On a Ride with Uber

Sitting in a glass-line conference room in the San Francisco-based headquarters of Uber, Travis Kalanick, the company’s CEO and co-founder, radiates confidence.

Using a whiteboard to discuss the company’s trajectory, he dishes out such phrases as “replication phase,” and “domination phase” and “lifestyle expansion” stage, as if Uber might soon take over the world.

No wonder he’s feeling optimistic.

Uber—whose mobile phone app enables users to quickly order a ride from a licensed, private car for between half to two times what a taxi costs—has already arranged tens of thousands of rides for Bay Area customers, using hundreds of cars, says the company.

And the service is fast expanding beyond its flagship service in San Francisco. Already available in Seattle, New York and Chicago, Uber has plans to drive into Boston and Washington, D.C., neighborhoods by November. By January 2013, the company expects to be available in 25 additional markets, including in Europe and Asia.

Could Uber, founded just 13 months ago, be getting ahead of itself? Not even close, Kalanick says.

He argues that the data nerds at Uber—including a nuclear physicist, a machine learning expert and a computational neuroscientist—have already made great strides in transforming the art of predicting demand into a science.

For example, the company analyzes historical patterns, the weather, sporting events, and even crime, to anticipate how user demand for car service will fluctuate at the neighborhood level. And it decides where to next introduce the service based on population density, regulatory environment, a city’s transportation pain points, competing taxi and limo services and its apparent tech affinity.

“How many Apple stores there are in a city can tell you a lot about how that city rolls,” Kalanick says.

At a minimum, business is going well enough that the wait list for private car companies that want to work with the 33-person company keeps growing longer, while several of its current partners, which operate their own fleets, are expanding the number of cars they own. Kalanick says that Uber is growing so fast that “in some places [on a power curve chart] it looks like it’s leaning to the left.”

Yet Kalanick has his sights set on more than the $20 billion a year that people spend on taxis and limos globally. Beyond Uber’s capabilities as a sophisticated dispatch service, he sees the company as a modern-day logistics company, whose growing car “liquidity” can be used in numerous ways, beginning with charging different rates for different levels of service.

For example, while San Franciscans already pay 1.6 times more for Uber service than a cab ride, they may soon be able to order a Mercedes S, driven by a highly rated driver, that will cost a bit more.

Eventually, and he’s not projecting when, Kalanick sees a day when Uber can deliver “more than simply cars and people,” like food delivery, or even a motorcycle.

In less capable hands, the company might sound doomed by its CEO’s expansive ideas.

After all, why mess with success? But Kalanick has a successful history of battling long odds, beginning with Scour.net, a multimedia search engine he co-founded in 1998 while still a student at UCLA.

The company, which predated Napster by roughly a year-and-a-half, was attractive enough to entice billionaire Ron Burkle and CAA founder Michael Ovitz as investors. But the company was also sued by Ovitz, the Motion Picture Association of America and the Recording Industry Association of America. (Ovitz sued to keep Scour’s founders from shopping the deal, after they’d signed a letter of intent. They didn’t, says Kalanick, who adds that the suit had the desired effect of scaring off any other potential investors.)

Soon after, the MPA and RIAA filed suits against Scour over copyright infringement. In the end, the company was sold off in pieces for a collective $11 million, none of which Kalanick saw.

The experience didn’t keep him from starting another company. On the contrary, in 2001, four days after the last asset of Scour was sold off, Kalanick started Red Swoosh, a content management network.

Again, the going wouldn’t be easy. Kalanick says that for at least four years, he verged on going broke, even living with his parents for one year.

“It was blood, sweat, and ramen,” he likes to say.

A lucky break came after Kalanick engaged in a “flame war” on a chat site with Internet billionaire Mark Cuban. Soon after, Cuban emailed to ask if he could invest in Red Swoosh. The company, which raised $1.7 million altogether, ultimately sold for roughly $19 million in stock to Akamai in 2007.

The experiences taught Kalanick plenty, he says, including about staying strong, structuring deals and operating leanly. Such is the case at Uber, which hires just three people for every new city that it “turns on,” including a general manager, a customer support person who is also responsible for managing the city’s social media efforts, and a supply chain analyst.

He likes to think the experience of starting previous companies has made him a better angel investor, too.

Between the spring of 2009 and 2010, Kalanick invested $1 million of his own money into 10 startups, including Formspring, the social question-and-answer site, and Expensify, a startup bent on simplifying the expense reporting process.

He stopped funding startups when he co-founded Uber, but he says he was never someone to simply invest to gamble. He liked getting his hands dirty, and spent anywhere from five, up to 20, hours a week with each startup at various points.

“I like to invest that way because I’m an entrepreneur at the end of the day,” he says.

Clearly, VCs see value in what he knows, too. Kalanick said in January, after just one pitch meeting at Benchmark Capital’s offices, he was asked to stick around until they put together a deal that suited both. The firm invested $11 million in that round. Uber has now raised $12.5 million altogether.

“When Benchmark wants something, they go and get it; they do not mess around,” Kalanick says.

Seemingly, the same could be said of him.

Constance Loizos can be reached at connie.loizos@thomsonreuters.com, and she tweets at @cookie.

Travis Kalanick at a Glance

Age:

35

Hometown: Los Angeles

Degree: B.A., Computer Engineering and Business Economics, UCLA

Career: Co-founder, Scour.net; founder and CEO, Red Swoosh; co-founder and CEO, Uber

Did you know? Kalanick’s dad, a former civil engineer for Los Angels, and his mom, a former sales account executive for the LA Times, still live in the house where Kalanick grew up.

Sample Investments

Expensify

Mission:

Simplifying the expense reporting process

Located: San Francisco

Funding: $6.2 million, including from Redpoint Ventures, Baseline Ventures, and Hillsven Capital.

Formspring

Mission:

Operates a social question-and-answer site

Located: San Francisco

Funding: $14 million, including from Redpoint Ventures, Baseline Ventures, and Freestyle Capital.

CrowdFlower

Mission:

enterprise crowdsourcing

Located: San Francisco

Funding: $13.2 million, including from Trinity Ventures, Bessemer Venture Partners and K9 Ventures.