Will Uber get an opportunity to grow up? Armed with a $40B valuation, many investors think so. Whether
you believe in the app based taxi hailer or not, Uber’s impact can be felt all around the world. There are millions of people using it everyday,
momentum that its lofty aspirations will prove true, and intense controversy
everywhere it goes. Is this the world changer that it purports to
be, or just the latest multi-billion dollar company to go bust?
Strategically, Uber is in a strong position. Its logistical system, army of drivers, and
competitive intelligence gives it a first mover advantage in its ambition to become the Walmart of personal services. Cabs
are just a platform for worldwide domination of local distribution. But Uber is asset light, and its not hard to see big players move into its
space. Amazon’s 2 hour delivery is gaining
momentum. Upstarts like Favor and
Grubhub are cornering specific niches like food. And how can you bet against Google or
someone with significant physical infrastructure like Fed Ex? The barriers to entry are not clear
particularly against well capitalized companies.
Speaking of capitalization, Uber’s dot-com esque valuation
has helped them act as a much bigger player than its revenue would
suggest. Even if Uber could continue to
grow its value and raise gobs of money (hard to swallow by every conventional metric), some of its
challenges cannot be resolved by throwing more money at it. Governments, lobbyists, and pretty much every
existing transportation company have vowed to fight Uber. Even tech savvy cities like Austin and
Vancouver have even banned the service. Further, Uber faces a very micro problem; it has
to fight county by county, city by city, and country by country. How long can it continue these individual
battles? And don’t forget about all the
other legal battles such as data breaches and personal security cases from bad
drivers.
The more intriguing facet of Uber’s uncertainty relates to the company’s
mysterious pool of drivers. Who are they
and will they continue to support the company?
Uber recent survey showed glowing demographics of the people that drive
for them (underemployed segments like the elderly and minorities). A big question is how reliable is Uber for
its drivers. Starts and stops in markets have reduced the recurring nature of this income. Few of its drivers derive their primary
income from it. The disparate nature of its drivers makes it hard to fathom that all of these contractors will be
available to support the service levels that Uber’s valuation implies. Can a group of part timers be leveraged into
a massive service provider all around the world? It is very opaque, but a very interesting
question nonetheless.
Despite Uber’s uber-unicorn status, it is hard to bet against
it. It’s the poster child for the sharing and
distributed economy. Its challenges are greater than its tech giant predecessors have faced. In fact, the laws actually supported Amazon and Google early on through a sales tax ban and broadband subsidies. Uber’s road seems long and unchartered, but
it has not blinked an eye through adversity.
Call it entrepreneurial, innovative, and principled. But will we call it a survivor ?
