The Uber IPO

In the podcast episode of Acquired, hosts Ben Gilbert and David Rosenthal dissect Uber's tumultuous journey, particularly focusing on the events leading up to and surrounding its IPO. They recount Uber's meteoric rise under the aggressive leadership of Travis Kalanick, its innovative disruption of the transportation industry, and its subsequent cultural and legal crises that ultimately led to Kalanick's resignation. With Dara Khosrowshahi stepping in as the new CEO, Uber aimed to rehabilitate its image, address its financial hemorrhaging, and go public. Despite the IPO's lackluster performance, the hosts highlight Uber's potential for growth, especially through its Uber Eats platform, while also acknowledging the challenges it faces in a highly competitive and fragmented global market.

• Ben Gilbert and David Rosenthal discuss the highly anticipated IPO of Uber.
• Uber has raised over $20 billion and just secured $8 billion in its IPO.
• The company is described as a multi-mobility transportation platform, food delivery service, and international ride-sharing holding company.

"Welcome to season four, episode six of Acquired, the podcast about technology acquisitions and ipos. I'm Ben Gilbert. I'm David Rosenthal and we are your hosts."

The quote introduces the hosts and the episode, setting the stage for the discussion about Uber's IPO.

• Uber's historic losses are noted, with over $3 billion lost in the previous year, the largest for any company going public.
• Despite losses, Uber's diverse business includes ride-sharing, food delivery (Uber Eats), investments in international companies (Didi, Yandex.Taxi, Grab), and a trucking platform (Uber Freight).

"Today we are diving into a company whose epic history is matched only by its epic operating losses, with over 3 billion last year, the largest of any company to ever go public."

This quote highlights Uber's significant financial losses despite its growth and market presence, which is a key point of discussion for the episode.

• The hosts reflect on the evolution of their podcast and the content they offer to listeners, including the limited partner bonus show.
• They invite listeners to become LPs to access deeper content on company building, venture capital workings, and investment theses.

"So if you like acquired and you want to go deeper on company building topics, you should totally consider becoming an LP yourself."

The quote is a promotion for the podcast's premium content, encouraging listeners to become LPs for in-depth analysis and discussions.

• Pilot is a partner of the Acquired podcast, offering accounting, tax, and bookkeeping services for startups.
• The company is backed by notable investors and focuses on allowing startups to outsource non-core activities.

"Pilot both sets up and operates your company's entire financial stack."

This quote explains Pilot's comprehensive financial services, which is relevant for startups looking to focus on their core business.

• The episode delves into the history of transportation, starting with an incident in 1889 involving a hack (horse-drawn carriage) and the subsequent regulation of the industry.
• The discussion moves to the introduction of motorized cabs in New York City in 1907 and the labor issues that arose with drivers being treated as independent contractors.

"Chadbourne, he jumps out of the cab, he runs away, but he's really pissed. And he's not just anybody."

This quote sets the historical context for the regulation of transportation, which is important for understanding the environment in which Uber later emerged.

• The episode discusses the Great Depression's impact on the taxi industry, leading to an oversupply of cabs and the development of the medallion system.
• The hosts talk about the emergence of the limo and black car industry as an alternative to the regulated taxi market.

"And this weird, interesting sort of shadow market develops in cities where these people are no longer regulated."

The quote describes the development of an alternative transportation market, setting the stage for Uber's eventual disruption of the industry.

• Taxi Magic and Cabulus (later Flywheel) are discussed as early attempts to modernize taxi dispatch and payment systems.
• The episode covers the limitations of these systems due to their reliance on the existing taxi industry infrastructure.

"They got one big thing wrong, and that was that they worked within the existing system."

This quote explains the critical mistake made by early taxi app companies, which is crucial for understanding why Uber's approach was different and more successful.

• Garrett Camp's background and the founding of Uber are explored.
• The episode discusses the challenges of innovating in the black car industry due to mafia influence and the need for someone who "doesn't know or doesn't care" to disrupt it.

"The only way to break the log jam is just kind of with somebody who doesn't know any better."

This quote captures the essence of the entrepreneurial spirit that led to Uber's creation, emphasizing the boldness required to disrupt a long-standing industry.

• Garrett Camp was inspired by a scene in Casino Royale where James Bond summons his car with his phone.
• Watching the car move towards him on a map on his phone screen intrigued Garrett.

"He was watching Casino Royale. And there's this scene in Casino Royale where Bond summons his car with his phone. And this has happened in a bunch of Bond movies, but in the casino royale version of this, on his phone, he's watching on the screen, on a map as the car is coming to him."

The quote describes the moment of inspiration for Garrett Camp, which was a key factor in conceiving the idea that would eventually lead to the creation of Uber.

• Garrett Camp decided to stop using taxis and instead use black car services.
• He was financially comfortable enough to make this lifestyle choice.

"At this point, he had already flipped the switch in his head to screw this taxi thing. I have a good amount of money. I'm just going to hire a black car whenever I want to go anywhere."

This quote explains Garrett's mindset shift away from taxis and towards private car services, setting the stage for the development of Uber.

• The black car industry was stigmatized and often associated with the "gypsy cab industry."
• Despite the stigma, Garrett discovered that black car drivers were largely good people and entrepreneurs.
• Garrett began to build relationships with black car drivers by collecting their numbers and calling them directly for rides.

"So Garrett was like, you know what? How bad can these guys be? So starts using it a little bit, and he finds they're actually not that bad."

The quote illustrates Garrett's realization that the black car industry was not as bad as its reputation suggested, which led him to consider it a viable alternative to taxis.

• Garrett Camp combined his experience with black car services and his James Bond inspiration to conceive a private driver service on his phone.
• He envisioned marrying the concept from the movie with the service provided by black car drivers.

"He says, why don't I just put two and two together and build what I saw in the James Bond movie, marry it up with my friends who are the black car drivers and have a private driver service on my phone?"

The quote captures the moment Garrett conceptualized the idea of Uber, merging the cool factor from James Bond with the practical service of black car drivers.

• Garrett Camp decided to name the service Uber, a term he used to describe something great.
• Melody McCloskey, Garrett's girlfriend at the time, was involved in the naming process.
• The name "Uber" was chosen for its connotations of greatness and superiority.

"He says, uber, it means great things. It means greatness. And that's what he decides to call this service, Uber."

This quote reveals the origin of the name Uber, which Garrett associated with excellence and which became the brand's identity.

• Garrett initially planned to buy a fleet of Mercedes S-Class cars and lease a garage in San Francisco.
• He consulted with Tim Ferriss's assistant to research the feasibility of this plan.
• Travis Kalanick suggested using existing cars owned by drivers instead of buying a fleet.

"His initial idea, though, he's got this network of drivers and he uses this. He has lots of other friends who are part of the kind of new Web 2.0 era entrepreneurs in San Francisco. He thinks they would like to use this too, this private driver network."

The quote outlines Garrett's initial business model for Uber, which included owning and operating a fleet of luxury vehicles for a private driver network.

• Travis Kalanick is characterized as a smart, aggressive, and self-aware individual.
• He had a history of standing up to bullies and was academically and athletically talented.
• Travis co-founded Scour, a peer-to-peer file-sharing service, and Red Swoosh, a content delivery network.

"Travis is a guy who, right before he officially became the CEO of Uber, he gave a talk on YouTube that we'll link to and actually a couple listeners sent to us, which is really great. And he introduced himself in the talk. As he says, I like to think of myself as the wolf in Pulp Fiction."

This quote provides insight into Travis's personality and self-perception, which influenced his leadership style at Uber.

• Travis's first venture, Scour, was sued for $250 billion by the MPAA.
• After Scour's bankruptcy, Travis founded Red Swoosh, which was later acquired by Akamai.
• These experiences shaped Travis's approach to business and conflict.

"The company ends up filing chapter eleven bankruptcy to get rid of the lawsuit, and then the assets of the company get sold out of bankruptcy. So the company is torched."

The quote summarizes the outcome of Travis's first venture, Scour, which faced legal challenges and bankruptcy, setting a precedent for his future endeavors.

• Garrett and Travis collaborated on the Uber idea while in Paris, sketching out unit economics on a tablecloth.
• Travis advised against buying a fleet of cars and suggested using existing vehicles owned by drivers.
• They recruited Ryan Graves to run the company after Travis tweeted about the opportunity.

"And so he's like, this is all going through his head. He has the black cars. He sees casino Royale. He says, why don't I just put two and two together and build what I saw in the James Bond movie, marry it up with my friends who are the black car drivers and have a private driver service on my phone?"

The quote captures the moment when the Uber concept was further refined, combining practical business considerations with the initial inspiration from James Bond.

• Uber faced a cease and desist order from city regulators, claiming the service was illegal.
• Travis and the team successfully argued that they were not breaking any laws.
• The legal challenge motivated Travis to take on the role of CEO at Uber.

"This feels like a quote unquote homecoming for him after his experience at scour. And they had been really careful. And this is another point that has been completely lost in the last couple of years of Uber. They followed the rules."

This quote highlights the legal challenges Uber faced early on and Travis's decision to become CEO, driven by his previous experiences and the opportunity to navigate the regulatory landscape.

• Travis Kalanick becomes CEO of Uber and negotiates a 23% stake in the company.
• Post seed round, he commits his entire life to growing Uber.
• Demonstrates his dedication by breaking up with his longtime girlfriend, prioritizing the company over his personal life.
• His mission is to make Uber as big as it can possibly be.

"I realized I was more passionate about this company than I was about her. I should probably find someone I like at least as much about my job."

This quote illustrates Travis's intense dedication to Uber, prioritizing it over his personal relationships.

• In early 2011, Uber seeks to raise a Series A round.
• Travis Kalanick aims for Bill Gurley and Benchmark to lead the round.
• Benchmark invests $11 million at a $60 million post-money valuation for an 18.3% stake.
• The investment size and valuation were almost unheard of at the time for a Series A.

"Because they're the best. It's not even a close call."

Travis's response to why he chose Benchmark highlights his confidence in Benchmark's capabilities as investors.

• After the Series A, Uber focuses on rapid expansion to other cities.
• New York, Seattle, Chicago, Boston, and Paris are among the first cities.
• Paris marks Uber's international expansion despite internal concerns.
• Uber achieves $9 million a month in bookings and almost $2 million in net revenue within a year.

"If it's a city and it's big, we need to be there yesterday."

This quote captures the urgency and aggressiveness of Uber's expansion philosophy.

• Travis Kalanick envisions Uber as a logistics company, beyond ride-sharing.
• He anticipates the potential for delivery services, which later leads to the creation of Uber Eats.
• The idea was to leverage the existing liquidity in cars for delivery purposes.

"We're a logistics company and...I want stuff brought to me."

Travis's quote reflects his broader vision for Uber, foreshadowing the inception of Uber Eats.

• Uber raises a Series B round of $32 million at a $322 million post-money valuation.
• Shervin Pishevar at Menlo Ventures leads the round, selling only 10% of the company.
• The round's valuation and the small equity given were remarkable for the time.

"You know where to come, you know where to find."

This quote implies the strategic foresight and investor relationships that played a role in Uber's fundraising.

• The launch of peer-to-peer ride sharing by Sidecar and Lyft introduces new competition.
• Uber and Travis attempt to lobby regulators to shut down these new competitors.
• The new market dynamics significantly affect Uber's unit economics and growth strategy.

"Uber and the regulators trying to shut down Lyft."

This quote indicates the competitive landscape and Uber's efforts to maintain its market position against new entrants like Lyft.

• Uber raises significant capital to compete globally, particularly against Didi in China.
• The company raises over $20 billion, with its valuation peaking at $72 billion.
• Investors include Google Ventures, Fidelity, Tro Price, Goldman Sachs, and sovereign wealth funds.

"That we can just blow away our competitors and crush them into oblivion."

This quote reflects Uber's aggressive strategy of outspending competitors to dominate the market.

• The realization that ride-sharing is a nationally fragmented market leads to a strategic pivot.
• Uber begins to focus on dominating North American markets and owning stakes in international competitors.
• The company faces pressure to go public due to agreements with investors like Goldman Sachs.

"If they're just going to be the North American winner in ride-sharing, then they have to be the North American winner in other things."

This quote summarizes the strategic shift Uber had to make in response to the fragmented nature of the global ride-sharing market.

• Susan Fowler's blog post was a catalyst for exposing HR issues and a toxic work culture.
• HR did not acknowledge or properly address the harassment she faced.
• Senior levels of the company were also complicit in mishandling the situation.
• Travis Kalanick, the CEO, had a history of making inappropriate comments that contributed to the negative perception of Uber's culture.

"This continued to be a case HR did not acknowledge. It did everything wrong, and it went up to senior levels of the company who continued to do everything wrong."

The quote highlights the systemic failure of Uber's HR department and senior management to address harassment issues within the company.

• Uber spent $650 million to acquire a company called Otto.
• Otto was led by Anthony Lewandowski, a former employee of Waymo, Google's self-driving car division.
• Google sued Uber, claiming Lewandowski took intellectual property from Waymo to Otto, which Uber then acquired.

"They basically spent, I think it was $650,000,000 to acquire auto. Uber did. And it looked, and probably essentially was that they spent that money to acquire Google. Trade secrets."

This quote suggests that Uber's acquisition of Otto was primarily motivated by obtaining Google's trade secrets rather than Otto's own technology.

• A leaked video showed Travis Kalanick berating an Uber driver.
• Uber executives participated in a trip to an escort bar, leading to resignations.
• Uber sponsored a trip to an escort bar in Seoul, leading to negative publicity and executive resignations.
• The company used software called 'greyball' to evade regulators in cities where ride-sharing was banned.

"Bloomberg publishes a video that has been leaked, a dash cam video from an Uber driver of Travis in this Uber with probably intoxicated on a night out on the town, getting into an argument with the Uber driver."

The quote describes an incident that further damaged Uber's public image, showing the CEO's disrespectful behavior towards an Uber driver.

• Uber illegally accessed the medical records of a woman who was raped by an Uber driver in India.
• The company was trying to verify her claims, which indicated a disbelief in her story.

"They illegally accessed the woman's medical records, basically stole the woman's medical records, and they wanted to confirm that she was indeed raped because the implication was Uber didn't believe that what she was saying was true."

This quote reveals the unethical lengths Uber went to in order to challenge the victim's claims, demonstrating a lack of empathy and proper conduct.

• Eric Holder led an investigation into Uber's practices, resulting in the Holder Report.
• Senior executive Emil Michael resigned following the report, which detailed various incidents of misconduct.
• Travis Kalanick took a three-month leave of absence following his mother's death and other company crises.

"On June 11, right after this, the holder report is issued to the Uber board. It's really bad."

The quote indicates the severity of the findings in the Holder Report, which documented extensive issues within Uber's leadership and culture.

• During an all-hands meeting, board member David Bonderman made a sexist comment, leading to his immediate removal from the board.
• The incident underscored the need for a change in leadership and culture at Uber.

"David Bonderman, co-founder of TPG, who is on the board from TPG's investment in Uber, is on stage alongside other board members, including Ariana Huffington, who I believe is the only female board member at this point in time at the company."

The quote sets the scene for a critical board meeting where a sexist comment by a board member highlighted the pervasive cultural issues within Uber.

• A group of core investors, led by Benchmark, demanded Travis Kalanick's resignation from Uber.
• The investors presented a letter to Kalanick in Chicago, leading to his resignation as CEO.

"So they organize a group of the core investors, core venture investors in the company, benchmark, first round, Menlo, lowercase Capital. And then they get fidelity involved, too. They write a letter. They all sign a letter."

This quote explains the collective action taken by major investors to force a change in leadership at Uber, culminating in the resignation of the CEO.

• Dara Khosrowshahi, former CEO of Expedia, was appointed as the new CEO of Uber.
• Khosrowshahi's background and approach were seen as a stark contrast to Travis Kalanick's.
• He was tasked with fixing the company culture, stemming losses, and taking the company public.

"And it is Dara Kazrashahi. He had been the CEO of Expedia since 2005 and really is an incredible story and an incredible kind of choice to come out of all of this and lead the company."

The quote expresses the optimism surrounding Dara Khosrowshahi's appointment as CEO, given his successful track record and the fresh perspective he could bring to Uber.

• Uber went public with a lower than expected valuation and faced a decline in share price on the first day of trading.
• The company's future growth and profitability remained uncertain as it transitioned to a public company.

"Uber priced its IPO at $45 a share towards the bottom of the range. Equal to an $82 billion market cap. Open trading today on Friday at $42 a share or a $76 billion market cap."

The quote details the initial public offering of Uber, highlighting the challenges it faced in the market and setting the stage for its future as a publicly-traded company.