How Uber, Airbnb and the Killer Companies of the New Silicon Valley are Changing the World
Learn the history of two huge tech upstarts.
As you may know, start-ups are typically emerging, compact companies with groundbreaking business concepts. Google, Facebook, and eBay were all once small, fledgling companies. Over the past few years, there has been a surge in new start-ups emerging. However, there comes a time when a business transitions from being a start-up to something more substantial. We refer to them as upstarts.
In this summary, we'll explore two emerging companies that have gained widespread recognition: Uber and Airbnb. Both have revolutionized and disrupted traditional business models, completely transforming the personal transportation and hospitality sectors.
What factors have contributed to the success of these emerging companies, and what does the future hold for them?
In this summary, you'll discover how the CEO's personality can impact a company's business approach, how Uber was compelled to transform itself due to a competitor, and what lies ahead for Uber and Airbnb.
1. The term "upstart" is commonly associated with successful start-ups such as Airbnb and Uber.
Companies that have experienced rapid growth and achieved phenomenal success are now considered start-ups. They have demonstrated a willingness to challenge established players and have disregarded conventional business practices. These companies can be referred to as upstarts.
Both Airbnb and Uber have gained global recognition and are experiencing tremendous success. And that's even though they lack tangible assets, unlike numerous prominent companies.
At first glance, Airbnb functions similarly to the world's largest hotel company. However, it does not possess the rooms that are being rented out.
Similarly, we consider Uber the most prominent car service in the world. However, it needs its own fleet.
Part of the reason these companies have been able to expand rapidly is due to their freedom without being tied down by assets. In the tech world, being quick and adaptable is essential for success.
We should also acknowledge the immense scale of these businesses. These are the so-called unicorns, massive start-ups valued at over a billion dollars.
In 2016, Airbnb had a valuation of $30 billion, while Uber was valued at $68 billion.
Airbnb's rapid ascent was greatly aided by Sequoia Capital, a prominent early investor. Sequoia Capital has enjoyed significant returns as a result. In fact, the amounts it earns from similar investments in Google and WhatsApp are insignificant.
However, achieving such success demands significant effort and, occasionally, a more assertive approach to business.
2. Uber's ability to constantly reinvent itself has been a critical factor in its global success, even when it may need to secure contracts.
Before Uber's rise to success, the concept of a company that promoted rides in unfamiliar vehicles appeared absurd. So, how did Uber pull it off?
The company started as a town car service in San Francisco, where transportation was notoriously challenging. Securing a taxi proved incredibly difficult, as the demand far exceeded the available supply.
Uber, thus, launched a dependable car service catering to the city's young professionals, with a strong emphasis on style as a fundamental aspect of their business model. It was impressive that there was no need to wait for a cab.
Over time, additional ride-sharing services like Lyft joined the market. Uber had already made its mark in a few cities, but faced with a looming threat, the company recognized the need to expand its services to include the taxi industry. This expansion proved a resounding success thanks to its impressive app and dedicated user base.
At that moment, Kalanick had a revelation: Uber needed to maintain its adaptable image, constantly evolving to remain current and appealing.
However, Kalanick had grander aspirations and successfully guided Uber to achieve international success, particularly in Europe. Surprisingly, he came close to reaching a monopoly in the highly competitive Chinese market.
Unfortunately, Uber faced intense competition from Didi Chuxing, which hindered its progress. Didi Chuxing had a significant advantage over Uber in China, with a more immense capital and expansive presence, operating in 400 cities compared to Uber's 100. Recognizing the inevitable outcome, Kalanick strategically decided to strike a deal. As part of the agreement, Uber gracefully exited the Chinese market and transferred its operations to Didi Chuxing, securing a valuable 17 per cent stake.
Despite not successfully expanding Uber into China, Kalanick managed to amass billions of dollars from the Chinese market, solidifying his status as a tech industry phenomenon. In addition, this additional capital allowed him to accelerate Uber's growth.
Undoubtedly, Kalanick's boldness played a crucial role in his company's triumph. However, it became evident later that Uber occasionally found itself amid controversy.
3. Airbnb has experienced remarkable growth, transforming into a dominant force in the hospitality industry.
Similar to how hitching a ride with a stranger has become a regular occurrence, so has the idea of paying to stay in someone else's home. Nowadays, thanks to Airbnb, many tourists view it as an entirely acceptable method of finding accommodation.
Airbnb emerged out of necessity and humble origins. One of the company's founders, Brian Chesky, was occupied with other projects and unfortunately couldn't cover his rent expenses. Therefore, he opted to rest on a friend's sofa and compensate him with a small amount.
That's when a brilliant idea sparked in his mind. Homeowners can generate extra income by renting out their spare rooms and apartments, providing a more affordable alternative to traditional hotels for travellers.
Guests are drawn to the genuine experience of staying at an Airbnb. They have the opportunity to connect with locals and discover unique experiences that often go unnoticed by most tourists.
The founders found this idea incredibly inspiring, leading to Airbnb adopting the slogan "Belong anywhere." This conveys that you will always feel at home, no matter where you are.
Over time, Airbnb became a significant force in the travel industry. In August 2016, the company experienced its most successful night, with a staggering 1.8 million guests staying in Airbnb rooms worldwide. That's impressive, surpassing the total number of rooms in the entire Marriott Hotel Group, the world's largest hotel company!
It was an unexpected turn of events.
Initially, the concept was met with resistance from investors concerned about potential safety issues deterring users from utilizing the service.
Despite a few setbacks, Airbnb has demonstrated that we can have faith in our fellow humans.
Undoubtedly, Airbnb and Uber have introduced consumers to some remarkable innovations. However, the journey has had its fair share of challenges.
4. The CEOs of Uber and Airbnb are known for their determination but occasionally find themselves amid controversy.
Bill Gates and Mark Zuckerberg have left an indelible mark on the entrepreneurial world. However, both individuals possess a reserved and gentle demeanour, far from the typical image of assertive and quick-talking chief executives.
Travis Kalanick and Brian Chesky, the CEOs and co-founders of Uber and Airbnb, have a unique approach. They both possess an undeniable charm and eloquence in their speech.
Notably, Kalanick disagreed with Christiane Hayashi, the former director of San Francisco's Taxis and Accessible Services Division, who attempted to hinder Uber's initial growth in the city. The taxi drivers Hayashi served were highly frustrated because Kalanick's company appeared to effortlessly bypass every rule despite being subject to strict regulations. During a particularly intense meeting, Hayashi found the Uber executives unpleasant, while Kalanick characterized Hayashi as highly frustrated and expressing their emotions loudly. His readiness to engage in this conflict demonstrated that Kalanick had no qualms about embracing controversy.
However, his approach can also be exceptionally motivating. Supporters of Uber came together to show their backing during the company's confrontations with local government entities, such as in New York City.
Meanwhile, Brian Chesky of Airbnb had such a magnetic presence that after delivering a speech at a conference hosted by the investment bank Allen and Company, he received an invitation to the bank's annual gathering. There, he showcased his expertise and successfully pitched Airbnb to influential decision-makers.
However, while Airbnb and Uber have connected people innovatively, their methods have sparked controversy.
For example, Uber does not directly hire its drivers. Instead, they are classified as independent contractors. This allows the company to bypass the need to offer benefits like health insurance, typically provided to employees at more giant corporations.
On one occasion, Airbnb made a public commitment to compensate a host named "EJ" after their apartment was damaged by guests. Nevertheless, the company failed to fulfil its promise, prompting EJ to launch an online campaign to exert public pressure. After facing controversy, Airbnb was compelled to modify its insurance conditions for hosts.
The lesson is quite evident. A CEO's charisma and determination can propel them to the pinnacle of success. However, some opposition is expected in the process.
5. It is essential for upstarts to remain committed to their initial idealistic visions.
Starting a company can often be accompanied by a sense of idealism, as there is a lack of fear of failure. Staying idealistic can be challenging once you've achieved fame, fortune, and success.
Can Airbnb and Uber maintain their human touch and avoid becoming soulless profit-driven entities?
During their early stages, Airbnb faced a challenge when they were approached by the Samwer brothers, known for their reputation of replicating apps and capitalizing on the success of the original companies, ultimately pressuring them to acquire the replicated version.
However, Airbnb resisted the temptation and concluded that the most effective strategy to outperform the competition was to develop the most exceptional app. And it was a success – eventually, Wimdu, the Samwers' clone, failed.
Airbnb is dedicated to preserving its distinct working environment, which was initially fostered through values such as thorough deliberation of decisions and the belief in the importance of every individual. However, the company must remember their previous experience with the Samwer brothers to avoid adopting their cutthroat approach.
Meanwhile, it is concerning that Uber is hesitant to allow its workers to unionize or have adequate working conditions. The company has lost touch with its roots and those who initially supported it. It is essential to ensure fair treatment for its drivers.
Just like a venture capitalist, one must remember that great power comes with great responsibility.
These two companies are poised to shape the future of business. Kalanick and Chesky have a unique chance to shape the mindset of a new generation, and their financial resources give them the power to impact future choices.
There is always a risk that they might fall into the same traps as traditional corporations, driven by greed or a hunger for power through conformity.
We still need to determine the long-term global impact of Airbnb, Uber, and other emerging companies. Hopefully, they will remain faithful to their initial principles.
Summary conclusion
Airbnb and Uber result from the vision and determination of two ambitious entrepreneurs and their talented team. These two companies can significantly impact worldwide, but it's essential to ensure they use their influence responsibly.