You’ve probably heard of Uber. There aren’t many companies that come across as exciting and daring enough to challenge the NSW Government and win. Today they’re worth a huge $62.5 billion USD and providing over a million rides every day.
So how did it all start?
We all know the end, but not the beginning. If you believed popular culture, you’d think the Uber founders would be two naive genius university drop-outs who stumbled upon an amazing idea. In contrast, the two co-founders were actually experienced entrepreneurs:
- Garrett Camp (Founder of StumbleUpon)
- Travis Kalanick (Co-founder Red Swoosh)
Back in 2008, both Garrett and Travis were just friends without a single clue they would be running one of the world’s most successful startups. Standing in the rain after a conference in Paris, they complained how difficult it was to find a taxi when none came by.
“ I think his original pitch had me and him splitting the costs of a driver, a Mercedes S Class, and a parking spot in a garage, so that I could use an iPhone app to get around San Francisco on-demand. Hilarious! Obviously things have changed quite a bit 😉 ”
– Travis Kalanick
By January 2010, Uber did their first test run in New York with only 3 cars cruising in the city. Several months later, Uber launched officially in San Francisco and cost 1.5 times more than a cab! Their USP (unique selling proposition) was that anyone could request a car at any time in San Francisco by just tapping a button.
From February 2011, Uber closed an $11 million Series A funding round which was later followed by a Series B of $32 million in December of the same year. The rest is history, with Uber planning a $2.1 billion investment in December 2015.
How did they do it?
Early Adopter Advocacy – the importance of the early adopter tech community is huge. They built a genuine relationship with users and spread the word by sponsoring tech events and providing free rides to users. They knew that attendees of these events were more likely to try Uber, were well respected and more likely to share it through social media, tech press and with friends.
The Uber experience – because the product’s convenience solved a genuine problem for users, Uber leveraged it’s customers as a significant platform for growth.
‘I’m talking old school word of mouth…’Who’s Ubering home?’ 95% of all our riders have heard about Uber from other Uber riders’ – Travis Kalanick
From there, they provided $25 free rides (now $10) when each user referred a friend to the platform. By creating a network effect, Uber was able to generate the insane virality across individual cities as they spread.
Intense Local Launches – having a two-sided marketplace model, Uber had to create an intense local network effect. Uber realised that growth is not one-size fits all model so they launched heavily in each city and completed each one well before moving on. This is because of different legal regulations (Yes, Uber X was illegal in NSW until recently) and demographic interests in different cities.
Guerilla Marketing – Uber has been famous for launching a number of unorthodox marketing strategies to create virality:
- UberUMPIRE – on Australia day anyone could request an umpire to officiate their game of backyard cricket…absolutely free.
- On-demand Uber Ice Cream delivery
- On-demand roses for Valentine’s day
- UberCHOPPER helicopter rides to the Hamptons.
What entrepreneurs can learn:
Building a startup isn’t just plain luck – Garrett and Travis’ have both built companies acquired for $75 million (StumbleUpon) and $19 million (Red Swoosh) prior to Uber. Their experience certainly played a huge role in Uber’s success. They understood how to prototype their app, hire the right people and get significant investment for their startup. You may not have the experience just yet, but there’s always a time to start!
- Just do it – the best way to learn is by doing.
- Find a mentor – someone who’s been there and done that. You’d be surprised by the generosity of people if you simply asked!
Uber was solving a genuine problem and had real customers that actually experienced the same problem as Garrett and Travis. When you had to go somewhere in the past, hailing a cab was a nightmare – in wind, rain or shine. You have to waste time waving your hand and then fumbling with coins to find the right amount of cash…
Many startups go and build awesome products with amazing features only to realise there are no customers. Uber focused on the needs of the customer and not the features of its product when it started.
Uber may seem like a fairytale unicorn startup story of the 21st century, but did you know each year there are eight new startups becoming a unicorn (billion dollar company)? Not getting started is probably the largest thing holding you back right now, because who knows what the future might hold?