Scott Gorlick: How Uber Acquired 1M Drivers & The Uber’s Expansion Playbook | E1196

Scott shares his journey of launching Uber in Atlanta, emphasizing the challenges of building operations from scratch and the importance of driver acquisition. Initially, drivers were skeptical, but incentives and strategic onboarding helped overcome early hurdles. Scott describes the pivotal moment when Uber's utilization surged, highlighting the need for more drivers rather than demand. He reflects on Uber's competitive dynamics with Lyft, the impact of regulatory challenges, and the importance of being close to drivers. Scott praises Travis Kalanick's leadership and speed, noting the cultural and operational shifts post-Travis. He also touches on Uber's evolving strategies and the potential of its ads business.

• Building the Operation from Scratch
  • Initial skepticism from drivers, but willingness to try due to no cost.
  • Early weeks showed low utilization rates, causing nervousness.
  • A pivotal night saw a sudden spike in utilization, indicating a turning point.

"For the first 2 or 3 weeks of the city, dude, I was nervous. Zero out of 10 cars utilized, one out of 10, two out of 10, and then one Friday night... within like a 10-minute span, we went from like two out of 10 cars utilized to like all 10 cars utilized."

• This quote highlights the initial challenges and the breakthrough moment in Atlanta's Uber launch.

• Transition from Consulting to Uber
  • Realization that consulting wasn't a fit.
  • Frequent visits to San Francisco, meeting various companies.
  • A rainy night in Chicago led to using Uber for the first time.
  • Cold email to Travis Kalanick led to a job at Uber.

"I had this Jerry McGuire moment where I was like, huh, I need to be a part of this Uber thing... I decided to email Travis at uber.com not thinking that I would hear anything, and I got an email back."

• Demonstrates the serendipitous and proactive steps that led to joining Uber.

• Supply vs. Demand
  • Initial focus on acquiring drivers.
  • Utilized Yelp lists to contact potential drivers.
  • Onboarding process included training and providing iPhones.

"When you're starting a marketplace, you really need to do two things: you need to get supply and you need to get demand."

• Emphasizes the dual focus required for launching a marketplace.

• Initial Driver Recruitment
  • High acceptance rate (75%) among contacted drivers.
  • Onboarding involved a 60-minute session and training on the app.
  • Early days saw low utilization rates, creating nervousness.

"We onboarded the drivers; they'd show up at the office, we'd do like a 60-minute onboarding, check out their cars, tell them a little bit about the company, and then we would kind of take them through the training on how to use the app."

• Details the initial onboarding process and the challenges faced.

• Early Strategies to Retain Drivers
  • Paid drivers $20-$30 an hour to wait during initial market launch.
  • Positioned drivers in high-demand areas.
  • Referral incentives for both riders and drivers.

"In the early days, we paid a driver $20 or $30 an hour to sit there... This lasted probably 60 or 90 days into a market launch."

• Explains the financial strategies used to retain drivers during the initial phase.

• Manual Processes for Driver Acquisition
  • Relied on cold calling and manual onboarding processes.
  • Gradual scaling from one driver to larger group sessions.
  • Engaged drivers at strategic locations like airports.

"For probably the first million drivers that we onboarded, a lot of our processes were manual... It was getting drivers to show up at the office and batching onboardings."

• Highlights the manual and hands-on approach to scaling driver acquisition.

• Successful Tactics
  • Cold calling proved to be highly effective.
  • Driver referrals with monetary incentives.
  • Sharing successful strategies across different cities.

"Cold calling was an incredible mechanism to get people through the door... When we started doing referrals of drivers, we would pay like a $25 or $50 bonus for a driver to bring their friend."

• Demonstrates the effectiveness of cold calling and referral programs.

• Early Mistakes

  • Frequent issues with office spaces due to high traffic and activity.

"We probably got kicked out of every office that we joined early."

• Reflects on the logistical challenges and mistakes made during the early days of driver acquisition.

• Initial co-working spaces were not accommodating to the constant flow of drivers, causing disruptions.
• The business operated 24/7, leading to understaffing issues, especially in the early days.
• Limited staff handling a significant number of drivers without the aid of advanced AI tools.

"We were renting space in co-working spaces, and a lot of these co-working spaces weren't too happy with drivers coming by all hours of the day and disrupting the flow."

• Early operational setups were not ideal for the business model.

"I was the only person handling the driver side... probably had like 1,500 drivers that were just me... we didn’t have any of the AI tools that we did today."

• Severe understaffing issues in the early stages, making management challenging.

• Initial unit economics were poor, but there was an expectation that margins would improve at scale.
• Increased competition and funding from SoftBank to competitors made it harder to maintain favorable unit economics.
• High spending on driver and rider acquisition due to competitive pressures.

"When we talk about unit economics... the margins would themselves at scale... if we could kind of rationalize the competitive playing environment."

• Belief that scaling would eventually improve margins despite early economic challenges.

"SoftBank was pouring money into all the different competitors... unit economics as we launched... actually got worse over time."

• Increased competition and funding led to deteriorating unit economics.

"We started paying like $250 to each side... escalated to $500... there was a point in time where... we were paying $1,000 to each side."

• High costs for driver acquisition in competitive markets.

• Key metrics for rider retention included total spend, rides per week, and rides per month.
• For drivers, retention was tracked by periods (28 days, 56 days, 96 days) and metrics like trips per week, ratings, and hours worked.
• Good retention meant retaining 25-30% of drivers after a year.

"On the rider side... total spend... rides per week and rides per month... understanding how we're mapping into their day-to-day routines."

• Metrics for rider retention focused on spending and ride frequency.

"On the driver side... retention... 28 days, 56 days, 96 days... if a driver stays with us for three months, they're likely to stay with us longer."

• Metrics for driver retention focused on duration and activity levels.

"If you started the year with 100 drivers... probably have 25 or 30 of them left at the end of the year."

• Good retention rates for drivers were around 25-30% annually.

• Initially, Uber only offered black car services, limiting the scale.
• Launching UberX in 2012-2013 significantly expanded the business.
• Free UberX week was a marketing strategy to boost initial adoption and utilization.

"When I started at Uber, we were only black cars... for the first year in Atlanta, we were only black car."

• Initial product offering was limited to black cars, restricting growth.

"We started launching UberX more probably in late 2012, early 2013... that's when the business really started to explode."

• Launching UberX led to significant business growth.

"We actually did free UberX week... running at probably 80-100% utilization all the time."

• Free UberX week was a successful marketing strategy to drive adoption.

• Uber allowed Lyft to launch first in new cities and then followed to avoid initial regulatory scrutiny.
• This strategy was short-lived, and Uber eventually launched simultaneously with Lyft in new markets.
• Brand recognition and on-the-ground teams gave Uber an advantage in established markets.

"We had a policy that said if Lyft launches in a city, we are going to wait 30 days... then we're going to launch after that."

• Initial strategy was to let Lyft launch first and follow after 30 days.

"We probably did that for like three or four or five cities and then we just started launching at the same time."

• The strategy was short-lived, and Uber began launching simultaneously with Lyft.

"When we went into a market like Atlanta... we had been operating for 18 months before we launched UberX... Lyft had to come in and sort of build that brand equity."

• Uber's established brand and presence gave it an edge in certain markets.

"We certainly cranked up our spend to make sure that we were winning early market share... getting the drivers quicker."

• Increased spending to secure market share and driver acquisition in competitive markets.

• Uber treated each city as its own startup, allowing for a high degree of autonomy and innovation.
• The launch playbook consisted of 180 steps, emphasizing the importance of a structured approach to entering new markets.
• Key roles in the launch team included a launcher, a general manager, an operations manager, and a marketing manager.

"At Uber, we saw almost every city as its own startup, and that was an incredibly freeing thing for people that were young and in their 20s and 30s to go into a market and create it from scratch."

• Each city’s team had the freedom to experiment and innovate, fostering a competitive and collaborative environment.

"Every city had the freedom to experiment and try things...we all kept each other accountable."

• Weekly all-hands calls and dashboards were used to track performance, creating a competitive dynamic that pushed teams to excel.

"Every week, we would get on a city call, an all-hands call, and every city would go down the list and say how much gross bookings you did last week, how many trips you completed, how many drivers you onboarded."

• Regulatory challenges were a significant barrier, often causing operational difficulties in certain cities.
• External factors, such as local laws and regulations, were the primary reasons for underperformance in some markets.

"If a city was struggling, it would be due to the regulations and the laws...they would make it really difficult to operate."

• Specific examples, like South by Southwest in Austin 2014, highlighted the absurdity of some local regulations and the lengths Uber went to navigate them.

"In Austin, we were not allowed to operate because there were two rules...if you ordered a black car, the minimum fare was $55, and you had to legally stare at it for another 29 minutes before being allowed to get in."

• Uber's innovative strategies, such as offering free UberX rides during events, sometimes led to confrontations with regulators.

"We decided to do free UberX for all of South by Southwest...The Regulators ended up targeting some of the cars and requesting specific cars to come to specific places."

• Lyft was considered a strong competitor, particularly in building a community among drivers.
• Uber acknowledged that Lyft excelled in areas where Uber was more transactional.

"Lyft was an incredible competitor...they did a great job on the driver side building community."

• Promotional strategies and pricing moves were critical in driving market share swings between Uber and Lyft.

"Once competition came in, you could start to see market share swings based on the specific Rider promo that Uber was offering in a city in a given week."

• Uber attempted to diversify too quickly, pursuing projects like vertical takeoff and landing vehicles, which distracted from its core mission.

"We were looking at doing a vertical takeoff and landing type helicopter play...there were just a lot of things that became distractions from the core mission."

• The company's aggressive stance with regulators and media was seen as a mistake in hindsight.

"If I could go back or we could go back and do it all over again, I think we would have found a way to present our image in a way that was less combative."

• Uber recognized the need for a more humble and gentle approach, especially with the media.

"I probably would have been combative in the areas that we were with writers and politicians but a little bit more humble and gentle with sort of media."

• Travis Kalanick's leadership was instrumental in Uber's growth, but the company recognized the need for cultural and strategic shifts over time.
• The transition in leadership aimed to create a more regulator-friendly and sustainable company image.

"Uber would not have become the $150 billion company that it is today without Travis...I think over time, what would have happened is a more ingratiated approach with regulators."

• The evolution of Uber's leadership and culture was seen as necessary for its long-term success and stability.

"With the transition of TK out and D in, the company slowly ingratiated that the regulator is our friend, a friendly face."

• Speed and Hustle:
  • Travis Kalanick's mantra: "Fear is the disease, hustle is the antidote."
  • Emphasis on trying new things quickly, amplifying successes, and iterating on failures.
  • Unique ability to understand both product and operations deeply.
  • Exceptional at context switching and empowering teams.

"Fear is the disease, hustle is the antidote."

• Travis's approach to overcoming fear with rapid action and persistence.

"He sees something and he moves quickly... if it works, amazing, we're going to pour more gasoline on it, and if it doesn't, we're going to keep trying until we figure it out."

• Travis's quick decision-making and iterative approach to problem-solving.

"His level of understanding across product and operations is very unmatched... he could dive into the weeds with engineering but then nerd out with you on positioning cars in different cities."

• Travis's deep and broad understanding of various business aspects, enabling effective leadership and decision-making.

• Impact of Founders:
  • Belief in the superiority of founder-led businesses for long-term success.
  • Travis's departure led to a perceived loss of "Founders Edge" and slowed down operational speed.
  • Founder-led businesses maintain a unique vision and drive that can be diluted with new leadership.

"I think Travis is an incredible founder who should have been given the opportunity to lead Uber into the Next Generation."

• Advocacy for founders continuing to lead their companies for sustained growth and innovation.

"You lose some of that Founders Edge without Travis and some of that magic, and I think the speed slows down."

• Observations on the loss of unique qualities and operational speed when a founder departs.

• Strategic Decisions:
  • Different M&A decisions under Dara, with some acquisitions like Postmates and Drizly deemed less strategic.
  • Uber Eats' slower growth compared to DoorDash attributed to distractions and strategic differences.
  • Emphasis on the importance of being close to customers and operational locations.

"There were some deals we did in 2020, 2021 that didn't make a lot of sense... the Drizly acquisition probably didn't make much sense either."

• Critique of certain strategic acquisitions made under Dara's leadership.

"Uber Eats is still the top food delivery brand worldwide, but we missed a big opportunity and were distracted by everything that was going on when Travis left."

• Reflection on missed opportunities and the impact of leadership changes on Uber Eats' market position.

• Inspiring Teams:
  • Travis's ability to inspire intense loyalty and followership among early employees.
  • Creation of a strong, mission-driven culture with a focus on teamwork and shared goals.
  • Willingness to engage deeply with the team and tackle complex problems.

"The best Founders built Cults and they're cult leaders... Travis was really good at inspiring the team."

• Explanation of how Travis inspired loyalty and a strong team culture.

"We had strong opinions but they were loosely held, and we were all kind of going to war together every day on this mission together."

• Description of the collaborative and mission-driven culture under Travis's leadership.

• Metrics and Dashboards:
  • Importance of having a clear handle on key business metrics.
  • Criticism of the over-reliance on multiple dashboards without clear alignment on critical metrics.

"The biggest mistake that I see Founders making day-to-day is not having a handle on their metrics."

• Highlighting the importance of clear and aligned metrics for business success.

"We've kind of entered an era of death by a thousand dashboards... here are the three or four most important metrics for our business and align around that."

• Advocacy for simplicity and focus in measuring business performance.

• Autonomous Vehicles (AVs):
  • Questions about Uber's strategy and the timeline for autonomous vehicles.
  • Belief in the partnership approach rather than developing hardware in-house.

"The question... I have the most questions about today is on autonomous vehicles and sort of what the strategy is there."

• Highlighting the uncertainty and strategic considerations for Uber's AV plans.

"The decision to partner with the leading AV player in the space... is the right long-term strategy."

• Support for Uber's strategy to partner with leading AV companies.

• Uber vs. Lyft:
  • Uber's success attributed to being close to customers and operational locations.
  • Importance of direct engagement with drivers and customers.

"Being close to your customers is just such a big Edge."

• Explanation of Uber's competitive advantage over Lyft.

• Uber Eats vs. DoorDash:

  • Analysis of Uber Eats' performance and missed opportunities in the US market.
  • Impact of strategic distractions and operational challenges on market share.

"We really fumbled the bag in the US with DoorDash... we missed out on a major opportunity to be the number one food delivery player in the US."

• Reflection on the strategic missteps that led to Uber Eats' lower market share compared to DoorDash.

• Ads Business:
  • The potential and growth of Uber's ads business.
  • Leveraging data from the platform to push targeted ads effectively.

"The ads business is a monster... it's in a billion dollar run rate now."

• Recognition of the significant growth and potential of Uber's ads business.

"Uber as a platform... knows where you're going, what shops you're visiting, what restaurants you like... you can then push ads to somebody in the app."

• Explanation of how Uber's data can be used to drive targeted advertising.

• Metrics Alignment:
  • Need for standardization of key business metrics across companies.
  • Importance of distinguishing between input and output metrics for better growth strategies.

"If we all started speaking the same language, the world would be a lot better place."

• Advocacy for standardized metrics to improve clarity and comparability in business performance.

"Revenues are an output metric... number of rides per week is our metric."

• Emphasis on focusing on input metrics that drive growth rather than just output metrics.

• Effective Growth Strategies:

  • Example of Perplexity's innovative growth strategy through partnerships and free memberships.
  • Importance of creating stickiness and long-term user engagement.

"Perplexity... offering a free Pro membership to anybody with a LinkedIn premium account or an Uber One membership."

• Highlighting an effective growth strategy that leverages partnerships to acquire and retain users.

• Storytelling and Lessons:
  • The importance of tying stories to lessons for impactful learning.
  • Enjoyment and value derived from sharing and reflecting on experiences.

"For me, the best is when you have stories that then are very tied to lessons."

• Emphasis on the value of combining storytelling with practical lessons for deeper understanding and inspiration.