He still gets exercised when he talks about it: “We’re totally legal, like totally legal, and the government is telling us to shut down. And you can either do what they say or you can fight for what you believe,” says Kalanick, setting a pattern of what he called “principled confrontation” that still persists.
Instead, the start-up ignored most of the order and simply changed UberCab to Uber, buying the Uber.com domain name from Universal Music Group for what was then 2 percent of the company. (Later, Uber bought back the shares, which would now be worth hundreds of millions, for $1 million.)
From there, the money came pouring in, including $10 million in funding in February of 2011 from Benchmark, which valued Uber at $60 million. “I had this idea of looking at a smartphone as a remote control for real life, and this was the best example I had ever seen,” said venture capitalist Matt Cohler.
The next round, in October of 2011, attracted interest from the best-known venture capitalist in the tech world, Netscape co-founder Marc Andreessen, of Andreessen Horowitz. He was Kalanick’s preferred investor for the round, a situation Kalanick hoped to make even better by selling just over 12 percent of the company at a $375 million pre-money valuation. For that princely sum, he wanted Andreessen to join the board of Uber. This is where the accounts between the entrepreneur and the firm differ. Kalanick thought that Andreessen Horowitz had agreed to his terms and said he was surprised when he got an e-mail from Andreessen asking him to dinner. There, Andreessen told Kalanick that the valuation was too rich for the financials at the time—only 9,000 customers, a $9 million run rate (a measure of projected performance), and $1.8 million in revenue. He was then offered $220 million by Andreessen as the new valuation.
Kalanick countered, but the firm stuck to its lower price. There was another dinner days later with Andreessen, and, by then, Kalanick seemed to have folded, agreeing to accept that deal in an e-mail exchange. But he had not. Working now from the F.ounders conference in Ireland, the entrepreneur decided he could not accept the lower figure and asked for a larger one. Andreessen Horowitz refused to move higher. The deal was finally dead, but there seemed to be no hard feelings, with Kalanick and a firm partner having drinks at Dublin’s Shelbourne Hotel bar afterward.
While this kind of wrangling is not uncommon in Silicon Valley, it was devastating to Kalanick, he recalls. “It was a big momentum deal, so when the bottom comes out from under it, you have to go back to the well and start the whole thing,” he says. It’s clear now that Andreessen Horowitz missed a giant opportunity in its effort to get lower valuation from Kalanick. Not surprisingly perhaps, it would invest in May 2013 in the ride-sharing app’s main rival, Lyft, leading a $60 million round that valued it at $275 million.
As it happened, though, Shervin Pishevar, then of Menlo Ventures, had also been pursuing a stake in Uber and promptly invested $20 million. He then brought in millions more from a syndicate of Hollywood names that he socialized with, including Ari Emanuel, Ashton Kutcher, Jay Z, and others. Amazon’s Jeff Bezos invested as well.
Overall, the round totaled $37.5 million for a post-money valuation of $330 million. From there, the investing enthusiasm just picked up speed as subsequent rounds went higher and investors piled into what was a very fast car. By summer 2014, it had reached a pre-money valuation of $17 billion.
Whereas Silicon Valley start-ups tend to give their conference rooms whimsical, sweet names, like Twinkie and Pong, the main conference room in Uber’s swanky new offices on San Francisco’s Market Street is called War Room. It’s an appropriate lair for Kalanick and his ever growing team. He needs the help, because as Uber expands to cities across the U.S. and around the world Kalanick must continue to wage what has already become a very ugly and protracted battle with the taxi industry and the regulators that Uber claims are deep in its pocket. Kalanick doesn’t mask his disdain for his adversaries, either. “Some city-council people are really awesome, but most are uninspired,” he says. “I meet with them as little as possible.”
He justifies his unwillingness to negotiate as logical, not uncooperative. “If you don’t agree with the core principles, which are the premise of that compromise, then you have to have what I call principled confrontation,” he says. “And so that is the thing that we do that I think can rub some people the wrong way.” “I think of them as robber barons,” says Barry Korengold, president of the San Francisco Cab Drivers Association. “They started off by operating illegally, without following any of the regulations and unfairly competing. And that’s how they became big—they had enough money to ignore all the rules.” (Kalanick has been quick to point out via Twitter that Uber drivers in New York City who work at least 40 hours a week can make more than $90,000 in a year; by way of comparison, the median cabdriver’s salary is $38,000.)
You can still rev him up immediately just by asking about Uber’s “surge pricing” model, which refers to the practice of charging customers higher prices at peak times. It got a lot of attention during a snowstorm in New York in December of 2013, when rates were massively increased, up to eight times, attracting a flood of negative press and customer feedback. Kalanick declines to back down amid the criticism. “You want supply to always be full, and you use price to basically either bring more supply on or get more supply off, or get more demand in the system or get some demand out,” he lectures like a professor. “It’s classic Econ 101.”
Despite his generally unyielding attitude, Kalanick will admit that impressions do matter. “What we maybe should’ve realized sooner was that we are running a political campaign and the candidate is Uber,” he says. However, even as he explains this, he can’t help but slide away from his measured, politic tone and back toward absolutism: “And this political race is happening in every major city in the world. And because this isn’t about a democracy, this is about a product, you can’t win 51 to 49. You have to win 98 to 2.”
It was this line of thinking, combined with the flak the company was attracting, that led Kalanick to David Plouffe, the high-profile mastermind behind the 2008 Obama presidential campaign. In August, Kalanick hired Plouffe to lead Uber’s efforts in public policy and communications. Plouffe sees Uber’s scrutiny as a by-product of its inevitable march toward dominance. “I don’t subscribe to the idea that the company has an image problem,” says Plouffe. “I actually think when you are a disrupter you are going to have a lot of people throwing arrows.”
