Ambitious Uber Strains to Pace Itself

Most people think of Uber as a high-priced car service that hipsters summon through an iPhone app. But co-founder and CEO Travis Kalanick has something else in mind: he wants to transform the San Francisco company into the next, the notorious delivery business that went bust by offering free delivery within an hour for items as small as a chocolate bar or a DVD.

Given Uber’s cachet, it’s hard to understand why Kalanick wants to mess with success. Since its founding 13 months ago, Uber says it has arranged tens of thousands of rides for Bay Area customers, and Kalanick tells me the waitlist for private car companies that want to work with Uber is growing.

Uber is also increasing its geographic reach. The company has expanded its service into Seattle and New York and is officially launching in Chicago, Boston, and Washington D.C., in the next few months. After that, it really shifts into high gear, expanding into 25 new markets.

Kalanick has placed great emphasis on growing intelligently. With a nuclear physicist, a machine learning expert, and a computational neuroscientist on the payroll, the 33-person company claims that it analyzes historical patterns around such disparate elements as sporting events and the weather to anticipate how user demand will fluctuate down to the neighborhood level. The company is also shrewd about scaling, hiring just three people for each new city it “turns on.”

As a result, Kalanick says the company is “throwing off cash.” So much so that he sees no immediate reason to add to the $11 million that Uber raised from Benchmark Capital early this year after just one pitch meeting. (The company has raised $12.5 million in total to date.)

Given its ambitions, that may change. Certainly, Kalanick sees Uber as far more than a sophisticated dispatch service. He suggests it’s more akin to a next-generation logistics company whose employees are turning the art of predicting demand into a science —  and that may ultimately be capable of delivering more than cars and people.

Heightening interest in the service is already driving a number of Uber’s partners to expand their fleets, Kalanick says, adding that Uber’s “growth is so steep that in some places [on a power curve chart] it looks like it’s leaning to the left.”

Indeed, he sees a day in the not-too-distant future when there is sufficient car “liquidity” that Uber can charge different rates for different levels of service. For example, today all of Uber’s San Francisco customers pay twice what they would pay if they hailed a cab, but later, a Prius might cost considerably less than a Mercedes S Class. Eventually, Uber’s logistics system could do the same for someone wanting a helicopter ride or a private jet or food delivery, he says.

Kalanick has a successful history of battling long odds. He cofounded the multimedia search engine Scour while still a computer science student at UCLA and survived two lawsuits from three of LA’s biggest heavies: CAA founder Michael Ovitz, the Motion Picture Association of America, and the Recording Industry Association of America. (Scour was later sold off in pieces for a collective $11 million, none of which Kalanick saw.) Another company he founded – a content management network called Red Swoosh – sold to Akamai for $19 million in stock in 2007 after raising just $1.7 million, including from Internet billionaire Mark Cuban, despite being an underdog in a fairly crowded space.

In fact, when I push Kalanick for more details about the potential to turn Uber into an advanced delivery service, he demurs, telling me it’s “still mostly speculation.” He adds: “We don’t talk a lot about” what comes next because people already spend $20 billion a year on taxis and limos,  and “we’re shooting for all of that.”

But deep down, you can tell he wants more.

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