UberCab’s Masterstroke: Forgoing Buy-In from San Francisco Officials

Uber didn’t see it coming, but this week, the startup —  whose iPhone application connects its users with on-demand rides from third-party limo drivers —  became an overnight sensation whose business is now poised to explode.

It owes some thanks to San Francisco City officials.

As many industry watchers already know, the San Francisco Municipal Transportation Agency and the California Public Utilities Commission recently issued the San Francisco-based company a cease-and-desist order, stating in part that it was misleadingly advertising itself as a taxi company.

Though the company exclusively contracts with licensed and insured black car companies, it yesterday renamed itself from “UberCab” to address the concern, taking great pains to tell the press how eager it is to cooperate with both agencies.

But its smartest move yet may have been not consulting with the bureaucrats in the first place.

Four months ago, aware of the demand in San Francisco for more, and nicer, options to what many residents will attest are too few cabs, Uber opened for business. And despite charging one-and-a-half times what are already expensive taxi fares in the city, it’s already putting many dozens of underused limos and Town Cars to work every day. (Unfortunately, the company won’t discuss what kind of revenue-share it enjoys.)

Of course, Uber plans to do everything necessary to keep city and state officials happy from now on. “When we got the cease-and-desist order, the first thing we did was to get on the phone with regulators and start a productive, cooperative dialogue with them,” co-founder Travis Kalanick told me earlier today. “We feel that we’re compliant as is, but we’re engaged in active, ongoing discussions with them.”

Kalanick — who has also contributed to the $1.25 million that Uber has raised to date — added: “To be operating in the city, we want to make sure the regulators understand how our system works, inform them about our technology and so forth and ensure that we continue to be compliant.”

Of course, the company could have done that before it launched, instead of simply getting “familiar with its regulations,” as Kalanick says it made certain to do.

That it didn’t was smart. City officials would have invariably dragged their feet while meeting with organized taxi groups who feel threatened by Uber’s service. More, Uber wouldn’t find itself at the center of a firestorm that has been astonishingly good for its brand recognition – and business.

“Given the cease-and-desist [orders], it’s been a busy week,” laughs Kalanick. “We’ve seen waves of social media interest. We were a trending topic on Twitter. It’s business as usual at this point, but with a lot more attention and activity.”

It’s great news for a company that right now has plans to move into new markets, including New York and Los Angeles, and will undoubtedly be facing knockoffs if it doesn’t hustle.

“We definitely expect copycats,” says Kalanick. “But it’s much more complicated than meets the eye. A lot of interesting algorithms go into running an effective platform technology like ours.”

Certainly, Uber’s first-mover advantage helps, too. Good thing it didn’t stop to ask questions before hitting the gas.

For more on Uber, check out this CNN video: