Internet-based taxi startup Uber just can’t keep itself out of the headlines. If it isn’t butting heads with the law in countries like Thailand and Spain, clashing with existing taxi cab drivers in Europe, or being sued in California for ‘misleading customers’, it’s now dealing with the arrest of an Uber driver in India who has been accused of rape.
Yet this is a company that has found it very easy to attract funding. Uber was valued at a massive $40bn in a latest funding round, doubling its valuation in the space of six months. According to the Financial Times, this exceeds the market capitalisation of Twitter and LinkedIn, and closes in on Yahoo’s $48bn valuation.
So what makes Uber such a high-value startup, and why is it attracting so much controversy? Founded in 2009, Uber is a ride-sharing service already operating in a number of countries. It uses a smartphone application to receive ride requests from customers, which it sends to drivers. As well as requesting rides, customers can use the app to track the location of their designated vehicle.
Initially only offering luxury cars, the service expanded with ‘UberX’, which allowed Uber to work with any qualified driver that has an acceptable car. Because of the way the app works, it can avoid regulation and charge customers lower fees, which is one of the big reasons for its popularity and valuation – but also the conflict and controversy that has put Uber constantly in the headlines.
Uber has been called ‘disruptive’, and it is indeed a startup that has disrupted the way the taxi industry works in a number of countries. In Europe, taxi drivers have protested with the blocking off of traffic in cities like London, Madrid and Paris, arguing that taxis taken through Uber can bypass regulation applied to normal taxis.
But potentially more seriously, Uber has been accused of unlawful business practices. In California for example, prosecutors have filed a lawsuit against the service for issues such as overcharging users and misleading consumers about the quality of driver background checks.
So as well as being ‘disruptive’, Uber might also be called ‘polarizing’. Uber’s controversial reputation is also partly due to its CEO Travis Kalanick, who has built a certain amount of infamy through inflammatory comments towards the taxi industry, regulators and sometimes even his own customers!
But it’s this single-minded determination to disrupt what he considers broken transportation systems that could have contributed to Uber’s success in attracting investors.
Simply put, the idea behind Uber is innovative and powerful – providing cheap transport with the touch of a button. It was always going to cause conflict with taxi firms and regulators, as well as competitors like ride-sharing startup Lyft.
But some of the tactics Uber are said to have used seem rather vicious and unsporting. With Lyft for example, Kalanick has admitted to tampering with one of its fund-raising rounds, as well as sending undercover ambassadors to take Lyft rides, attempting to get drivers to defect!
Startups must be competitive, but this seems way over the line. And the message seems to be getting to Kalanick – in a blog post he admitted Uber’s growth had come with ‘significant growing pains’ and that it needs to ‘acknowledge and learn from mistakes’.
But with investment of $1.2 billion in its latest funding round, Uber does seem like a startup reaching for the stars – its disruptive business model could change the way transportation is used by many people around the world.
Investors see Uber as being a business like Amazon, which has has hugely disrupted its industry (retail), and changed the way people do their shopping forever. Uber is doing a similar thing with transportation, and like Amazon, it’s likely there will be casualties and controversy along the way.
But it’s difficult to argue against the worthiness of providing a service cheap enough that people don’t have to own a car. Parking would become less strained and congestion would ease, which many people would see as game changing, making a difference to cities and the world at large.