I’m better than I was. I’m more intense. I’m more awesome. The difference is, in the last [startup] I was afraid of failure. Now I’m not afraid anymore. Now I can just have fun and go and kill it.
—Travis Kalanick1
Around the same time Brian Chesky was warned about the Samwer brothers, someone much closer to home was making life difficult for Travis Kalanick and the small band of employees at the city’s other rising startup, Uber.
The four plainclothes enforcement officers who had served Uber with its first cease-and-desist on October 20, 2010, set off a mad scramble inside the company. Austin Geidt texted photos of the citation to CEO Ryan Graves, who was in the board meeting at First Round Capital. Graves stepped outside to call her, then returned to the office to discuss the situation with Travis Kalanick, Garrett Camp, and investors Chris Sacca and Rob Hayes. The letter threatened penalties of five thousand dollars per ride and ninety days in jail for each day the company remained in operation. But which laws had they broken, exactly? And who in the vast and impenetrable San Francisco bureaucracy was behind the effort to stop a company that was quickly attracting the loyalties of the local tech community?
A few blocks away, on the seventh floor of a former bank building at 1 South Van Ness Avenue, Christiane Hayashi was planning her next move.
As director of Taxis and Accessible Services at the Metropolitan Taxi Agency, Hayashi was the most powerful figure in the city’s highly dysfunctional cab industry. She had worked as a deputy city attorney since graduating from UC Hastings College of the Law and had toiled away in environmental law and Y2K compliance. She was no stranger to San Francisco’s bare-knuckle politics, where rival democratic factions battled incessantly and corruption often bubbled indiscreetly under the surface. A stint in the Department of Elections, where she managed the transition away from punch-card ballots, was particularly grueling. Hayashi and two other lawyers were accused of mismanaging funds and signing false time sheets. A special counsel eventually investigated and cleared her.2
The experience “crushed my spirits for a while,” she says. After she was exonerated, she fled city politics and moved to San Cristóbal de las Casas, in the Mexican state of Chiapas, where for a few months she sang in the house band at a local disco. But performing six nights a week in a building she recalls as a hellacious firetrap couldn’t match a safe desk job and a comfortable government pension. In 2003 she randomly ran into a city supervisor while hiking in the Guatemalan jungle and, soon after, was lured back to the Bay, first representing the SFMTA in the city attorney’s office and then taking over the taxicab commission when it moved inside the MTA as part of the periodic reshuffling of the bureaucracy. She figured taxis would be fun and laid back. “Taxis were going to make elections look easy,” she says. She quickly learned otherwise.
Hayashi got a close look at the city’s taxi system, which had a fifteen-year waiting list for medallions, caps on the number of cars allowed, and nonexistent service outside of downtown and the airport. Everyone knew the taxi rules needed to be changed but no one could agree on how to do it. In 2009, Mayor Gavin Newsom asked her to overhaul the medallion system for the first time in thirty-two years and to install a New York City–style auction process to raise capital for the city. Hayashi worried that an auction would make medallions unaffordable for most drivers and came up with a new set of rules that raised the price to $250,000, offered low-interest loans to drivers, and gave older drivers a way to cut back on their hours.
Many other proposed changes during those years were bitterly contested by drivers and followed the exact same script as other taxi dramas playing out around the country and the world. Taxi drivers resisted any attempts to increase the number of medallions, reasoning that it would cut into their income and further congest airport taxi lots and the streets outside tourist hotels. They also vigorously fought efforts to mandate credit card readers in cabs because the transaction fees would come out of their pockets, plus their income would be documented and reportable to the government. Hayashi pointed out that they would certainly make up for this with increased tips, plus, passengers wanted to use credit cards instead of cash. They responded by encircling the MTA building and honking their horns in protest. One driver held a sign over his sunroof that read CHRISTIANE GO—LEAVE US ALONE.
Hayashi wielded a fast wit and plenty of personal charm to deal with cranky cab-industry vets who were hostile to change. But the fighting took its toll; she says she was “badly battered” by the credit card and medallion fracases and started to see her work as thankless. “I always joked my job was safe because no one else wanted it,” she says. “The drivers hate you because their wife doesn’t love them and their children are ugly and it’s all your fault. The taxi-fleet managers don’t like you because they aren’t making any money. And any regulation is too much regulation.”
She’s talking about this years later, at a barbecue in the backyard of a friend’s house in Berkeley. She’s in her early fifties and visiting from Las Vegas, where she clerks for a county court and lives on a farm with a view of the mountains. Though she’s recaptured her sense of humor, getting her to reminisce is difficult at first—those years at the MTA were the hardest of her life. “I was very stressed out in that job, which is one of the reasons why I love living in the country so much and not having any responsibility,” she says.
In the summer of 2010, Hayashi’s phone started ringing off the hook, and it wouldn’t stop for four years. Taxi drivers were incensed; a new app called UberCab allowed rival limo drivers to act like taxis.
By law only taxis could pick up passengers who hailed them on the street, and cabs were required to use the fare-calculating meter that was tested and certified by the government. Limos and town cars, however, had to be “prearranged” by passengers, typically by a phone call to a driver or a central dispatch. Uber didn’t just blur this distinction, it wiped it out entirely with electronic hails and by using the iPhone as a fare meter. Every time Hayashi picked up the phone, another driver or fleet owner was screaming, This is illegal! Why are you allowing it? What are you doing about this? She knew many of these drivers and fleet owners personally and had done her best to balance their interests along with the public’s, but the result had been a system that didn’t serve passengers or the city particularly well. Then Uber had radically tilted the entire playing field. The enraged drivers “were right,” Hayashi says. “We are sitting here regulating the hell out of these poor guys and then we just ignore what was going on?”
Hayashi was aware of the limits of her authority. Regulating limos and black cars was the responsibility of the state, not the city. But she saw an opening: this startup was calling itself UberCab and thus seemed to be marketing itself as a taxi company. She talked to the enforcement division at the Public Utilities Commission of California, which was tasked with regulating limos and town cars, and they orchestrated the joint cease-and-desist. After receiving the threatening letter, Uber promptly asked for a meeting.
Travis Kalanick, Ryan Graves, and Uber’s outside lawyer Dan Rockey met Hayashi and other city and state officials on November 1 in a conference room on the seventh floor of 1 South Van Ness. It was the first of countless times that executives at Uber would face government officials to discuss the legality of their company’s service. Graves says they were nervous. “We didn’t know what to expect,” he says. Beforehand, the Uber team agreed on a respectful, inquisitive, cooperative, and confident tone.
Somehow, things fell apart anyway. Kalanick later said the PUC officials were reserved and asked for more information but that Hayashi “was fire and brimstone, deep anger, screaming.”3
Hayashi says that she was strident, not screaming, and remembers the Uber execs as “obnoxious” and Kalanick in particular as “arrogant.” “You can’t do this!” she told them. “You can’t just open a restaurant and say you are going to ignore the health department!”
She says that nothing was decided at the meeting and calls it “totally pointless.” But that’s not entirely true. In fact, Uber’s first clash with city regulators likely changed the course of this tale.
Garrett Camp had been trying to get his friend Travis Kalanick more involved with Uber for almost two years. From the mad sprint on the morning of Barack Obama’s inauguration to their adventures at South by Southwest in Austin, the Lobby conference in Hawaii, and LeWeb in Paris, Camp had been evangelizing for a world in which luxury cars could be summoned with a tap on a smartphone. That fall Kalanick was working at Uber a few days a week, signing up limo fleets, and leading many conversations with investors, and he did much of the talking in the critical meeting with Hayashi and the other regulators. Uber remained a side project. Ryan Graves was still the CEO. But slowly, steadily, Kalanick had started to believe.
Kalanick was still in his self-described “burnout phase” after his last full-time job.4 He was traveling around various countries in Europe and South America, wearing a dorky cowboy hat; when back at home, he applied his capacity for manic focus to mastering video games like Wii Tennis and Angry Birds. Chronically restless, he was also investing and advising various startups and giving occasional speeches about his past misadventures as an entrepreneur.
Camp knew that Kalanick would be perfect for Uber. His friend loved digging into the details of complex businesses and plumbing the secret science of building startups. So Camp, still consumed with his newly independent first company, StumbleUpon, continued to press Kalanick to take over Uber. “I really think Travis should run it,” Camp said to one of Uber’s earliest advisers, Steve Jang, that year. “He’s almost there. He’s close.”
By the time of the first fateful meeting with Hayashi, Kalanick was telling friends he was ready to find a new full-time job. But it wasn’t necessarily going to be at Uber. Another company he was advising, Formspring, a question-and-answer site that had raised $14 million, seemed poised to become the next big social website and was negotiating with him to be its chief operating officer. Ade Olonoh, the co-founder of Formspring, says that discussions got so advanced that Kalanick was offered the role and there were board conversations about Kalanick’s compensation. Kalanick told me it was one of several jobs he considered at the time.
Formspring was one of ten companies in which Kalanick had made angel investments. He fashioned himself a hands-on mentor to young CEOs, the Silicon Valley version of the Wolf from Pulp Fiction, who could drop into tricky situations and help raise money or negotiate deals.5 “His skill was taking a messy hard problem and being a facilitator, willing and ready to roll up his sleeves,” says Olonoh. “He had a lot of pride in being the type of investor who helped his companies.”
Kalanick discovered another startup, CrowdFlower, which relegated menial business tasks to independent workers over the internet, by cold-calling its customer-support line and striking up a friendship with its CEO, Lukas Biewald. For two years, they spoke a few times a week, and Biewald was a frequent guest at the Jam Pad. “He helped me when he had no reason to,” Biewald says. Kalanick was full of tips on how to deal with investors, hire top execs, and negotiate with prospective partners. “Lukas, everyone is going to give you advice,” Kalanick told him. “Ask for the story behind the advice. The story is always more interesting.”
Travis Kalanick was born in 1976 and raised in a home on a leafy street in the middle-class suburb of Northridge in L.A.’s San Fernando Valley. His father, Don, served two years in the U.S. Army and was a civil engineer for the City of Los Angeles. His mother, Bonnie, sold ads for the Los Angeles Daily News.
At Granada Hills High School, Kalanick ran track, anchoring the 4-by-400-meter relay and specializing in the long jump.6 A photo in his high-school yearbook shows him in midjump, his right leg outstretched, his face clenched with focus. “I would put it all in,” he said. “Leave it all on the field.”7 He spent one summer driving his old ’86 Nissan Sentra around to neighborhood homes and selling twenty thousand dollars’ worth of knives for Cutco, a brand of kitchen merchandise often hawked door to door by students. Occasionally he was the butt of his friends’ jokes; they often commented on his “sharp” attire.8
Talented with numbers, Kalanick got a perfect score on the math portion of the SAT and became a neighborhood tutor. “I could get a thirty-minute math section done in eight minutes,” he said. “You put me on the verbal [SAT test] and my shoulder would hurt, my neck would hurt, I’d take the entire thirty minutes and I’d be stressing. But math I’d just fill in the bubbles.”9
The summer after he graduated high school, he started an SAT training company called New Way Academy with a classmate’s father, a man who belonged to the local Korean church. They advertised the courses through the church, and hundreds of kids signed up. Each Saturday morning during his freshman year at UCLA, Kalanick would put on a white shirt and a tie and teach a class called 1500 and Over. The name itself was a sales pitch to students and their parents. “The first person I tutored went up by 400 points,” he bragged years later.10
Kalanick lived at home during college and pursued a computer science degree. But this was the late 1990s, and for those whose interests lay at the intersection of entrepreneurship and computers, the siren call of the internet was irresistible. Kalanick dropped out of school his senior year, 1998, to join six classmates developing one of the web’s first search engines, Scour.net. The site, which debuted around the same time as Google, let people search the computers of other students on university networks for multimedia files like movies, TV shows, and songs. Most of those files, of course, were being hosted and downloaded online for free, in violation of copyrights.
In the site’s first year, the L.A. Times, the Wall Street Journal, and numerous other publications wrote about the company, and user growth took off. The seven classmates holed up a two-bedroom apartment near fraternity row and worked, ate, and slept there. “Anyone with any concept of hygiene would just be offended by what was going on in that place,” says a co-founder, Jason Droege, who would later join Kalanick at Uber.
Scour was a hit on college campuses; in June 1999, the Scour website was getting 1.5 million page views a day and had logged 900,000 visitors over the previous two months.11 Kalanick, the oldest member of the group and a self-styled businessman among coders, was vice president of strategy, in charge of cultivating investors and media partners. Droege recalls that a twenty-two-year-old Kalanick already had a penchant for constant pacing, his phone usually pressed to his ear, focused totally on finding anyone who could possibly help the young startup.
Discussing these early startup experiences, Kalanick would later refer to himself as a chronically “nonlucky” entrepreneur—someone who labored for years but never seemed to get any breaks. That history of hardship started here, in the Wild West days of online deal-making. In 1999, Scour was set to raise millions from superagent and former Disney president Michael Ovitz and the investment firm of supermarket mogul Ron Burkle. The notoriously aggressive Ovitz, who wanted to augment his e-commerce website Checkout.com with a network of other internet properties, set about trying to maximize his leverage, stringing out negotiations for nine months after the parties had agreed in principle to a deal. When the impatient founders finally tried to solicit other investors, Ovitz sued Scour in the Los Angeles Superior Court, alleging that they had reneged on the agreement.12
When the smoke cleared, Ovitz and Burkle had acquired 51 percent of the company,13 and the young, impressionable Scour founders had gotten a valuable lesson in the brutality of business in the big leagues. Nevertheless, Scour flourished, at first. The founders moved into Ovitz’s swank offices in Beverly Hills, eventually hired seventy employees, and got an education in the L.A. business scene, reading books the Ovitz crew passed them, like The Art of War, by Sun Tzu, and The Forty-Eight Laws of Power, by Robert Greene. Kalanick and his colleagues believed they could work with rights holders to create a more efficient and economical way to distribute media over the internet. When the rogue file-sharing service Napster took Scour’s technology a step further, allowing people to not only search for files but pass them back and forth, Scour moved quickly to catch up. It introduced its own version of the technology, called Scour Exchange, which made it even easier to trade audio and video files without paying.
Then Hollywood woke up to the impact of peer-to-peer file sharing and moved swiftly to crush it. Kalanick and his colleagues had met with all the leading music and movie studios and believed that the meetings had gone well. But in July of 2000, thirty-three media companies, including the major music and movie trade groups, sued Scour in court for a whopping $250 billion. “This lawsuit is about stealing,” said legendary MPAA president Jack Valenti. “Technology may make stealing easier, but it doesn’t make it right.”14
Scour’s allies ran for cover. Even Ovitz backed far away and, Kalanick later asserted, had a colleague threaten Kalanick with physical harm if he dragged Ovitz’s name any farther into the fracas.15 Ovitz denies he ever threatened Kalanick and talks about him favorably as a young but impressive negotiator who couldn’t quite see the larger picture when the industry rallied against file sharing. “Travis didn’t understand that we had made a mistake” in backing Scour, Ovitz told me in 2015 at a tech-industry conference. “We didn’t realize we were creating enemies in the world of intellectual property. If you got sued by every angry music and movie company and everyone in the world who has IP, you’d notice. That didn’t bother Travis. It sure as hell bothered me.”
Scour’s attorneys, like Napster’s, believed the company was protected by the “safe harbor” provisions of the Digital Millennium Copyright Act of 1998, which stipulated that internet companies could not be held liable for the activities of their users. Scour, they argued, wasn’t hosting the content, only pointing to it. But the startup couldn’t hope to fight the combined might of the entire media industry. It laid off most of its staff in the fall of 2000 and declared bankruptcy to escape the litigation.16 “That’s when we really learned how the world can work,” says Droege. “It’s not whether or not you are right or wrong.”
In bankruptcy court, after a fifteen-minute auction, the assets of the company were sold for nine million dollars to a little-known Oregon firm.17 Kalanick, still only twenty-four, had to watch as everything he had worked for, the dream he had quit college to pursue, was trampled by powerful companies and their high-priced lawyers.
It was the kind of traumatic experience that could harden the character of a young entrepreneur. It was also just plain depressing. “By the time we actually truly went out of business, I was probably sleeping fourteen hours a night,” he said later.18 In public, he tried to hold his head high. “I was [playing] the game I call ‘fake it till you make it.’ Basically fighting reality. When you do that too long, when you are in failure state, it will eventually crush you.”
Despite that setback, Kalanick was ready to dust himself off and try again.19 He started talking to one of his Scour co-founders, Michael Todd, about redeveloping the technology behind Scour and selling it to media companies as a tool to help them distribute their material online. Bandwidth was expensive back then, around six hundred dollars per megabyte (as opposed to about a dollar per megabyte on a broadband internet line today), and peer-to-peer networking could reduce the cost. They called their new company Red Swoosh, after the twin half-moon insignias in the original Scour logo. Kalanick said it was “a revenge business” and recognized a satisfying irony: “The idea is the same peer-to-peer technology but I take those thirty-three litigants that sued me and turn them into customers,” he said. “Now those dudes who sued me are now paying me. It sounded good.”20
In practice, it didn’t work out as well.
Kalanick tried to raise money in 2001, right in the midst of the dot-com bust. Silicon Valley was a ghost town. At a local bar in Palo Alto, a venture capitalist told him that all innovation in software had been done and there was nothing left to invent.21 On September 11, he had a meeting scheduled in L.A. with Daniel Lewin, a co-founder of the Boston-based streaming-media company Akamai. Lewin was on American Airlines Flight 11 and died in the terrorist attacks.
Red Swoosh had an office in Westwood, seven full- and part-time employees, mostly refugees from Scour, and a few paying customers. But the scent of failure was strong, even at the beginning. Todd and Kalanick couldn’t agree on company strategy, and bandwidth prices were dropping and making the product less compelling. Kalanick claimed he discovered that Todd wasn’t properly withholding the firm’s payroll taxes and was trying to surreptitiously sell the engineering team, without Kalanick, to another company.22 Todd left Red Swoosh over the spat and disagrees with Kalanick’s version of events, saying only that “Travis is a great storyteller.”
Todd landed a job at Google and promptly hired away Kalanick’s last software engineer. Kalanick, twenty-seven, was now utterly alone. He had lived at his parents’ house for a year and had gone without regular paychecks while pursuing deals with companies like Microsoft and AOL, only to watch them invariably fall through. “Imagine hearing ‘no’ a hundred times a day for six years straight,” he told me years later. “At some point even your friends are like, ‘Dude, you need to do something else.’ To keep going in the face of that can be a lonely existence.”
Kalanick tried some unusual tricks to get attention. In 2003, while at the county recorder’s office in Hawthorne to get a passport, he noticed television news trucks parked out front. Curious, he asked why they were there and learned they were covering prospective candidates who were registering to run in that year’s election to recall and replace California governor Gray Davis. A self-described C-Span junkie in high school, Kalanick was intrigued and put himself on the list to run. He then spent a few days canvassing Hermosa Beach near his home, telling sunbathers about his file-sharing platform and trying to obtain the needed ten thousand signatures to get himself on the ballot. He got about fifteen. “I only had certain things to say, you know. I didn’t have much,” Kalanick recalls.
Kalanick may not have considered himself a serious candidate for governor but he stubbornly believed he could make Red Swoosh work. Internet mogul Mark Cuban saw promise in the idea and, despite the fact that Kalanick had no regular employees, invested a million dollars in the business in 2005. It was enough to keep going. “I like to call these my blood, sweat, and ramen years,” Kalanick said. “I always very much believed in what we were doing.”23
With the new capital, there was only one thing to do: move to Silicon Valley. He found a small office in San Mateo, twenty miles south of San Francisco, and, utilizing only his conviction and charisma, he hired four engineers. David Barrett, the first to sign on and the future founder of a cloud software company called Expensify, says Kalanick was “completely honest about the state of business” and was “persuasive, compelling, and candid.” He found Kalanick’s enthusiasm infectious. “If you had a shit-ton of data, we gave you a way to move it,” Barrett says. “The problem was that there were only three companies in the entire world who wanted to do it.”
Enjoying a modicum of momentum, Kalanick leased a new office in San Francisco but had a month before he could move in. Instead of waiting, he took the whole company to Thailand, where they worked eighteen-hour days out of cafés and a house overlooking the craggy Railay Beach coastline rewriting the Red Swoosh code. It was a productive retreat and the first of what Kalanick called workations, a tradition that continued at Red Swoosh and, later, Uber.
Back in the Bay Area, Kalanick raised more money from August Capital—the firm that later passed on Airbnb—and resumed scrapping to find a graceful exit for Red Swoosh. Again demonstrating his skill as a salesman, he landed satellite TV provider EchoStar as a client and, in 2007, sold the entire company to Akamai for $18.7 million, plus an extra payout if the company met certain goals.24 It was a meager exit by most Silicon Valley standards but a huge relief for Kalanick, netting him several million after six years of deprivation and anonymous toil. “He could have and should have given up well before he sold it,” says David Hornik of August Capital. “He deserved it.”
Kalanick had endured the most grueling experience of his life and emerged as battle-hardened and defiant as ever. Around this time, he went out to a nightclub in San Francisco with several friends, including Napster co-founder and Facebook investor Sean Parker. At the end of the night, inebriated, Kalanick was waiting for his friends outside the nightclub when an imperious bouncer told him to move away from the door. Kalanick moved only a few steps away. “Keep going,” the bouncer ordered. Kalanick inched over another step. “Keep going,” the bouncer said menacingly. “I’m not breaking the law. You tell me how I’m breaking the law,” Kalanick replied.
By the time a nearby police officer arrived, the bouncer was forcibly trying to move Kalanick while he defiantly gripped a parking meter with both hands. He was arrested for obstruction of the sidewalk and says he spent eight to ten hours in the city jail before Parker realized what had happened and put up two thousand dollars to bail him out.25
“Fear is the disease. Hustle is the antidote,” he said at a Chicago startup event a few years later.26 “You start a company in 2001, good luck, right? You can’t count on funding. You can’t count on sales. You can’t count on anything but just crazy hustle and just grit your teeth, claw your way to success. There was just no easy way to do it.”
To commemorate the sale of Red Swoosh, Kalanick bought a pair of patterned socks with his new motto embossed on them: “Blood, sweat, and ramen.”
Now he had a decision to make. His friend Garrett Camp wanted him to take the top spot at Uber. But in 2010, Uber was a tiny company. It had some half a dozen employees, a few dozen limo drivers in San Francisco using the platform, and little in the way of expansion plans. Its motto, “Everyone’s private driver,” conveyed luxury and exclusivity, not mass-market appeal. And Kalanick was reluctant to displace Ryan Graves—or at least savvy enough to know that Silicon Valley in the age of venerated founders like Mark Zuckerberg tended to look askance when investors ousted the original chief executive.
At the same time, Uber excited him in a way that Formspring, the much larger Q-and-A site that was also recruiting him, did not. Uber was turning out to be a company rooted in complex math. Its biggest challenge, and where he found himself already frustrated with the performance of the startup, was finding ways to attract more drivers during peak times and to route cars into the areas of highest demand. Uber had the data to make those kinds of prescient decisions. In fact, it was slowly dawning on the founders and board members that Uber was going to have more data about how people moved around cities than just about any other company in history. “I’m an engineer at heart and math moves the needle on this,” Kalanick told me a few years later. “My happy place is right in the midst of all that complexity.”
Uber’s financial results also looked promising. The company was exhibiting an elusive phenomenon called negative churn, in which users who joined the service were more likely to stay with it and gradually increase their frequency of use than they were to leave. In other words, once customers joined Uber, they turned into a sort of high-yield savings account. The lifetime value of a user seemed unknowable, perhaps unlimited. When someone signed up, according to an early internal estimate, he or she was worth forty or fifty dollars a month in gross revenues and eight to ten dollars in gross profit—for the foreseeable future. “This is the equivalent of a perpetual-motion machine and cannot go on forever, but it means that rider spending is accelerating at a rate that is bigger than our churn rate,” Kalanick wrote to his fellow investors in an e-mail that year.
These kinds of numbers were rare in a startup. They were the sort of numbers that could attract significant new financing and fuel rapid expansion. Uber might be the canvas on which Kalanick could apply all of his talents, hard-won experience, and ambition.
But that alone didn’t tip the scales. In speeches that fall, Kalanick was still talking about himself as a “startup consigliere” and “the Wolf.”27 Then he had that explosive meeting with Christiane Hayashi.
The meeting thrust Kalanick back into the thick of the familiar battle between new technology and the old, outdated ways of doing things. In the weeks after, he kept the Uber board informed about negotiations with the city. Uber had to stop marketing itself as a cab company, but that was an easy compromise. By the time of the cease-and-desist, the founders had already decided to drop the Cab from the UberCab name, and investor Chris Sacca was negotiating with the Universal Music Group, which owned the Uber.com web address, to buy it for a 2 percent ownership stake of the company (at the time, about a hundred thousand dollars). Universal Music also elicited a promise from the startup that if Uber didn’t work out, the company would give the name back.
The California Public Utilities Commission wanted Uber to register itself as a limo company or, technically, as a “charter party carrier,” but Uber’s lawyers believed the company could make the case that it was merely an intermediary between drivers and riders, not an actual fleet operator. It was as much a limo company as Orbitz or Expedia were airlines, they argued. In a follow-up ruling in late 2010, the PUC agreed, and Uber never stopped operating. To the consternation of Christiane Hayashi, who was trying and failing to get the city attorney’s office to give her authority to regulate the startup, Uber had a winning argument.
Kalanick later said that Uber’s first fight in San Francisco added to his personal conviction about the company just as he was taking a more active leadership role. “For me that was the moment where I was like, for whatever reason, I knew this was the right battle to fight,” he told me in 2012. On a tech podcast, he added that the fight with the MTA recalled all the litigation and conflict of his decade in the world of peer-to-peer technology. “The great thing is I’ve seen this before,” he said. “I thought, Oh, man, I have a playbook for this. Let’s do this thing. When that happened, it felt like a homecoming.”28
After that first meeting with Hayashi, Kalanick spent weeks negotiating with Garrett Camp and angel investors Chris Sacca and Rob Hayes over his compensation as CEO. He somehow calculated that he needed a 23 percent ownership stake in Uber, up from his 12 percent stake as a founder and adviser, but declined to explain his logic. The other board members didn’t want to dilute their own holdings but ultimately acquiesced. “The best thing I ever did for Uber was completely roll over in negotiations with Travis,” says Rob Hayes.
Finally, Kalanick himself delivered the news to Ryan Graves, pitching it as a partnership and the opportunity to work together more closely. If he was angry or upset at the demotion, Uber’s original CEO hid it well. “I kind of revisited what I was hoping to get out of the experience in the first place,” says Graves, whose title changed to general manager and later, vice president, operations. He recalls telling Kalanick, “As long as it’s a partnership, as long as it doesn’t feel like a job, I’m good. I didn’t come here to take a job. I had gotten fully sold on the idea of running a company. As long as that’s the case, then all good. I trust you.”
They signed the final documents on November 23, 2010, and announced it to tech blogs a month later.29 Graves wrote on Uber’s website that he was “superpumped” about having Kalanick on board full-time, deploying a gung ho phrase that would become a motivational motto among future Uber employees. And Kalanick expressed some of the hard-charging enthusiasm and ambition that he had brought to Scour and Red Swoosh.
“The bottom line is that I’m all in on Uber,” he wrote.
The excitement and joy of being Uber is coming out my pores and I’ll stop at nothing to see Uber go to every major city in the U.S. and the world. So what’s next? Taxi frustration is going down. Reliability, Efficiency, Accountability, and Professionalism in urban transportation are going way up. Every city Uber rolls into is going to be a better place when we’re done with it and if you live in that city, your world of transportation is changing forever, and it will be oh so Uber when that change arrives.
There was another unintended consequence of Christiane Hayashi’s fight with Uber. The young startup received a torrent of publicity from Silicon Valley’s technology blogs. Between that and the already strong word of mouth, the number of Uber rides started bounding upward by 30 percent each month.
The company had moved temporarily into the local offices of First Round Capital, where they availed themselves of the foosball table and other perks of venture capital life. Every few days, Kalanick would charge excitedly into Rob Hayes’s office with new data. Once he ran in and announced that thirty-five rides had been completed in a single hour! A new record! “I remember looking at Travis and saying, ‘Dude, I think you have the tiger by the tail. I think this is real,’” Hayes says. “He just smiled devilishly at me.”
Kalanick was now prepared to devote himself fully to another entrepreneurial adventure. He stopped angel investing, curtailed his advising of other companies, and even broke up with a longtime girlfriend, explaining to a stunned colleague, “I realized I was more passionate about this company than I was about her. I should probably find someone I like at least as much as my job.” He also showed early flashes of belligerence toward competitors—an augur of the conflicts to come. “They will be getting into one of the most complex businesses I’ve ever seen for all the wrong reasons, and they will sorely underestimate the pummeling they will go through at the expense of my bare knuckles,” he e-mailed a friend who was pointing out a Tweet critical of Uber by a potential rival. Kalanick signed off with Bleeding Uber Blood.
First, though, Kalanick had to address some of Uber’s early problems. At the time, the Uber app was showing users how many cars were available in their area. Users opening the app and seeing no cars available, an all-too-frequent occurrence the founders started calling “zeros,” had always exasperated Kalanick and Camp. That, in their minds, was not an “Uber experience.” To fix it, Uber had to add new drivers, predict when and where spikes in demand would occur, and encourage drivers to flock to those neighborhoods.
This required a wholesale identity change. Uber, Kalanick realized, wasn’t really a lifestyle company that offered swank rides, despite what the motto “Everyone’s private driver” suggested. It was a technology company, and it had to become intimately familiar with its own internal metrics. “This is a company that needs to run on data,” Kalanick told colleagues. He amped up hiring, and in December he recruited a new director of engineering, Curtis Chambers, whom he had first met at Akamai. Chambers started work on a new dispatch system to replace the already creaky original created by Oscar Salazar, which was being held together with spit and duct tape by engineer Conrad Whelan.
The Uber execs were dealing with seasonal swings in demand, which they were seeing for the very first time. The daily, weekly, and seasonal rhythms of the city’s transportation grid were beginning to present themselves. Halloween had been busy, while Thanksgiving, to their alarm, was slow—people stayed at home, it turned out. Over the Christmas holiday, anticipating a rush on New Year’s Eve, they made their first attempt to bring supply and demand into balance. Uber enlisted as many drivers as it could and raised the fares to twice the usual rate for that night. It also ran a lottery system and awarded a handful of users VIP status, which locked them into the normal fare and gave them exclusive access to a few dozen cars. Then Kalanick and some of the engineers decamped to Marina del Rey in Los Angeles to watch it all unfold. It was Uber’s first workation.
Amid overloaded servers, intermittent service, and a balky app that badly needed an upgrade, the first New Year’s experiment didn’t work that well. But it started the company down a path—a controversial one, it turned out—of using price as a way to deal with volatile demand.
As 2011 began, Kalanick had another big move in mind. It was time for Uber to raise its first significant round of funding, the Series A. He wanted to work with one investor in particular: Benchmark’s Bill Gurley, who had previously expressed interest in the seed round.
Gurley had tracked Uber’s progress closely over the nine months since then, what the former Florida Gators basketball player calls “hanging around the rim.” Sensing the opportunity to bring transportation online in the same way OpenTable had consolidated restaurants and Zillow had aggregated real estate listings, Gurley was aggressive. He went on a bike ride with Chris Sacca in Truckee to talk about the company and drove up to San Francisco late one night to spend two hours with Kalanick at the W Hotel bar, hammering out prospective deal terms.
Gurley had identified a big opportunity but he was also fortunate. He had tried and failed with Taxi Magic and Cabulous, two investments in rival companies that would have precluded his backing Uber. Now he recognized that Uber, free from the regulation and price controls that governed the operation of yellow cabs, was the larger prize.
Benchmark almost scuttled the deal with a practical joke. Kalanick was on Sand Hill Road in Menlo Park to visit rival Sequoia Capital before a scheduled meeting with Benchmark’s partnership. As they waited for Kalanick to arrive, Gurley and his partner Matt Cohler looked at the Uber app and saw a single Uber car in front of Sequoia’s office a mile away. Because Uber did not yet operate down in Silicon Valley, they guessed this oddly idle car was Kalanick’s ride. Cohler summoned the car with the Uber app on his phone, and when Kalanick came out of his meeting, it was gone. He had to run over to Benchmark in his dress shoes, and he arrived sweating and late. That night, the firm sent Kalanick a pair of running shoes. “I don’t know why we thought that was a good idea,” Gurley says of the prank.
Kalanick didn’t hold a grudge, and Benchmark led an $11 million fund-raising round that valued the fledgling startup at $60 million. Rivals like Sequoia and Battery Ventures, which had considered investing in the round and passed, added their names to the list of everyone who underestimated either the size of the opportunity or the fortitude of its new CEO. “Scour and Red Swoosh were tough,” Gurley says. “All of the sudden, Travis had a little wind at his back. It often felt like he thought he had an obligation to the entrepreneurs’ society of the world to play Uber for all that it was worth.”
Kalanick, the combative CEO who had something to prove in the wake of his past business failures, and Gurley, the seasoned investor who intimately understood the benefits and challenges of building an internet marketplace, were a potent combination. With fresh capital in the bank, they agreed, Uber needed to do one thing right away—expand out of San Francisco and into every major city in the world.