due to shareholder revolt. Shareholder pushed back. This directly impacted the valuation of Uber. In January two thousand and eighteen, UBER's value was reduced from seventy billion dollars to forty eight billion dollars. Almost thirty billion dollars 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, excepting culture. This lost them a thirty billion dollar valuation. But it was after Klanic resigned that things started to turn around again, and of course I want to point this out. Clinic was not directly at fault for the things that were discussed in this blog post, but it was generally felt amongst the sharehole holders that there was not enough...

...done to get rid of this sexist culture at Uber. So in steps Dera Cost Roshahi. He was announced the CEEO in May of two thousand and eighteen. And two thousand and eighteen that was also the year that soft bank invested in Uber. Soft Bank investing in Uber, Uber gaining a powerful ally in a pack and Asia, as well as the fact that the old CEO, clanic resigned, Dera new CEO stepped in. This bumped Uber's valuation back up to sixty two billion dollars in two thousand and eighteen, not securing the previous run that they had had before all of this. Two thousand and seventeen turmoil occurred, but it's 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 seventy billion dollar valuation so quickly. So how did Uber do it all? Well, Uber began as an idea and from that idea 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 thirty billion dollars 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, Multibillion 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 root. 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 tax you would pick you up, but they wouldn't know exactly where you're standing. You wouldn't know where in the taxi had arrived. You had to be waiting outside, because if you weren't waiting outside, there is a good chance you can 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, and that was really what the Uber Difference was. How did Uber actually grow as a company? Could, because it's great if you have a good product, but 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 credits 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 set up 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 attacks 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 in actually hiring these employees, they could pass those savings on to 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 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 multibillion dollar valuation. Of course they were innovative. They had 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 it's 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.

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