In an effort to encompass the entire entrepreneurial journey, Brad Stone, author of The Upstarts, provides a glimpse into Uber and Airbnb to illustrate the developmental phases in the early life-cycle of a company.
Part I: Side Projects
Airbnb’s three co-founders included Joe Gebbia, Brian Chesky, and Nathan Blecharczyk. Prior to founding Airbnb, Gebbia and Chesky were roommates in San Francisco and close friends.
On September 22, 2007, Gebbia emailed Chesky suggesting that they turn their apartment into a designer’s bed and breakfast to accommodate people coming to town for the World Design Congress. Gebbia and Chesky successfully hosted a designer, and after, started to frequently meet with Gebbia’s old roommate Blecharczyk, an engineer with an entrepreneurial past. The three of them decided to further develop the idea of allowing people to rent out extra spaces in their homes. Despite meeting with a variety of angel investors, they were unable to gain funding causing them to fall into debt. However, they bought boxes of cereal and re-branded them as “Obama O’s” and “Cap’n McCain’s” and priced them at $40 per box which helped cover their debt. This creative ploy helped them gain a spot in the Y Combinator startup school.
“If we didn’t get in (to Y Combinator) we wouldn’t exist.” – Gebbia (37)
Blecharczyk played a crucial role in the growth by doing things like scraping Craigslist to find potential hosts to recruit and emailing them to recommend that they feature their home on “one of the largest housing sites. . .on the web, Airbnb” (100). Airbnb started to grow and secured funding from a few investors including Reed Hoffman.
Garrett Camp was frustrated with the inefficiency of the taxi industry in San Francisco and other cities. While watching the James Bond movie Casino Royale, he observed how Bond could use his phone to watch Mondeo moving on a map toward his destination. This image stuck with him, and he decided to start a transportation company in which the driver and rider could use an app with an integrated credit card payment software. On November 17, 2008 he registered UberCab and shared the idea with some friends including the man who would become the future CEO of the company, Travis Kalanick. They rolled out a product in San Francisco and started to promote it around the city.
Ryan Graves was recruited to help him run the company, but as Uber started to further develop, Camp strongly encouraged Travis Kalanick to takeover the reins as CEO. Kalanick was excited by Uber’s growth prospects and eventually agreed. Benchmark led an $11 million fund-raising, and with the new capital, Kalanick was eager to expand outside of San Francisco. During expansion, Uber encountered other competitors. Lyft, originally called Zimride, was inspired by the minivans driven by unlicensed taxi drivers in Zimbabwe and would eventually become Uber’s closest competitor in the United States.
Part II: Empire Building
The success that Airbnb was receiving led to the development of copycat companies; the main one, Wimdu, was founded by the Swamers brothers. The Airbnb founders and a few investors went to meet with the brothers but decided they couldn’t partner with them while remaining true to their core values. Therefore, they continued to battle for international cities. In order to battle Wimdu, Airbnb hired Oliver Jung to handle some of the international expansion. As Airbnb grew, legal issues started to heat up in New York, so Belinda Johnson was hired as Airbnb’s first in-house attorney and would become a fierce advocate for the company.
Uber attempted to expand into New York but struggled to find enough drivers which caused long wait times. However, Kalanick was ruthless and instructed his team to never ask “Can it be done?” but rather “How can it be done?” (165). Uber started to experiment with surge pricing during high demand times, and despite receiving push back from politicians, continued to exercise it. Kalanick vouched for additional capital and a few investors jumped on the opportunity including Goldman Sachs and Pishevar. As Uber continued to grow, it started to encounter numerous political roadblocks. Politicians were divided as they tried to figure out the best way to regulate Uber while taking fire from taxi firms. However, Uber mobilized people to advocate on its behalf and was able to continue operating in D.C..
Part III: The Trial of the Upstarts
The growth of Airbnb ignited debate about its impact on housing prices, residential neighborhoods, and city regulations. Users of the platform became involved to help protect its ability to function. Peter Kwan, an Airbnb host in San Francisco, created the Home Sharers, a club that tackled issues like keeping the names and addresses of hosts private and maximizing the number of nights they could rent out their listing each year. Efforts like these helped to pass a law that allowed hosts to rent their homes for under thirty days without restriction when the host was present and for ninety nights a year when they were absent. Getting laws like these passed helped enable Airbnb to grow into the giant company it is today.
As Uber continued to expand, some cities such as Austin, Las Vegas, and New Orleans resisted the “unregulated ridesharing.” However, many saw the convenience of Uber which enabled Travis’s Law: “politicians accountable to the people could be pressured to accommodate any service that was markedly better than the alternative” (248). The application of this law helped Uber to overcome the restrictive laws in many cities like Miami.
Uber expanded into London in 2012 and then in June 2013 Uber proceeded to introduce UberX without asking for permission. Black-cab drivers were infuriated with the new competition and gridlocked the city with a midday strike. The strike’s intended purpose backfired and the attention Uber received caused sign-ups to jump 850 percent (297).
Cheng Wei noticed an opportunity and created his own taxi-hailing application in China named Didi Dache. After Uber and Didi both poured billions into their battle for the Chinese market, they met to discuss other alternatives. In exchange for Uber leaving China and giving its operations in the country to Didi, Didi offered Uber a 17 percent stake and a billion-dollar investment in Uber (323).
As a loyal user of Uber, Lyft, and Airbnb, I enjoyed gaining a deeper understanding about their unique backgrounds and company values. Although I knew a little bit about each company, I was able to learn more about how the original ideas were cultivated, the expansion process, and the various pivots that the companies needed to make to continue growing.
I was surprised by the large role played by the companies’ users to influence politicians as well as the variety of competitors with similar concepts that didn’t survive. Reading about the various entrepreneurial journeys excited me and reminded me about how technology can enable one to impact so many people’s lives. I would highly recommend this book to anyone with an interest in startups or a curiosity about the companies that have changed the way people move and travel.
Topic: Politics in the Private Sector
While reading the book, I was surprised by the impact the government had on Uber, Lyft, and Airbnb’s ability to function. As the companies expanded, they started to threaten other players who had long been entrenched in their respective industries. The arrival of Uber infuriated cab drivers that had experienced harsh regulations and been forced to obtain expensive medallions. Additionally, Airbnb created new competition for traditional hotels, travel agencies like Expedia, landlords, and everyday people that feared Airbnb would prevent others from being able to become permanent residents. Most likely as a result of this new competition, in 2016, NYC hotel rates were the lowest since the great recession (293).
The leaders of the companies poured money into hiring lawyers and lobbyist that they believed would fight for their best interest. However, politicians were also being attacked by powerful unions and other individuals that demanded the startups should be contained with tighter regulations. In addition, many people that had become reliant on the startups voiced their concerns as well. In fact, Airbnb’s hosts were the company’s “most persuasive evangelists” (289).
Politicians in each city were forced to grapple with the implications that came along with these disruptive new technologies. The government has a duty to act in the best interest of the people they serve, but what qualified as acting in the people’s best interest quickly became blurred. Even today, there is a never-ending list of questions regarding how to best regulate technologies, such as driverless cars, that have the potential to improve lives but also present moral and ethical issues. I believe we have a responsibility to start fighting with these questions to form an opinion that can be used to make important decisions in the future.