The Uber IPO

Welcome to the big one. On the day of its IPO, we tell the story of Uber. It’s a story whose roots stretch back 130 years, but whose impact reverberates perhaps more powerfully on our current world than any other. A story that, in all of its greatness and in all of its ugliness, may just be the story of our time. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links: Austin Geidt’s incredible journey: https://youtu.be/-NjaqDMYNVsTravis’s self-introduction as “the Wolf from Pulp Fiction”: https://youtu.be/VMvdvP02f-YTravis interview on TWiST: https://www.youtube.com/watch?v=550X5OZVk7Y

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  Oh my God, this is insane. I have literally 21 pages of notes in the Google Docs.

• 0:21Ben Gilbert?

  Welcome to season four, episode six of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:29David Rosenthal?

  I'm David Rosenthal.

• 0:30Ben Gilbert?

  And we are your hosts. We sit here today on the day of Uber's long awaited IPO. And David, let me tell you, I am super pumped to be here today.

• 0:39David Rosenthal?

  Me as well, Ben, me as well.

• 0:41Ben Gilbert?

  Well, here, here was my alternate intro, and frankly, I have a few here. We covered Pinterest and Lyft recently, both valued at about $15 billion. Today, we are covering a company who has raised over $20 billion in Uber. Or perhaps this third, Uber just raised $8 billion, or approximately one half of Lyft's entire market cap in its IPO. Or maybe this fourth one, today we are diving into a company whose epic history is matched only by its epic operating losses with over $3 billion last year, the largest of any company to ever go public. But what you really need to know about Uber, they are a broad multimobility transportation platform, a hyper-growth food delivery service

• 1:24Ben Gilbert?

  that leverages Uber's existing customers and driver assets and an international ridesharing holding company with enormous chunks of Didi, Yandex Taxi and Grab, and a trucking shipping marketplace called Uber Freight to top it all off. So holy God, David, there is a lot to cover here.

• 1:41David Rosenthal?

  I thought we were doing an Uber episode, not a SoftBank episode.

• 1:46Ben Gilbert?

  At this point, what's the difference?

• 1:47David Rosenthal?

  What is the difference?

• 1:48Ben Gilbert?

  Yep. All right. Well, listeners, before we dive in, I want to say this past week's limited partner bonus show, we had an incredibly appropriate guest join us for a deep dive on Uber's history, Brian Tolkien. And Brian was one of Uber's first 100 employees, helped start the product operations group, and eventually ran Uber Pool when it was first getting off the ground. And Brian had some really practical insights on how Uber developed their infamous playbooks and launched Cities in the early years. So if you like Acquired and you want to go deeper on company building topics, you should totally consider becoming an LP yourself. It's brain dead easy. It takes two taps in 10 seconds and you can listen right here in your favorite podcast player. And aside from great interviews like Brian, you can also get David and my walkthrough of a term sheet,

• 2:30Ben Gilbert?

  how VC firms really work, and some of our personal investment theses. You can click the link in the show notes, join, or go to glow.fm/ acquired. That's right. Glow.fm/ acquired or click the link right in the show notes from this episode. And everyone gets a one week trial, so feel free to check it out.

• 2:49David Rosenthal?

  Man, so professional. We've come so far. It's great.

• 2:52Ben Gilbert?

  It's funny, we're finding fit and how to actually describe that thing. I think when we first first got started, we were a little all over the place in describing the LP show.

• 3:01David Rosenthal?

  It's all about the ride.

• 3:02Ben Gilbert?

  It is. Oh, David.

• 3:04David Rosenthal?

  There we go.

• 3:05Ben Gilbert?

  All right. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF. Then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 3:26David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT. And your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote shadow AI running with no security review at all.

• 3:46Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 4:08David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:27Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Oof. Okay, David, that is all that I have. I promise before you take us back to like sometime in the 1400s when we were like just discovering transportation or something.

• 5:04David Rosenthal?

  Oh man, I wish I were.

• 5:07Ben Gilbert?

  Have I overshot?

• 5:07David Rosenthal?

  I wish I were. You've overshot, but I'm trying to, I don't remember, I'm trying to think if this is the farthest back we've ever gone. I don't know. Listeners, if you remember going back further, let us know, hit us up in the Slack.

• 5:18Ben Gilbert?

  As if there's not enough to talk about in Uber. Let's, let's extend the history even further in the past.

• 5:22David Rosenthal?

  All right, here we go. We're starting appropriately enough in San Francisco, downtown San Francisco, in the year 1889.

• 5:35David Rosenthal?

  Ben's reaction on video was great there. Okay, so a businessman named F. S. Chadbourne gets off of a ferry at the newly constructed ferry building terminal at the end of Market Street in downtown San Francisco. An amazing place. I love going to the ferry building. It is a beautiful treasure of downtown San Francisco. It was built the year prior in 1888. And he, Chadbourne gets off of his ferry and he hails what is very common back in the day, a horse drawn carriage that is driven by what is known as a hack. To take him where he is going on his business. And this horse drawn carriage is driven by a man named James Nosie Brown. Why is he called Nosie? We're about to find out.

• 6:17David Rosenthal?

  Nosie drives Chadbourne not to where he is supposed to be going, but takes him to an out of the way location, probably in what was then very sketchy Soma. Unconfirmed, now also sketchy, home to startups. And he holds him up. He says, hey, for me to take you where you're going, I'm going to unclear if he actually threatened his physical safety, but you're going to have to give me more money to take you where you want to go. Chadbourne, he jumps out of the cab, he runs away. But he's really pissed and he's not just anybody. He is a wealthy muckety muck and he has contacts in the city government. He lobbies them to enact, this has been a totally unregulated industry. It was just happening, people who had these hacks who had.

• 7:01Ben Gilbert?

  I now know where this is going.

• 7:02David Rosenthal?

  Yeah. Horse drawn carriages, they would just line up, do whatever they pleased. And he lobbies his friends in the government to enact very strict regulations. And henceforth, in what would come to be known as the Chadbourne, I don't know if it's act or whatever, regulations. All drivers in San Francisco had to be licensed with a badge and that badge number had to match the vehicle's number. And I think it was in a city ordinance because it's named after himself. We jump a couple of short years later to New York City, where most people in America think of the center of the cab industry and indeed would become fully 50% of the entire taxi industry in the US. In 1907, where the first cars, the first motorized cabs arrive in New York City

• 7:45David Rosenthal?

  and a businessman named Henry Allen imports them from France. And he starts the first cab company, the first network of drivers, a transportation network company, if you will. And he, he hires a bunch of drivers. He has huge success. There's tons of demand. This is so much better, so much faster than horse drawn carriages. It's cheaper. Everybody loves it. This might sound familiar of something that would happen a little over a century later. But one year in, it becomes clear that not all is utopian in this, this new transportation model in cities. The drivers are unhappy and they go on strike and they. argue in their strike that Alan had to kind of promised them that they were going to be

• 8:28David Rosenthal?

  employees, they were going to get a pension plan, these were going to be great jobs. He was going to give them all sorts of benefits.

• 8:34Ben Gilbert?

  It is crazy how, what a mirror this is.

• 8:37David Rosenthal?

  History repeats itself over and over again. But the reality is, they were not employees, they were essentially independent contractors. And they got charged by the day, they got charged 25 cents a day for a uniform rental fee, they got charged 10 cents a day for a quote unquote brass polishing fee. And then they also had to buy their own gasoline.

• 8:57Ben Gilbert?

  I think I've seen that brass polishing fee on my Uber receipts from time to time.

• 9:01David Rosenthal?

  Totally, it's amazing. This is 1907. And so they strike, and this is the beginning of the illustrious history of labor issues in the taxi industry. We fast forward a couple decades, moving quickly here. Something else that is going to get mirrored again later on in the episode. 1929, the stock market crash happens and the Great Depression begins. Now, what happens when this happened? In the Great Depression, people all over the country lose their jobs. They're looking for work, part-time work, anything to make some money to get by. And what is a relatively flexible, easy to start, low amount of training job that you can do, especially in New York City, you can become a cab driver. So this becomes the backup job for a lot of these people who lost their jobs on Wall

• 9:45David Rosenthal?

  Street, or in other industries, in the, in the stock market crash and the depression. So much so, that car dealers, you know, they can't sell cars to people who are buying them for their personal luxury transportation vehicles. They start marketing cars to these newly unemployed as job creators. Buy a car, get a job, you can start driving your own taxi cab.

• 10:07Ben Gilbert?

  Wow, there's like a reminiscent thing of Airbnb here too, where it's

• 10:10David Rosenthal?

  Totally.

• 10:11Ben Gilbert?

  Yeah, it's the very same issue that cities are having with, you know, people taking houses out of the supply market to be rented, is happening with cars at this point in history.

• 10:20David Rosenthal?

  It's happening with cars. And so what is this result in? This results in a huge oversupply of taxi cabs on the streets of New York, because a demand for taxi rides is down because everybody's losing their jobs. Supply is through the roof because everybody who just lost their jobs is now trying to become a taxi cab driver. And it becomes a total race to the bottom. Fares plummet through, through the floor, nobody can make any money, and it becomes a huge problem. The streets are congested with cabs. What does New York City respond with and other cities around the country? They respond with basically creating the medallion system and a bunch of other regulations around it, which limits the number of licensed taxis that can operate

• 11:02David Rosenthal?

  in cities, especially New York City, but also San Francisco and other big cities at any given point in time. And that continues to this day. That is the taxi industry. But what happened to all of these other people who had gone out and bought cars? And now they were no longer able to operate. They don't just go away. This weird, interesting sort of shadow market develops in cities where these people are no longer regulated taxi cab drivers approved by the city. And but the regulations for taxis centered around meters. So you would hail the taxi and then you would pay a time and mileage fare that was measured and regulated by the city as you would go. But there was nothing that stopped people on their own from offering flat rate services.

• 11:47David Rosenthal?

  So if you pre-negotiate a rate of where the ride is going and pay it upfront, then you can do that outside of the existing system. And this is the beginning of what was first called sedan service, then becomes the Is this for hire? Industry. This is the for hire industry as you know, sedan, limo, black car is eventually what it mostly becomes known as. And then, as we will see, there's kind of some sketching this that develops in this industry. And it becomes a derogatory term, sort of known as the gypsy cab industry. And so this becomes like these two markets, the official regulated taxi market in cities in the US and then the black car market, the for hire market, kind of develop in tandem over the next 100 years. And the taxi cab industry is highly regulated.

• 12:32David Rosenthal?

  And the for hire market is relatively less regulated.

• 12:37David Rosenthal?

  There are some kind of sustaining innovations in Clay Christian terms, but nothing disruptive. The sustaining innovations in the 40s, 1940s, radio dispatch is introduced. So there's no, there's no coordination system. In the early days, you just hail a cab on the street. Finally, radio dispatch is invented in the 40s.

• 12:55Ben Gilbert?

  Which for anybody who's ever tried to hail a cab through the radio dispatch system, you know exactly how well that works.

• 13:00David Rosenthal?

  Exactly. And then computerized dispatch in the 80s. But the problem is the taxi drivers are still independent contractors. So it's kind of like a suggestion, you know, if they, a dispatch goes out on the radio or on the computer system to somebody who needs a ride from a given location to a given destination. It's optional whether you got them. If you see a fare on the street along the way, you can just pull over and pick them up instead. So this kind of, a San Francisco taxi driver named John Han wrote a blog post in 2011, right after Uber and Taxi Magic and Cabulous and all the other companies we'll get into had launched. And he kind of describes the current situation. He says, "You don't have to respond to a radio call if you don't want to. Remember, dispatch service, we are told, is just a quote unquote,

• 13:44David Rosenthal?

  'information referral service.' This is due to complications that have arisen from independent contractor status. I guess what that means is that dispatch service doesn't legally entitle any public passenger in any way to a taxi cab that they've just ordered by phone. They can call, but they're not guaranteed to get one. It only guarantees that their information will be dispatched to us drivers so that their request will be made known to us."

• 14:05Ben Gilbert?

  All right, this explains a lot.

• 14:07David Rosenthal?

  "You can service radio orders if you'd like. I do, I like them. But I guess you could just as well take one and leave the passenger hanging on the phone for fun as a prank, so long as you see another fare on the street that could be better anyway." And then he's like, "I don't actually do this, but in theory I could. I'm just making a point." And anybody who is old enough to remember the world before Uber and Lyft and Sidecar and Didi and everybody else, that really was how it worked and it was awful. New York was probably the best American city, the most efficient cab market, but any other city, and particularly San Francisco, it was impossible to get a ride as a passenger.

• 14:48David Rosenthal?

  And drivers, they kind of do okay here. I mean, they're the ones, the cab companies and the drivers are the ones who are always lobbying to sustain the regulation that keeps the industry dynamics like this. But it's not like the drivers are doing great either. There are strikes all the time. There's tons of labor unrest and the industry kind of tick tocks between drivers doing sort of okay to drivers doing really poorly. The industry is completely broken. That goes on for a century. And then we fast forward to 2008. And two super critical things happened in 2008 that completely changed the course of this market. One, as we have talked about many times in the last couple

• 15:31David Rosenthal?

  of months here on the show, Lehman Brothers goes bankrupt and the Great Recession begins. We're going to come back to that, but this, the dynamics of what happened here totally mirror what happened 70 years prior in the stock market crash and the Great Recession. But unlike then, there is another thing that happens, and that is in that in 2008, Apple introduces third-party apps for the iPhone with iPhone OS 2.0. That definitely did not exist in 1929. Yeah. iPhone 3G and iPhone OS. It was not iOS yet. That's right. There was no iPad. iPhone OS 2.0. So, right around this time, a Virginia-based entrepreneur

• 16:15David Rosenthal?

  named Tom DiPascali decides that these, I don't think he was necessarily thinking about the effects of the Great Recession and the Lehman Brothers collapse, but he definitely was thinking about iPhone OS 2.0 and says, "This is the wedge to finally bring some modern customer-centric innovation to the city transportation and taxi industry." And Tom had previously started a software company that was a travel booking tool, and it was acquired by Concur. Seattle company and a great technology company. So he had left Concur and he starts this new company. He calls it Taxi Magic and his co-founder, interestingly enough, is a guy named George Arison.

• 17:00David Rosenthal?

  I know George. George is many years later, has become the CEO of Shift, the used car marketplace here in San Francisco. It's amazing. Yeah, it's amazing how much we talk about so much on this show, how small all of these little sub-worlds in technology are.

• 17:16Ben Gilbert?

  And in Taxi Magic, they're doing a logical thing of saying, gosh, there's all these taxis. Like, there should be a better interface to hail them.

• 17:23David Rosenthal?

  There should be a better interface to hail them. Yep. And the other thing that consumers hated, and I remember this, you could do it in New York, but not anywhere else, is pay for the rides with credit cards. You needed to have cash to pay for your taxi rides in every city and in plenty of cabs in New York, too. So Tom and Taxi Magic, they're like, okay, with this computer in your pocket, you can have a better interface for ordering and dispatching the cabs. And you can also take payment via credit cards that are built in to this computer in your pocket and pay for them. And it worked great. People loved it. I mean, I remember using Taxi Magic around this time. It was fantastic.

• 18:06David Rosenthal?

  In every city except New York in America, it was a huge revolution, especially in LA, where Jenny was doing her PhD at UCLA at the time. We used it all the time there. But there was just like so many companies that started at the very beginning of a wave. They got one big thing wrong and that was that they worked within the existing system. So Taxi Magic, of course, worked with Taxi, worked with, taxis worked with the cab companies. And so that meant a couple of things that were just sort of big problems. So one, what the blog post described about how dispatching worked, still applied to Taxi Magic, even though it was now done in a more friendly consumer-facing way.

• 18:49David Rosenthal?

  When a consumer would make a request, it was just a suggestion that went out to all of the drivers in that taxi company's network. And The ride wouldn't get assigned to whoever had first dibs on it was not who was closest to the customer, it was the driver that had been waiting the longest in the queue. So if you think about like any city, but even Los Angeles where Taxi Magic was most popular, LA is a huge city. It can take two hours to get across the city with traffic and you're getting rides assigned based on where you are in the queue. This is how bad the world was before all of these transportation network companies that like that was progress, you know?

• 19:29David Rosenthal?

  And of course, the problem still existed that if a Taxi Magic cab was on the way to pick up a customer and they saw somebody else on the street, they could still just pick up the person on the street and cancel the ride.

• 19:41Ben Gilbert?

  Boy, it really shows how much power is on the supply side and how little power is on the demand side, where even with a user interface innovation like that, they're still meeting the needs of the supply side, which is you've been waiting a long time, you deserve a fare.

• 19:54David Rosenthal?

  You deserve fare. Yep, absolutely. So nonetheless, like I said, this was like a drop of water in the desert. Consumers loved it. Concur ended up investing in the company. It's still based in Virginia. It quickly expands to 25 cities around the country. And the next year in 2009, a certain venture capitalist who is going to come to play a very large role in this story, had been thinking for quite a while about the taxi and the transportation space. And he had invested in some other companies that had taken a marketplace approach to disrupting things like restaurant reservations and reviews online. And he'd been thinking about there's time might be right for an online

• 20:35David Rosenthal?

  marketplace for taxis. It was of course, Bill Gurley at Benchmark. And Bill heard about Taxi Magic and Tom, and Tom, of course, was a known entrepreneur. Bill flies out to Virginia from Silicon Valley and he says, this is what I'm looking for. I want to invest in your company. I want Benchmark to lead your series A. Concur had invested a little bit of money before. I'm offering, I'm going to invest $8 million at a $32 million valuation for the company. He says, but- I think we need to think about expanding out of the taxi market and into the black car market, bring them on as well, because all of the things I was just describing about the taxi market are kind of limiting and you might be able to solve that in the black

• 21:20David Rosenthal?

  car market. And we could just have a new version of the product. We can keep Taxi Magic. Let's create a new version of the product, also called Limo Magic.

• 21:27Ben Gilbert?

  You could see how if you're, if you're the founder of a company and you have a pretty dead set vision of exactly how you think you're going to run your playbook, how this could be a little jarring.

• 21:35David Rosenthal?

  A little jarring. And we have to say huge thank you to friend of the show Brad Stone and his book, The Upstarts, where he chronicles all of this. We're going to refer to Brad many times on this episode. Tom, exactly Ben, as you say, he says, okay, you know, I appreciate the offer, but like, this is my company. I'm a second time entrepreneur. I know what I'm doing here. Thank you, Bill. You're great. Benchmark is great. I'm not going to take your money. He declines the investment. And that obviously turns out to be the wrong decision on, on both declining the investment and not doing Limo Magic. Taxi Magic ultimately would go on to change its name to Curb. If you came across Curb in the last few years, and it would get sold to Verifone, which is the company that provides

• 22:20David Rosenthal?

  the credit card payment terminals to the back of cabs in a, in a fire sale. So not the trajectory of what would become Uber. There's another company, though, that gets started right around this time, sees the same vision. This one is an even better story. So back in 2008-

• 22:35Ben Gilbert?

  I'm guessing this is not Uber.

• 22:36David Rosenthal?

  Well, I'll, I'll start telling the story and I'll, I'll let you and listeners judge whether it is or isn't.

• 22:42Ben Gilbert?

  All right.

• 22:43David Rosenthal?

  Back in 2008, in Los Angeles, if you know the history of Uber, you might know a little bit about Los Angeles. One of the great American corporations, the Best Buy Company, Best Buy Corporation, had set up an in-house incubator in LA. I think Best Buy is based in Utah, right?

• 22:59Ben Gilbert?

  I don't know.

• 23:01David Rosenthal?

  I believe that's where their headquarters is, but they'd set up an innovation incubator in Los Angeles. And the idea was that retail employees, this was like, this was pre recession when they set it up. This was a marketing thing. Retail employees at Best Buy stores could apply to the incubator with their startup ideas. And if they got selected to join the incubator, Best Buy would pay for them to move to LA for two months and work on it, work on their idea in LA for two months. And then they'd go back to working on the retail.

• 23:29Ben Gilbert?

  Two months?

• 23:30David Rosenthal?

  I know, it's completely nutty. This is completely nutty. So a Geek Squad technician named Daniel Garcia had the idea that consumers should be able to see their Geek Squad cars on a map as it was coming to their house. And that this new ability to build applications for iPhone, third party applications for iPhone, they could build a Geek Squad app that would allow consumers to know, you know, see and track when their Geek Squad service was arriving. So he goes, he applies the incubator, he gets in. And the head of the incubator was a guy named John Wolpert. And John and Daniel kind of realize partway through that this like, this is okay, like, doesn't move the needle on Geek Squad or

• 24:15David Rosenthal?

  for Best Buy. But if they applied this to the taxi industry more broadly, there might be something interesting here. And so they're riffing on, on what they could call it. And it's super fabulous. This idea, they decided, great, we're gonna call it cabulous. Fabulous cabulous. And Wolpert, the head of the incubator, he was a former IBM guy. And he starts to realize as they're digging into this, like, oh, wow, this is, this is big. And the time is now. And of course, it's 2008, things are starting to go south in the economy. And Best Buy is hurt more than anybody. Well, not more than any, not more than the banks, but second to the banks are like the car companies and the, you know, retailers. And so they say.

• 24:57Ben Gilbert?

  Particularly large consumer electronics retailers.

• 24:59David Rosenthal?

  Particularly large consumer electronics retailers, exactly. And so Best Buy, Wolpert goes to the corporate execs at Best Buy and he says, hey, you don't want to be supporting this incubator anymore. You need to cut costs. I want Work on this. Can I just take this idea Cavulus out of the incubator, move to San Francisco and start building it and working on it? And they're like, yeah, sure. Take it, spin it out. They don't even take any equity.

• 25:21Ben Gilbert?

  Yeah, I don't have time for this meeting right now.

• 25:23David Rosenthal?

  Yeah, exactly. Like, my hair is on fire. So they, uh, they let it go. And, uh, well, Britain, I believe Daniel, too, Garcia, moved to San Francisco and they start, they build the company. They start working on Cavulus. They raise a small angel round and they get a call. Uh, Walpert gets a call one day. Just, uh, knowing Bill, I know this is exactly how he operates. He just gets a call. Walpert's never talked to Bill Gurley before. He picks up the phone and it's Bill Gurley. And, um, Walpert's and Gurley says, hey, I hear you're, uh, I heard about what you're doing. I'm very interested. Uh, I hear you are fundraising right now. I would like to talk to you about it. And Walpert says, you know, we're only raising a very small angel amount. I

• 26:05David Rosenthal?

  know, you know, I don't know if Gurley or, or Walpert says this, you know, Benchmark doesn't do seed. They, uh, like, they're a firm, they invest larger checks. Uh, and unlike most other series A firms, they basically really mean it when they don't do seed investing. Um, and so Walpert says, yeah, yeah, we'll talk later. I really think I just want to raise a small amount right now. And Gurley says, okay.

• 26:28Ben Gilbert?

  What is with these people turning down Bill Gurley? Like, what are you doing?

• 26:31David Rosenthal?

  I know. Well, it was probably debatable as we go on through the story, but, uh, for several years, it was probably the best thing and, and still to this day, the best thing for Bill and Benchmark, that all these people did turn them down. Um, so they raise a small angel round. We'll come back to all the history behind this meeting, but, um, eventually while they're up in San Francisco, they get a, they get a call, another call from, um, uh, two guys that want to meet that are also working in the transportation industry, two guys named Ryan Graves and Travis Kalanick, that, uh, want to go take them out to lunch and meet with them and understand what their roadmap is and, um, where they're planning to go with this Cavulus thing. And so the three

• 27:12David Rosenthal?

  of those guys, three, those three men sit down to lunch and Ryan kind of says, um, hey, so are you going to stay in the taxi industry or are you thinking about the black car industry? And Walpert says, oh, no, no, no, no. We're going to stay in the taxi industry. We're going to do this with the existing system. We're going to work with the taxi companies. This is a highly regulated industry. This is the only way to go. And Ryan and Travis say, thank you very much. They pay for lunch and they walk out. We'll, we'll put a pin in that and come back to it later, but that is, the cabulous would eventually be rebranded as Flywheel. So if you see many of the taxis in San Francisco, owned by the DeSoto Cab Company, they did a partnership with Flywheel and they still exist and it is a ordering and dispatch system for taxis.

• 27:54Ben Gilbert?

  It's one of the best ways to order an, an actual taxi.

• 27:58David Rosenthal?

  It is, it is. Unfortunately for them, that is not the big market anymore.

• 28:04David Rosenthal?

  Okay. So who are Ryan and Travis? People probably know who Travis is, but what is going on here? Let's come back to the black car industry. Okay. So it seems obvious. We've just told you this whole history and so many people, so many entrepreneurs, so many venture capitalists had been wanting to disrupt and innovate in transportation. Everybody knew this was broken. This was obvious. Why hadn't people looked at the black car industry before? Way less regulation in, in many states, including California. It was regulated at the state level, not at the city level. So if you, to the extent you did have to deal with regulation, it was a far easier path. What were the barriers? It seems like way

• 28:42David Rosenthal?

  lower barriers to entry. Well, here's why. Because every time somebody did try to go innovate in the black car industry, this is what would happen. So people might know about a company named Seamless Web. So there was a young corporate lawyer in New York in the late nineties named Jason Finger and he was eating, this will also come back. He was a, like many people in banks and law firms in New York in those days would eat dinner every night in the office while he was working and the ordering system for ordering food and having food delivery delivered was nuts. And so he came up with this idea of how to organize and deliver food in cities, started Seamless Web. It became huge. I used

• 29:25David Rosenthal?

  it every night when I was in banking in New York. It eventually merged with Grubhub, is now part of Grubhub, one of the, one of the largest food delivery services in the U.S. But Jason thought like, while he was a couple of years into working on Seamless, he thought, Well, the other thing that lawyers and bankers do in New York is they order black cars. And there was this opportunity to use the internet to make meal delivery much better. I could do the same thing with all the black cars that people use. And so he actually started working on it. And his idea was that there was going to be Seamless, the core product, the meal delivery product, was going to become Seamless Meals. And then he was also going to build Seamless Wheels. And so he talked to a couple of black car companies, got some supply on board. He was talking to banks and law firms about using it.

• 30:09David Rosenthal?

  And then one day he comes into work and there's a voicemail on his phone in the morning and he-

• 30:13Ben Gilbert?

  And David, I'll stop you here for a moment and say, gosh, you know, food delivery and ride coordinating on a platform, that sounds like a really good idea to combine those two.

• 30:22David Rosenthal?

  Yeah, man, I mean, why wouldn't you do both of those on the same platform?

• 30:29David Rosenthal?

  So he gets into the office and he's got the flashing light on his phone. This is like the early 2000s.

• 30:34Ben Gilbert?

  Oh, yeah.

• 30:35David Rosenthal?

  And he plays the voicemail and it's from a blocked number. So he can't tell what the number's from. And the voicemail says, he tells this to Brad Stone in the Upstarts, "Jason, we understand you've been pitching a car service to large enterprises in the New York City area. We don't think that would be a good idea. You've got such a beautiful family. Why don't you spend more time with your beautiful baby daughter? You've got such a good thing going with your food business. Why would you want to broaden into other areas?" Click. And as you can imagine, and if you hadn't put two and two together, lightly regulated industry, growing up in New York City over the past century,

• 31:16David Rosenthal?

  companies, a fragmented and not super visible array of companies that operate in them, it's run by the mafia.

• 31:25David Rosenthal?

  So every time somebody would try and encroach on their turf, and I think this is probably mostly in New York City, but I bet in lots of other cities around the country, some version of this would play out and-

• 31:36Ben Gilbert?

  Did Seamless bail on the idea after that?

• 31:38David Rosenthal?

  They bailed, yeah, immediately bailed on the idea. The meal delivery was working great. And as the voicemail said, you know, Jason had a young family. Like I would do the exact same thing if I were in his position. And so that was the end of Seamless Wheels. And of course, everything ended up great. Seamless Meals, you know, like we said, ended up merging with Grubhub is doing great today. But so sometimes when you have a situation like that, the only way to break the logjam is just kind of with somebody who doesn't know any better. So we come back.

• 32:10Ben Gilbert?

  Or doesn't care any better.

• 32:11David Rosenthal?

  We come, doesn't know or doesn't care. And we've got two people, one who doesn't know and one who doesn't care. So in the middle of 2008, a Canadian entrepreneur who was in Silicon Valley by this point had started a company back in Canada called Stumble Upon. And this is of course Garrett Camp.

• 32:30Ben Gilbert?

  And of course, mark time, we are what, like 22 minutes into this episode and now discussing somebody involved in the founding.

• 32:37David Rosenthal?

  Oh, man. This is, apologies for all this backstory, but I think it's super important. And like, as we've seen, this, all of this history that's played out over 100 years and then over 10 years is going to play out again. So Garrett had still sold Stumble Upon, he had started Stumble Upon back in Canada, he'd sold it to eBay and Stumble Upon was, Stumble Upon was content discovery on the internet. And he had sold it to eBay the past summer in 2007 for $75 million. By the way, we covered this in our Skype episode, but like eBay went through like this.

• 33:14Ben Gilbert?

  Yeah.

• 33:17David Rosenthal?

  Drunken binge of buying all of these companies that did not make sense. And of course, who was the largest venture capital backer of eBay? It was.

• 33:25Ben Gilbert?

  Benchmark.

• 33:25David Rosenthal?

  Benchmark. And as chronicled in the great book, E-Boys, which I think we've recommended many times on this show. So eBay drunk on, on their market cap.

• 33:39Ben Gilbert?

  And their insane business model of never holding any inventory on anything and you can buy, you know, it's, it's still.

• 33:47David Rosenthal?

  Are you saying marketplace business models are a good idea, Ben?

• 33:50Ben Gilbert?

  Kind of mind blowing that Amazon beat them.

• 33:54David Rosenthal?

  Well, I would, I mean, eBay's still doing good. But yes, yes, different, the power of marketplace business models. eBay acquired Stumble Upon for $75 million. Garrett is like nominally working at eBay sort of. He ends up just leaving eBay. He's moved to San Francisco. He's still, he's young, he's single, he's doing what any, maybe not any, but you could imagine somebody, a young single man who's just come to a big city like San Francisco and has millions and millions of dollars would do. He hangs out all day watching James Bond movies during the day and going out and to nightclubs and partying at night. Why not? Why not?

• 34:27Ben Gilbert?

  And he's like 26, 27, something like that.

• 34:30David Rosenthal?

  Yeah, mid twenties. And he'd, you know, he'd been working really hard on Stumble Upon for, for a little while and coming to this money. And he wanted to, you know. Use enjoy the fruits of his labor as as wouldn't blame. I probably wouldn't make the same decision myself, but that's what he did. I don't know. Maybe when I was that age. Well, no, Jenny and I have been together since I was like 20. So no, definitely would not have happened. Anyway, I don't blame him for doing it. But both of those things were really important. He was going out at night, going to nightclubs in San Francisco, having a terrible time getting there and coming back because there were 1500 taxi medallions for all of San Francisco, which is, you know, a major city. And so he couldn't get around. And during the day, he talks about this. He was watching James Bond movies and he was watching Casino Royale.

• 35:13David Rosenthal?

  And there's this scene in Casino Royale where Bond summons his car with his phone. And this has happened in a bunch of Bond movies, but in the Casino Royale version of this, on his phone, he's watching on the screen on a map as the car is coming to him. Yeah. And, and Garrett's like, whoa, that's super cool.

• 35:35Ben Gilbert?

  And at this point, he had already flipped the switch in his head to screw this taxi thing. I have a good amount of money. I'm just going to hire a black car whenever I want to go anywhere. Like I'm, I'm done with this taxi crap.

• 35:50David Rosenthal?

  Yes, he was done with the taxi crap. And so what he, what he started to do, you know, and remember, it is hard to remember now, but I, if you were in, if you were living in cities in this time, the, the stigma of the black car industry, the quote unquote gypsy cab industry was super strong. Everybody knew, don't talk to them. These were guys who would be driving cars. They'd roll down their windows as you're on the street. If you're trying to hail a cab, they'd be like, you need a ride where you're trying to go? And everybody's like, don't do that. Don't do that. And so Garrett was like, you know what? How bad can these guys be? So he starts using it a little bit and he finds they're actually not that bad. Like these, these black car drivers, what they're trying to do, they have their scheduled rides that they're doing for the banks and the law firms and that they're getting through limo companies or, you know, prom nights for high schoolers or whatnot.

• 36:35David Rosenthal?

  But in between those scheduled rides, they're just trying to make some extra money. And by and large, they're pretty, you know, good people. They're, they're entrepreneurs. And so he gets like 15 of these guys' numbers on his phone and he stops using the taxi industry. He's just call it goes through the list when he's, when he's out at night, calls one, then the next says, hey, you freak. Can you come get me? And he starts building relationships with them. And so he's like, this is all going through his head. He has the black cars. He sees the gym. He sees Casino Royale. He says, Why don't I just put two and two together and build what I saw on the James Bond movie, marry it up with my friends who are the black car drivers and have a private driver service on my phone?

• 37:16Ben Gilbert?

  It is amazing that it was that both pieces of that puzzle, both going to nightclubs and watching James Bond movies all day were both requirements in discovering the idea and be able to implement it.

• 37:28David Rosenthal?

  I know, I know. And so he's like, this is, he's, he's very excited, very, very excited about this. And at the time, he's dating a woman named Melody McCloskey, who would go on to become the founder and CEO of StyleSeat. And he tells, he's talking to Melody, he's trying to figure out what to call it. And Garrett had this, this turn of phrase, I don't know if this is from being Canadian or just what, but when things were like really great and he really thought it was awesome, he would call it Uber. So he would say like, you know, if, if he had like a really great coffee at, you know, sight glass or whatever, said, man, that was an Uber coffee. And, and so he and Melody were, were talking and he said, you know, this is a quote in, in the upstarts in Brad's book. He says, Uber, it means great things. It means greatness.

• 38:13David Rosenthal?

  And that's what he decides to call this service, Uber. He calls it Uber Cab. And he registers the domain name in August of 2008.

• 38:21Ben Gilbert?

  So funny that in this A plus era that we're in and, you know, all these big IPOs that Uber or the most or the greatest or the top or the biggest, you know, is, is exactly that. Like it's a very aptly named company.

• 38:36David Rosenthal?

  Very, very aptly named. So his initial idea though, he's got this network of drivers and he uses this. He has lots of other friends who are, you know, part of the, the kind of new web 2.0 era entrepreneurs in San Francisco. He thinks they would like to use this too, this private driver network. And his idea is he's going to go to sign up these sedan drivers that he knows. And then he's going to buy a fleet of cars. He's going to have his own, basically his own black car company. He wants to buy a fleet of Mercedes S-Class cars and then lease a garage in San Francisco and kind of keep them as his private network that he and his friends would use. And so he asks, this is great. He asks, he's friends with Tim Ferriss,

• 39:18David Rosenthal?

  the angel investor and now a big podcaster. And he asks Tim Ferriss's assistant to help him research the industry and figure out, you know, can he do this? And turns out he can. So this is now at the end of 2008 and all of these ideas are spinning in his head. And Garrett goes off with a bunch of his friends to Paris at the end of 2000 to the big Le Web conference. And he's, he's, he's going there because he wants to go to the conference, but also his good buddy, fellow entrepreneur, who has recently sold his company, Travis Kalanick, is hosting a bunch of San Francisco entrepreneurs in a really, really cool Uber, one might say,

• 40:03David Rosenthal?

  apartment that he has rented out in Paris on the VRBO website.

• 40:08Ben Gilbert?

  Which should surprise no one. Like this is, it's like the very first thing we learn about Travis in this story is that he has like a swank apartment for a bunch of his like wealthy friends coming in from another city to like have this unique experience. Like you can already get a picture.

• 40:25David Rosenthal?

  And the super amazing thing about this is why would, he was doing this because A, that fits with his personality, but B, he was thinking about his next startup idea. And unclear if he had heard about Airbnb, but he thought that a network of luxury residences around the world that people might have access to, kind of like, you know, the private homes versus the private driver, might be a pretty good idea. And so he was traveling around the world and looking for any excuse to go to conferences, tech conferences around the world, and rent out the fanciest places he could find on VRBO. Cause he was trying to figure out if he wanted to start a company.

• 41:03Ben Gilbert?

  And of course, very unlikely he had heard of Airbnb because these companies were started within three months of each other. And of course Airbnb at this time, you know, was very far from anything luxury.

• 41:14David Rosenthal?

  Brian, Nate and Joe were not hanging out with the crowd that Garrett and Travis were running in. That is for sure.

• 41:21Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 41:35David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 41:49Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 41:59David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 42:16Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise: the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 42:32David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 42:49Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 42:58David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. Okay, so let's say a little bit more about Travis. Travis is a guy who, right before he officially became the CEO of Uber, he gave a talk on YouTube that we'll link to, and actually, a couple listeners sent to us, which was really great. And he introduced himself in the talk as he says, "I like to think of myself as the wolf in Pulp Fiction." He is an interesting, interesting character. And I would say, after having now done many, many hours of research on Travis, I think that is a very accurate characterization. He has

• 43:41Ben Gilbert?

  Incredibly self-aware.

• 43:43David Rosenthal?

  All of the good and bad qualities of the Wolf in Pulp Fiction. And if you haven't seen Pulp Fiction, it's an amazing movie. I would assume most listeners have, but go see it and you'll know what we're talking about. So Travis, he grew up in LA, hence the LA connections for Uber. He was born in 1976 in a suburb in the San Fernando Valley outside of LA. His father, Don, had served in the army and was a civil engineer for the city of Los Angeles. So some like maybe DNA in the family of thinking about city infrastructure. His mother, Bonnie, sold ads for the newspaper, the Los Angeles Daily News. And Travis was super smart. And this is something that comes through that I think has gotten lost in the story of Uber and Travis over the last two years.

• 44:26David Rosenthal?

  He is incredibly smart and very much a human, as we will see, and very fallible, but very smart. And so the lore is when he was growing up in middle school, he got extremely good grades. He was top of his class and everything. And in middle school, he was bullied because of that. And apparently he made a decision one day in middle school to stand up to the bullies, that he wasn't going to take it anymore. And the way he was going to deal with the bullies is he was going to become hyper aggressive and give it right back to them. And, you know, that is kind of how things go. He, he also was naturally quite athletic. He played football in high school. He ended up running track. He was an excellent track runner in high school.

• 45:07David Rosenthal?

  He essentially turned himself into a jock, but he didn't stop studying either and, and turn off his brain. And so while he was still in high school, when he took the SATs, he got a 1580 on the SATs. He aced the math section, got an 800 on math and a 780 on verbal.

• 45:26Ben Gilbert?

  I can't imagine. Like it's just, it's, it also says something about the guy that we know these numbers. Like I, I would never

• 45:33David Rosenthal?

  Oh, he's, he's very, he's very vocal about the numbers. Because he started, on the back of this, he started an SAT prep company to help other kids in the area and make some, and profit off of this. And I believe that, not the name of the company, but the class he taught was something like above 1500 or something like that.

• 45:53David Rosenthal?

  And this is great. When he's giving it in an interview later, he would talk about, he talked about this and he said, you know, the math, like it would be a 30 minute math section and I would be done in eight minutes. The fact that he timed himself to eight minutes too is incredible. But then the verbal was super hard for him and he had to like, he had to develop systems to make it work. And he, and he said, when I would do the verbal, my shoulders would hurt and my neck would hurt. It would be so hard on himself. But, uh, but he persevered and he managed to do it. And he taught systems to his, his students to do the same. So on the back of that score, he goes to UCLA, incredible school. He becomes a CS major and this is in the late 90s and he drops out in 1998 to start a startup because

• 46:35David Rosenthal?

  this is the dot com go, go, go days. He and a bunch of classmates start a startup called Scour. Now this is super important. This is like the, in the Tesla episode, the equivalent of where you start learning about what it is that made Elon Elon.

• 46:48Ben Gilbert?

  Yeah.

• 46:48David Rosenthal?

  This is what makes Travis, Travis. He, uh, much like Elon's first company. So what was this company started? It was called Scour. It was a rip off of, a rip off of Napster. But there were a couple particulars about it. So-

• 47:04Ben Gilbert?

  Also, can we, can we talk about how the roots of Facebook and Uber both have a P to P file music sharing thing with Wirehog and Scour at their, uh, their earliest days?

• 47:17David Rosenthal?

  Absolutely. It's a, uh-

• 47:20Ben Gilbert?

  I think it says a lot about entrepreneurs in a, in a time where, uh, when you see a problem that is possible to exploit, even in a gray, if not very much crossing the line area, like the most aggressive just can't help but go and exploit that thing. And this was the era where you absolutely could exploit with peer-to-peer file transfer.

• 47:39David Rosenthal?

  Absolutely. And, and you know, I think probably much like Uber and well, not Uber specifically in the early days, but then the peer-to-peer true ride sharing, uh, industry that becomes the big industry that we talked about on the Lyft IPO episode. It's not entirely clear that it's like wrong to do this.

• 47:58Ben Gilbert?

  Right.

• 47:59David Rosenthal?

  And ultimately probably better for the, there would be no Spotify if there were no Napster.

• 48:03Ben Gilbert?

  A hundred percent. And you know, could be sharing anything on there too. It's not necessarily like explicitly designed to rip off music.

• 48:09David Rosenthal?

  Yeah. Okay. So you nailed one of the key things that is different about Scour versus Napster. There are two. One is that Scour, whereas Napster was architected, it was peer-to-peer file sharing, architected specifically for music. Scour was meant to scour your hard drive and be for anything, any file. And what would people want to share besides music? Well, they might want to share videos and movies. And so the other thing that was very different about Scour was it was based in Los Angeles. And what is the big industry in Los Angeles? It's the movie industry. So this is, like I said, the dot com days,

• 48:49David Rosenthal?

  the go-go-go. Who hears about Scour? Michael Ovitz. Now, this might ring some bells for listeners. I don't think we've talked about this too much on the show before, but Michael Ovitz was the famed super agent who started Creative Artists Agency, CAA. He then went on and became the president of Disney for two years, well, the kind of co-running Disney with Michael Eisner, who was CEO. They fought and Michael Eisner ended up ousting him after two years. But Ovitz and CAA became the inspiration for Andreessen Horowitz. And how, how Ovitz architected CAA to have the artist at the center and then all of the suite of services that a talent agency could surround the artist, that was the blueprint

• 49:31David Rosenthal?

  for how Mark and Ben envisioned Andreessen Horowitz when they started and really what that's become. So Ovitz has just been ousted from Disney by Eisner and he's looking for, you know, looking around, making some investments, trying to decide what he's going to do next. He hears about Scour.

• 49:49Ben Gilbert?

  Boy, these hyper-successful people looking around for their next thing sure are dangerous for these stories.

• 49:53David Rosenthal?

  Sure are dangerous. So he hears about Scour and he, along with his buddy, fellow LA billionaire, Ron Birkle, they meet with the Scour team of these dropouts from UCLA Computer Science Department who fit, you know, the mold to a T. And they say, all right, guys, we want to invest in your company. And we're going to give you $4 million, which was a lot back then, even in the go-go days. And we're going to give you $4 million, but we're going to do it, we're going to buy 51% of the company for $4 million.

• 50:28Ben Gilbert?

  This is like an ESPN-style first investment.

• 50:30David Rosenthal?

  Totally, totally. And Travis and his co-founders, they're pretty naive and they're like, well, this is cool. Michael Ovitz and Ron Burkle want to invest in our company. Like, yeah, let's do this. So they sign a term sheet, but Ovitz was also known for playing hardball. So what happens next? This is like, it is amazing how much this foreshadows what is going to come with Uber. They sign the term sheet. After they sign the term sheet, Ovitz delays funding the company. And Travis and his co-founders are like, what's up? Like, we signed the term sheet, we're ready to go. Wire the money, we'll give you 51% of the company. Ovitz starts trying to re-trade on the deal.

• 51:10David Rosenthal?

  And he was famous for being a tough negotiator. And so he locked up Scour with the term sheet signed. And he wanted to get even more of the company. So months go by, they're deadlocked in negotiations, Travis in what will become a Travis signature here. He's not going to budge. Ultimately, after a bunch of months go by and the exclusivity period on the term sheet had expired, Travis and his co-founders go out and they start talking to other people about investing in the company.

• 51:36Ben Gilbert?

  Also, I just want to pause and say, that is exactly the wrong mindset for early stage. Companies are so fragile at that point that like, zero people should be in value capture mode because there's nothing to capture. Like, you have to be in value creation mode.

• 51:52David Rosenthal?

  A hundred percent. I mean, this would not fly today, but I mean, also like, I completely agree, this was absolutely wrong. We're talking about Michael Ovitz here. He just left Disney. Like, he's accustomed to negotiations at a different stage.

• 52:06David Rosenthal?

  This is like bringing a bazooka to a sandbox, a shovel fight, a sandbox, plastic shovel fight. So Ovitz flips out and he does what? You know, his nuclear negotiations, he sues the company. So here we have Travis in his very first company. He sues the company to consummate the deal and be able to invest in the company. And Travis is like talking, ladies, like, what investor sues the company so that they can invest in the company? Ooh, indeed, indeed. So this is Travis's first, not only CEO experience, but experience with investors and quote unquote venture capital.

• 52:46David Rosenthal?

  So after this lawsuit, you know, again, these are kids who just dropped out of UCLA. They capitulately, they sign the deal. I don't know what terms it actually ended up getting done at, but it is done and Ovitz and Burkle invest. They control the company. They control the board, but Travis and his co-founders are actually building the thing. And so as we said earlier, the other thing different about Scour versus Napster is you can share anything and you can share movie files and they're in LA and Michael Ovitz just funded this company. You can imagine that the Motion Picture Association of America, which also at this point, the Recording Industry Association of America, the RIAA is like, I believe already sued Napster at this point. They see Scour right in their backyard with Michael Ovitz involved and they're like, oh no.

• 53:30David Rosenthal?

  This is, we are not going to go through the same thing that the music industry is going to go through. They turn around, they sue Scour. I believe this was, it got to this height because of the like a per instance violation. They sued Scour for $250 billion. That is one quarter of a trillion dollars that, you know, Travis has got to be like 21, maybe 22.

• 53:55Ben Gilbert?

  That is like three Ubers.

• 53:56David Rosenthal?

  Yeah, exactly. Like three Ubers today that the MPAA sues Scour for. And obviously they knew they weren't going to pay 250 billion down, but they were like, we are going to sue you into oblivion. And, and I think more importantly, they were sending a message to Michael Ovitz of, hey, man, you built your career on the interests of artists and like you just funded a piracy company. And so Ovitz, as you would imagine, gets the message and he all of a sudden wants nothing to do with Scour. So now according, this is according to Travis. Travis has talked about this in an interview. Supposedly what happens next, and Ovitz denies this.

• 54:38David Rosenthal?

  Is that Travis is scheduled to speak at a private entrepreneurs conference that Jason Calacanis is putting on in LA and he's gonna go on stage and speak and before he goes on stage, he's seated at a table and somebody comes up to him and suggests to him that if he's gonna go up and talk about everything that's going on and he's gonna get asked about the lawsuit, he might not want to mention Ovitz's name and there might be consequences if he does.

• 55:10Ben Gilbert?

  What is with these failed threats throughout this episode?

• 55:13David Rosenthal?

  I know. Well, this is the backdrop to Uber and, and of course, this scares even Travis. And so he goes up and he behaves and doesn't talk about Ovitz. And this is in an interview with Jason Calacanis does with Travis after he starts Uber and Travis is like, oh yeah, I thought I played it cool. And Jason was like, oh man, you were sweating bullets up there.

• 55:40David Rosenthal?

  So that happens. The company ends up filing Chapter 11 bankruptcy to get rid of the lawsuit and then the assets of the company gets sold out of bankruptcy. So the company is torched. Like here's Travis. He has just had this wild experience. The company was completely torched. He walks away thankfully with no personal liability, but it's over. So what does he do next? He and one of his co-founders from Scour, they go and they say, you know, this technology, it is pretty interesting as a technology and this is gonna mirror other episodes we've had here on Acquired. What if rather than using it with a front end to enable illegal peer-to-peer downloads, we take the same technology and we use it for moving content

• 56:25David Rosenthal?

  around on the internet? And who would want to move content around on the internet? Maybe it's those guys who just sued us, the movie studios. Like they're trying to, like online, online movie distribution isn't there yet, but people are moving content around. There's like a little bit like their clips that are being played online. Maybe we can help them with their bandwidth by using peer-to-peer hosting to enable. To enable better bandwidth management for for these movie companies.

• 56:52Ben Gilbert?

  And we should, we should, on a technical note, just just make a point to

• 56:57Ben Gilbert?

  to folks listening that like, when you type in a URL right now on the internet, even though it seems like, okay, cool, it goes to the server where that website is hosted and gets it. You know, in the early days of the internet, it had to go literally all the way to the one server where the website was hosted. Like now, things happen much faster because these things are cached all over the place and they're much closer to you, not really fully developed at this time.

• 57:22David Rosenthal?

  Nope. And Akamai existed, but was just starting to get going. So Travis starts, takes this, says, great, I'm gonna start my next company. He calls it Red Swoosh. And it does this, it's a competitor to Akamai, focused specifically on on the movie industry. And it is also a wild journey. He ends up running it for, I believe, six or seven years, raises a very, very small amount of money, including from Mark Cuban as an angel. And Travis ends up not taking a salary for four of those six or seven years that he's running the company. He moves back in with his parents and he lives at home in LA. And eventually, we mentioned Akamai, Akamai ends up acquiring the company and consolidating it into Akamai for $19 million. So finally, at the end of this, it's now 10 full years that Travis has been on this grind,

• 58:08David Rosenthal?

  starting with dropping out of UCLA. And he's lived with his parents for a long time. He's had his safety threatened. He's been sued for a quarter of a trillion dollars. And he finally has an exit. And he makes, I wasn't able to get the final, the the exact figure, but several million dollars because he hadn't raised too much money out of that $19 million acquisition.

• 58:30Ben Gilbert?

  Yeah, so the money is is one thing that like that that that has happened, but the mold has been cast for for Travis going forward, based on just some traumatic experiences.

• 58:43David Rosenthal?

  Incredibly, incredibly traumatic experiences.

• 58:47David Rosenthal?

  So he moves to San Francisco at this point. I don't know if he'd already moved to San Francisco or as part of the sale to Akamai. He he did. But this is the backdrop that he's operating in now coming into 2008, where he's angel investing, he's having fun, he's going out with Travis also, with with Garrett, also in San Francisco.

• 59:05Ben Gilbert?

  Is he looking for his next thing?

• 59:06David Rosenthal?

  He's looking for his next thing, he's thinking about this, this Airbnb idea. And and they go to Paris. They're in Paris and they spend most of the time just Garrett and Travis jamming on these two ideas. Garrett on his, on his James Bond Uber idea and Travis on his, you know, luxury apartments around the world idea. And throughout the week that they're there in Paris, they start spending more and more time on the Uber idea. And apparently, according to Melody, they all, all three of them go out to dinner one night at a fancy French restaurant. And in typical French bistro style, they have paper tablecloths

• 59:46David Rosenthal?

  on the, on the table. And Travis and Garrett are so deep in Uber discussions that they fill the entire paper tablecloth throughout dinner with sketching out the unit economics of Uber. It's amazing.

• 1:00:00Ben Gilbert?

  Which, I mean, I want to make some crack here that like, maybe they should have sketched the unit economics for Uber on something a little bit more high fidelity than a napkin. Based on what we're seeing today.

• 1:00:12David Rosenthal?

  Well, well, no, no, they actually, and this gets back to Travis being really smart. So the outcome of that, I don't know if it was specifically from that dinner, but the outcome of that week is, you know, Garrett was thinking about buying these Mercedes and renting a garage, a garage and storing them themselves. And Travis, like based on looking at the economics, he's like, do not buy cars. Like, whatever you do, do not buy cars. Use the existing cars that limo drivers, that sedan drivers already have, and just give them iPhones and put the app on there. That's all you need to do and the economics are going to be so much better. So by the end of the week, he's convinced Garrett not to, not to take the Mercedes approach. And Travis is intrigued enough by what's going

• 1:00:55David Rosenthal?

  on. He says, all right, I'm in, I'm not going to like join. I'm still thinking about other things that I might want to do, my other angel invest investments, but I'll angel invest in this and I'll be like a super advisor to the company.

• 1:01:05Ben Gilbert?

  This is my favorite part of this story that like, he's like committing, but like to, to what? He's like, well, I'm going to be like active, you know, like I'm gonna, yeah, you know, I'm gonna like, I'm not joining, but I'm in.

• 1:01:16David Rosenthal?

  Yep. So I believe the idea is that Garrett is really going to run with this. So they get back to San Francisco. This is now January 2009. Garrett, though, well, everybody makes out well. But what happens next is that eBay comes to their senses, gets to the end of their drunken hangover. This is, you know, post-stock market crash and the recession. And they're like, why do we own StumbleUpon? And they decide to spin StumbleUpon back out. And Garrett's like, great, I'm going to come back and be the CEO of StumbleUpon again. So Uber basically gets put on pause. But Travis is still like pretty interested in it. And so he's like still saying to Garrett, you know, hey, let's, let's keep working on this. They make a little progress. They go out, they, they talk to the, the black car drivers that Garrett already knows.

• 1:02:01David Rosenthal?

  They give them phones. They tried out, they'd contracted with a developer who Garrett knew, uh, based in New York City. A guy named Oscar Salazar, who is originally from Mexico. And Oscar built the app in, um, in New York City with two contract developers back in Mexico. And so they had this kind of rudimentary app and they tried it out and it sort of works. And so they do that over the next year in 2009. And then in January 2010, the two of them decide, hey, there's enough here to actually start a company. We don't really want to run it, you know, we're, we're still enjoying our lifestyles. But what if we recruited somebody to come in and run this company?

• 1:02:43David Rosenthal?

  And so on January 5th, 2010, Travis tweets, one of the most infamous tweets, famous and infamous tweets in Twitter and all of internet history. He tweets, quote, "Looking for, number four, entrepreneurial product manager slash biz dev killer for a location-based service, dot, dot, dot, pre-launch, BIG, all caps, BIG EQUITY, BIG EQUITY, BIG PEEPS INVOLVED, DASH, ANY TIPS, ALL CAPS, QUESTION MARK, QUESTION MARK."

• 1:03:18Ben Gilbert?

  And before getting into where this leads, can we just talk about how broad of a description that is? It's a product, what biz dev killer?

• 1:03:26David Rosenthal?

  Right. Also, I mean, people in Silicon Valley circles and entrepreneurial circles, you know, knew Travis at this point, but like the broader Twitter, like who is Travis? And what is this? What is this tweet? What is going on here? It's big. Nonetheless, in the most fateful Twitter reply to this point in Twitter history, in Chicago, a 27-year-old GE employee who's in the GE Management Development rotational program, which is a fantastic program, a really smart young guy named Ryan Graves sees the tweet on Twitter.

• 1:04:00Ben Gilbert?

  Miami of Ohio graduate.

• 1:04:01David Rosenthal?

  Indeed, indeed. Ohio Midwest strong. He sees the tweet and he replies, quote, "Here's a tip. Email me." Smiley face. Graves dot Ryan at gmail dot com. And that with those two fateful tweets, a couple of weeks later.

• 1:04:19Ben Gilbert?

  Can we say his email address like that on the show?

• 1:04:21David Rosenthal?

  Well, it's on Twitter.

• 1:04:22Ben Gilbert?

  It was on Twitter, so.

• 1:04:24David Rosenthal?

  It may or may not be his email address anymore. And Ryan, of course, now has a has a family office, Saltwater Capital, which are great investors. We're co-investors with them in a few companies here at Wave. Big fans of them. He moves out to San Francisco from Chicago. Now, Ryan's married. His wife is a schoolteacher in Chicago, but he sees this is the opportunity. This is his shot. And so he moves out to San Francisco and he becomes Uber's first CEO. Travis and Garrett bring him on and.

• 1:04:50Ben Gilbert?

  That's apparently what the definition of a biz dev killer, whatever is a CEO.

• 1:04:55David Rosenthal?

  I would love to. That's actually. I would love to ask them, how did how did that that tweet turn into CEO? We we may never know, but he becomes the first CEO of what is at this point Uber Cab. So he and Travis start going around the city. They're signing up more black car, black cab companies and drivers. In June 2010, they officially launch the non-beta consumer-facing app, rider app to riders. They have about 10 cars on the platforms. The app is live in the iOS App Store. There are 10 black cars on the platform in San Francisco and they go out to raise a seed round on Angel List, which had just gotten started as well. And so they the email blast gets sent out on Angel List and the description is that

• 1:05:39David Rosenthal?

  Garrett, Travis and Tim Ferriss are investors and advisors. Ryan Graves is the CEO and only employee of the company. And it gets blasted out to, I think, something like 170, 175 investors.

• 1:05:53David Rosenthal?

  Lots of people see it. Most people don't respond. Some people respond and want to invest, including First Round Capital, Rob Hayes, who leads the round, writes a $600,000 check. Chris Saka invests, invests 300K. Mitch Kapoor invests. Jason Calacanis, who we talk, invests. Friend of the show, Alfred Lin, who was still at Zappos, had not joined Sequoia yet. He invests in the round. And once again, they get another call. I think this was probably a response to the email.

• 1:06:18Ben Gilbert?

  By the way, this is like a crazy superstar party round. Like, I mean,

• 1:06:21David Rosenthal?

  Totally.

• 1:06:22Ben Gilbert?

  Look, it's the who's who on the sort of advisory, founding-ish team and the who's who in this initial angel round.

• 1:06:30David Rosenthal?

  Yep, totally. Well, you've got two proven entrepreneurs who are not running the company. But as an investor, you're like, well, maybe, maybe they might run the company. We'll see. They get another response to the email, though. And it is, once again, Bill Gurley. He sees, he either sees or hears about this round that's happening, and he takes Travis and Ryan out to dinner and says, all right, tell me your plans. Let's talk about this. What's going on? And they say, we're raising a seed round, but we have big ambitions here. And Bill says, okay, Benchmark doesn't do seed. Do your, do your seed round, but let's stay in touch. I want to, I'm very interested in this space. So the seed round ends up getting done. They raise 1.3 million in total at a $5.3 million post-money valuation.

• 1:07:16David Rosenthal?

  Wow. Even despite trading today in the IPO, that is, that is a long distance, many, many thousands of percent return from that valuation. And then on July 5th, the day after July 4th, 2010, TechCrunch writes an article announcing the launch of Uber Cab.

• 1:07:34Ben Gilbert?

  I remember reading this.

• 1:07:35David Rosenthal?

  In San Francisco. It was, as Ryan Tolkien, on our latest LP show, talked about, it was basically instant product market fit. I mean, the pent up demand, everything we talked about with Taxi B Magic and Cabulous, despite all of those problems and how much demand there was for that. Finally, a service that is actually going to address riders and solve all of these problems. And in a city that is such a big city like San Francisco and has only 1,500 taxi cabs, it is off, demand is off the charts.

• 1:08:08Ben Gilbert?

  And they're about to learn the real difficulty of a high-growth marketplace business. You're never in a really good place because either you have too much demand for supply or too much supply for demand and you have to sort of figure out what your strategy is to go get the, the other side built up just in time for you to overbuild and then need to switch back.

• 1:08:28David Rosenthal?

  Yep, totally. So they had hired a driver operations manager to start trying to onboard drivers and get things going in San Francisco. And it was not working out. It was not going too well. And this is where one more amazing story happens. I believe also on, on Twitter, Jason Calacanis, who had obviously angel invested in the round, he posted a tweet about the launch of Uber. And I believe that they were looking for an intern. And somebody sees that tweet again and doesn't reply to the tweet, but finds, does some sleuthing, finds Ryan Graves' email address, didn't take much on Twitter to find it, emails him and says that she wants to apply to be the intern. And the person who does that is Austin Geidt,

• 1:09:12David Rosenthal?

  who rang the bell on the New York Stock Exchange this morning.

• 1:09:16Ben Gilbert?

  Right in the middle of the, the big group of people.

• 1:09:18David Rosenthal?

  In the middle of the big group of people. She is now, I'm pretty sure, the longest-serving employee at Uber. She joins that summer as an intern.

• 1:09:26Ben Gilbert?

  Ryan Graves is on the board, but no longer an employee. So that's probably.

• 1:09:30David Rosenthal?

  No longer an employee. Travis, obviously, is no longer there. And I believe, I believe all the people who were, all, all two other people who were there before Austin are gone. She becomes the fourth employee of the company. And her story is just amazing. It's been told, but we're going to tell it again here because this is an incredible story. Austin grew up in Marin, in Marin County, just north of San Francisco in the suburbs. And she went to, she went to Berkeley for undergrad. And a short time into her, into her time at Berkeley, into her college career, she developed a pretty serious drug addiction. And she's very open and honest. She was given many interviews about this and a great talk at Fortune about this. And it basically ruined her life.

• 1:10:14David Rosenthal?

  And she had to take, she dropped out of college, took several years off of college, worked with her family and got completely sober. And then she returned to college in her mid twenties, ended up graduating from Berkeley at age 25. And it was that summer of 2010 when she graduated and she saw that tweet and she was, she had, I believe the story is she'd applied to be a barista either at Pete's or Starbucks and gotten rejected. To even go be a barista at, I believe it was Pete's, but ended up getting this internship at Uber. And she says later in this Fortune interview, she said, I think this is just amazing. She said, I'm so proud of the work my team has done at Uber that I've done at Uber, but it's not the proudest thing I've done. I'm more proud of being sober and being able to share that with my family means a whole lot more. And it's incredible. So Austin would join as an intern.

• 1:10:59David Rosenthal?

  And then we mentioned a few minutes ago, the first driver operations manager who was onboarding drivers to try and just get supply to keep up with this crazy demand wasn't working out. Austin takes over and becomes the first successful driver operations manager in San Francisco. And then would go on to lead and run the launch team for Uber. And she launched, I believe, just about every city that Uber operates in around the world. Incredible. Okay. So things start getting going on the driver onboarding front in San Francisco. By the fall in October of 2010, people are starting to notice this is a big thing in San Francisco. And other people who are, in particular, people who are starting to notice is the taxi industry.

• 1:11:42David Rosenthal?

  And so they, taxi cabs, they show up at the city regulator's office and they start lobbying and say, you gotta shut these guys down. They're taking away our business and what they're doing is illegal. And so on, in October 2010, while there is a board meeting for Uber going on and Ryan Graves and Travis and everybody are at First Round Capital's office in the middle of the board meeting. The Uber office gets raided and regulators show up and they issue a cease and desist order. I believe they have like a headshot of Ryan Graves there and they're like, this is a wanted man. And they say that Uber has to shut down and stop operating because they are not following the rules, quote unquote. And to the company and to Travis's credit,

• 1:12:25David Rosenthal?

  again, given all of his background, they say, what rules aren't we following? You know, Travis is, he would talk about this in an interview later, you know, this, he says, this feels like a quote unquote homecoming for him, you know, after his experience at Scour. And they had been really careful. And this is, this is another point that has been completely lost in the last couple of years of Uber. They followed the rules. They were not doing anything illegal. They were operating in the black cab market that was regulated by the state, not the city. They were not a taxi company. And they had been very careful about what they were doing was certainly not envisioned by current regulations, but it was not against the rules. And so they fight this and they end up winning because,

• 1:13:08David Rosenthal?

  like I said, the city had no jurisdiction over what they were doing. They were using black cars.

• 1:13:12Ben Gilbert?

  Like, given the, the narrative around this company, that is like a completely lost fact to history.

• 1:13:19David Rosenthal?

  Yep. Completely lost fact to history, but super important for two reasons. One, because they win and they do not get shut down. The state of California allows them to continue operating. The other outcome of this is, you know, I mentioned those quotes about Travis saying this felt like a homecoming. This is what pushes Travis over the edge to decide, you know what? This is going to be huge. I'm, I am born to do this. I need to come in and be the CEO of this company.

• 1:13:43Ben Gilbert?

  The company got raided and the, you know,

• 1:13:45David Rosenthal?

  Yes.

• 1:13:45Ben Gilbert?

  Officials were there, there was a headshot.

• 1:13:47David Rosenthal?

  This is how Travis's mind works.

• 1:13:48Ben Gilbert?

  You know, they were looking for this, the CEO, he was a wanted man. I want to be that guy. That's it. This is the company for me.

• 1:13:55David Rosenthal?

  Like, like he said, it was a homecoming because he went, he was in the meetings with the regulators and he thought, I can do this. So he comes in, he very amicably with Ryan, he'd hired Ryan. Ryan becomes, I believe, SVP of Operations and Travis comes in, becomes the CEO. He negotiates, he already had a 12% stake in the company from his advising an angel investment. He negotiates, he gets a 23% stake in the company. This is post-seed round as CEO. And he basically says he's going to devote his entire life to making Uber as big as it possibly can be. He actually, he, Brad writes about this in the book, he broke up with his longtime girlfriend and he explained, this is a quote, he said, I

• 1:14:37David Rosenthal?

  realized I was more passionate about this company than I was about her. I should probably find someone I like at least as much about my job. And this probably, no, no mincemeat meant to his girlfriend, but this is the mindset he's in. He said, this is his life now. He is, his mission in life is to build Uber as big as it can possibly be.

• 1:14:54Ben Gilbert?

  You're getting a lot of color on this guy here.

• 1:14:56David Rosenthal?

  Totally. So the growth continues. They go out in the beginning of 2011 to raise a Series A. And based on reputation and on his dinner with him early in the year, Travis's goal is Bill Gurley, and he wants Benchmark to lead the Series A. And he meets with other firms. Travis also talks about in interviews about the importance of running a process, but he always wants Bill to lead. And Bill and Benchmark do end up leading and he's, Travis has asked later, why'd you pick Benchmark? Jason asked him in this, in this interview. And his answer is because they're the best. It's not even a close call. And Benchmark ends up investing $11 million at a $60 million post. This is in

• 1:15:37David Rosenthal?

  the beginning of 2011 for an 18.3% stake in the company. Now that was almost unheard of in those days. A Series A at a $60 million post. I was at Madrona at the time. We were doing Series As at like a 12 post.

• 1:15:50Ben Gilbert?

  And then they were three or four million dollar investments.

• 1:15:52David Rosenthal?

  Indeed, indeed. So this was a huge, you know, laying of cards on the table.

• 1:15:58Ben Gilbert?

  Bill had found his company. I mean, I think one of the other things that, I remember when I first read Brad's book, the The upstarts and realized all the work that Bill had done for five to 10 years before making this investment on the industry. And it was the first time that it really hit me that truly great investors form an opinion about how the world will be and then go try and find the company that they believe will execute to create that future. And I think, obviously, there's lots of ways to be a great investor, but, you know, learning that that is the approach that Bill took here, it's, and the traction they had, of course, but it's no surprise at

• 1:16:38Ben Gilbert?

  all that it's a big check at a healthy valuation because it's, it's sort of the consummation of this years-long search.

• 1:16:46David Rosenthal?

  Yeah, he was ready to go all in. And I remember, so, New York was the second city that, when there is the Series A, it's clear, it's clear to Bill, it's clear to Travis, it's clear to everybody else in the company. This is working. We now need to replicate this in as many cities around the country and world as quickly as possible.

• 1:17:02Ben Gilbert?

  We need Brian Tolkien.

• 1:17:04David Rosenthal?

  Yeah, exactly, exactly. Well, and

• 1:17:07Ben Gilbert?

  And all his predecessors, of course.

• 1:17:08David Rosenthal?

  Fortunately, had Austin Gate, who led the launch team. So, they go to New York next. The third city is Seattle. And I remember so vividly Bill sending an email to Tom Alberg at Madrona, who we had on the show for the Amazon IPO, founder of Madrona, saying, and Bill and Tom knew each other from Amazon and from, from several investments over the year, years. And Bill emailing Tom when, when Uber was launching in Seattle and saying, "I think this is going to be a company that is going to be as big as Amazon. And it's coming to Seattle, it's going to be the third city. Would love anything you can do to help at Madrona with Amazon, everybody to help, to help bring Uber to Seattle." And it's just incredible. And I vividly, you know, Tom forwarded the email to, to everybody at Madrona. And I

• 1:17:53David Rosenthal?

  remember seeing, and I'd heard of Uber at that time, of course. And I was like, wow, that is, that is a really ballsy and involved move for a board member to do and to try and drum up support. And obviously, Bill was right.

• 1:18:07Ben Gilbert?

  Yep.

• 1:18:07David Rosenthal?

  In February 2011, I believe, right after or during as this round was closing, there's an amazing video we'll link to in the show notes that Austin Guy took on her phone of they do an Uber happy hour in San Francisco. And Travis is kind of giving the welcoming kind of 10 minute talk at the happy hour. They have all the early employees, they have the rider community in San Francisco, they have the top drivers there. He brings everyone up, he's super magnanimous, he thanks them, he thanks the drivers. And he says, kind of at the end of it, he says, you know, we're here in San Francisco, this is great. We're going to be very soon in 15 to 20 cities, not only in the US, but we're going to be all around the world. And this was, you know, we'd asked Brian Tolkien on the LP show, you know, was there

• 1:18:49David Rosenthal?

  a moment where was it ever a debate at Uber that they would go global or not? Because obviously no other ride sharing company really did. And he said, you know, if there was, it was before I got here. There never was, it was Travis's goal from the beginning was this is working, this is global, we're going to go everywhere.

• 1:19:04Ben Gilbert?

  What was Brian's quote? The culture was if it's a city and it's big, we need to be there yesterday.

• 1:19:10David Rosenthal?

  Yep, and that is, that is exactly, that is exactly what happens. So first New York, then Seattle, then Chicago, Boston, and then Paris is the, I guess that would be the sixth city. And that was, that was a huge, a huge moment for the company. And Travis was insistent that they go to Paris and they go to Paris then and they go international and everybody else in the company was saying, this is crazy, we can't go international, we can't go to Paris, we were like barely live in the US. And he said, no, we have to do this, we have to do it now. And we have to, I believe the directive was we're launching in three weeks. I think it was for LeWeb in 2011, LeWeb, that they had to launch for the LeWeb conference there and they did it.

• 1:19:54David Rosenthal?

  And that was the beginning of Uber being an international company. So by that time, this is now the end of 2011. Uber is already doing $9 million a month in bookings and almost $2 million a month in net revenue for a company that is essentially one year old. The traction is just, just incredible. They're launching cities all over the world and.

• 1:20:18David Rosenthal?

  This is actually the moment where Travis starts thinking, you know what? This is, we're going all in pedal to the floor on ride sharing around the world, but this can be bigger than ride sharing. You know, and he gives a quote in the Jason Calacanis interview. He says, we're a logistics company. And he says, you know, obviously there's ride sharing, but he says, I want stuff brought to me. Maybe there's, there's one that's, you know, even more focused. They were talking about examples of stuff that could be brought to you. And he said, yeah, you could do anything like Cosmo.com did, but maybe there's an even more focused service we can provide where you could say, you could say delivery of food as an example. Like you like to eat at a restaurant. They don't do delivery. We have liquidity in cars, so we can make that really interesting.

• 1:20:59David Rosenthal?

  This is the end of 2011 and, and that was the beginning of what would become Uber Eats.

• 1:21:04Ben Gilbert?

  It's so interesting, too. It's comments like this that, that Travis and others at the company would make saying, oh, we could move anything around. And then they wouldn't say anything for a year. And the whole like tech world would get up into a tizzy of like, ooh, Uber is going to launch like last mile UPS and deliver. It's going to be a courier service that moves anything around a city. And, and I mean, that sort of went away with the transition from Travis to Dara, but that always did seem like probably a red herring that that was somehow bigger than moving people around was moving non-food stuff around. But that was always the like, what if they expand into everything?

• 1:21:38David Rosenthal?

  Yeah, well, and it turns out, I mean, maybe eventually they will do everything, but Uber Eats is a monster of a business that we'll get into.

• 1:21:45Ben Gilbert?

  So quickly.

• 1:21:46David Rosenthal?

  And is, is a huge part, if not all of Uber's growth at this point. And just kind of amazingly prescient that even that early, one year into the company, they were already thinking about it and starting to work on it. So that, at the end of the year, they end up raising what again was, you know, the series A was a landmark series A. The series B was almost as much of a landmark. They sell 10% of the company in around, they raised $32 million at a $322 million post-money valuation. It's led by Shervin Pishvar at Menlo Ventures. They only sold 10% of the company in the series B, which was crazy back in the day. And they now have this huge war chest and then they just keep going city by city by city. They launch LA after that.

• 1:22:29David Rosenthal?

  LA, as we've talked about on other episodes, Uber completely transformed LA.

• 1:22:34Ben Gilbert?

  Is the series B, before we move on from that, is the series B, the one with the crazy like last minute change on who the investor was?

• 1:22:42David Rosenthal?

  Yes, so I was gonna get into this. So it was gonna be Andreessen Horowitz.

• 1:22:45Ben Gilbert?

  Yeah. I think this is nice telling.

• 1:22:49David Rosenthal?

  I was gonna tell it a little later, but we'll, we'll jump ahead now. So yeah, Travis wanted Andreessen to lead the Series B. And as the story goes, Andreessen was in to do it at a roughly $300 million valuation. But there was a dinner supposedly between Mark Andreessen and Travis. And after that, Andreessen Horowitz decided to lower the offer into a valuation in the low 200 millions. And also wanted to include a much larger option pool in the company. And Travis would have none of it. And that was, that was the end. And of course, then as we're about to see.

• 1:23:26Ben Gilbert?

  Shervin had like, like planted the seed with Travis before, like, well, if anything weird happens, like you know where to come.

• 1:23:33David Rosenthal?

  You know where to, you know where to find me. And, and so Travis called him up and, and they, they did the deal. Andreessen, of course, then would regret that decision, but not for too, too long, because shortly thereafter, they would invest in Lyft. And they would lead Lyft's first round after pivoting into peer-to-peer car sharing. And are still one of the largest shareholders of Lyft today. So, but back to Uber, this is, I would say, the, the apex of the original Uber. So we're now, they're at an unprecedented revenue growth rate, their GMV and revenue growth rate. They're raising unprecedented venture rounds. They're global. They're on the path to world domination.

• 1:24:15David Rosenthal?

  They're, at this point, I believe at about $100 million net revenue run rate. So like, they could go public at this point in time by the old set of rules.

• 1:24:24Ben Gilbert?

  If this were a different point in history, they would have.

• 1:24:26David Rosenthal?

  They would have. And maybe they were even thinking about it, but then history turns on a knife point once again. And we will refer listeners to our episode about a month or so ago on the Lyft IPO. But this is now early 2012 and Homebills has seeded the concept of peer-to-peer car sharing with Sidecar. And Sidecar has seeded the kind, the concept of peer-to-peer ride sharing with Lyft and Sidecar.

• 1:24:57Ben Gilbert?

  Which sure feels a lot less legal than what Uber is doing.

• 1:25:01David Rosenthal?

  It sure does feel a lot less legal, yes. But nonetheless, Sidecar and Lyft launched in San Francisco in the spring and summer of 2012. And it is, you know, we spent all that time describing the regulations in the taxi industry and in the black car industry earlier in the episode. Peer-to-peer ride sharing is completely ignoring these regulations and definitely illegal. You could argue whether Uber was in a gray area, it was not regulated, but it was not clearly illegal. What Sidecar and Lyft are doing is clearly illegal. Nonetheless, though, Uber and Travis, you know, because of their personality, they've there are a lot of people in certainly the taxi industry, but especially in regulators and city governments who don't really like them.

• 1:25:45David Rosenthal?

  And they're sort of, I wouldn't say happy to see something illegal happening, but they're happy to see competition arising and legitimate threatening competition to Uber. So what happens next? For the next six months or so, Uber and Travis fight really hard to get Lyft and Sidecar shut down, and they are lobbying with regulators on the side of regulators for protectionism.

• 1:26:10Ben Gilbert?

  It's crazy. This is like total, like the history is like glossed way over this, like Uber and the regulators trying to shut down Lyft.

• 1:26:18David Rosenthal?

  Yes, totally. And, and it makes total sense from Uber's perspective, and I think according to Brad, Bill Gurley drove a lot of this thinking on the board. They were terrified of anybody undercutting them on price. And what peer-to-peer ride sharing enabled was an undercutting of price. And so this was a huge, huge threat. And they had realized this when Halo moved over from London to launch in the US, working with taxis, but doing it with a lower take rate. I believe Halo had a 10% take rate and trying to undercut on price. And that was in response to that Uber had rolled out what was then Uber X. And Uber X was cheaper cars, Toyota Priuses, still with licensed drivers, but to compete at a lower, lower take rate margin with Halo.

• 1:27:03Ben Gilbert?

  I don't think I knew that Uber X was licensed drivers when it first launched.

• 1:27:06David Rosenthal?

  Uber X was licensed drivers. It was not peer-to-peer. And the original, the original purpose of it was to, was to compete with Halo.

• 1:27:14Ben Gilbert?

  This massive fear of undercutting on price is such an incredible foreshadow for the financial position that the companies are in today because

• 1:27:22David Rosenthal?

  Absolutely.

• 1:27:22Ben Gilbert?

  ride sharing, as it turns out, is an incredibly price-sensitive market. If you open both apps, one's a buck cheaper and it's the same, relatively the same distance away, you just do it. Like, there's so little gripping you to one platform or the other, and that's one of the reasons why these companies are spending so much money competing with each other to acquire and retain customers. Like, you can see it all the way back in this era.

• 1:27:44David Rosenthal?

  Totally. And so, this is the moment where everything changes. So, you know, Ben, we joked about unit economics and the table napkins in Paris earlier.

• 1:27:57David Rosenthal?

  Before this happened, the trajectory that Uber was on was the beautiful, typical Silicon Valley story from, you know, that point, up until that point in history. They had a beautiful marketplace-based business model. They were not taking inventory. They were working, you know, they were pushing the edges of regulation, but they were working within regulation. The unit economics were incredible. Uber was on a $100 million-plus revenue run rate. I assume not profitable because they were investing so much in growing cities, but they probably could have been. And I remember people talking about cities being wildly LTV profitable. I mean, I forget numbers that were thrown around that I'd heard, but, you know, 9, 10 plus X LTV to CAC for riders and drivers in San Francisco.

• 1:28:41Ben Gilbert?

  And for folks sort of on the fringe of the biz here, that's lifetime customer value to cost to acquire a customer. And if your customer lifetime is 10 times the cost to acquire, that's a great business you got there.

• 1:28:53David Rosenthal?

  An incredible business. And it was also an incredible business for drivers. There were drivers in San Francisco and other cities that were making hundreds of thousands of dollars on the platform, so much so that drivers were going out and they were, you know, Uber talked about this and Travis talked about this, kind of becoming their own little mini entrepreneurs on the platform, you know, kind of like to Airbnb's chagrin, like property managers in Airbnb, because they knew that if they got more cars on the system, they could make so much more money. It was really working for everyone. Then when peer-to-peer launched, it completely shifted the dynamics of the industry. One, by changing the unit economics, but even more so by impacting, like it opened the floodgates of supply.

• 1:29:34David Rosenthal?

  So now you had, and listener and friend Maxwell has emailed us about this. This was the huge change that peer-to-peer ride sharing brought. Before, all of the innovation that was happening with Uber was net good for most players in the industry. Like I said, the drivers were doing much better. But now when the floodgates of peer-to-peer opened, all of those gains got competed away because the playing field on the supply side just got massively, massively expanded.

• 1:29:58Ben Gilbert?

  Hmm.

• 1:29:59David Rosenthal?

  And because of that, then there was also the competition for the demand side between Uber and Lyft and Sidecar and Didi and everybody internationally. And so they had to spend, the companies had to spend so much on subsidies to bring in riders on the demand side, and it completely changed the unit economics. So what happens? Well.

• 1:30:20Ben Gilbert?

  Well, they don't IPO.

• 1:30:21David Rosenthal?

  They don't IPO, no. And for a while, for a number of years, the wisdom becomes certainly at Uber and to a certain extent at other companies too, certainly at Uber, certainly at Didi. The way we can win this is this is a war of attrition. We will raise so much money, this we talked about on the Lyft episode, what was it like 16 times the amount of capital that Uber raised versus Lyft at one point in time?

• 1:30:45Ben Gilbert?

  Yeah.

• 1:30:46David Rosenthal?

  Something like that, that we can just, we can just blow away our competitors and crush them into oblivion. And once we've crushed them, then the unit economics will become more stable and we can return to profitability on these platforms.

• 1:31:00Ben Gilbert?

  Shouldn't be long.

• 1:31:01David Rosenthal?

  Shouldn't be long. So in August of 2013, Lyft raised the $60 million from Andreessen in May of 2013. In August of 2013, Uber raises $258 million, led by Google Ventures, with TPG coming in, the private equity firm. And this is the start of this. Instead of just investing those $260 million in the US and competing with Lyft though, remember Uber is now international and Didi in China starts raising huge amounts of capital. So Uber is now spreading this capital, fighting land wars.

• 1:31:31Ben Gilbert?

  Yeah, Uber's doing a multi-front war. Like they have to capitalize wars on all these different borders.

• 1:31:37David Rosenthal?

  All of these, all of these different borders.

• 1:31:39Ben Gilbert?

  And we should say too, they are maintaining a very strong leverage position in this negotiation. They raised that whatever $260 million on a $3.7 billion post-money. So this is like, you know, they, they just got a 10x from that previous round where they were valued at 350 million.

• 1:31:56David Rosenthal?

  Totally, which was a, what, five, six X from, from the series A.

• 1:32:01Ben Gilbert?

  Yep.

• 1:32:02David Rosenthal?

  And, and that would have been, you know, and I think people thought about at the time like, oh, wow. That would have been like, if they had gone public, maybe they would have gone public at a relative market cap like this. I guess this was just sort of a, you know, private IPO type thing. Turns out that was far from the end of the capital raising. And we'll skip over a lot of this here in the interest of time, but go, go listen to our Lyft episode. Go listen to way back our Didi episode that we did with, with Brad Stone. And Brad really was the foremost reporter in talking about the dynamics between Uber and Didi. It ended up, the amount of capital that they were raising from sovereign wealth funds, from huge, from hedge funds, from huge, you know, entities, pumped the valuations of these companies so much. Over the next couple of years, Uber ends up raising $20 billion in total.

• 1:32:44David Rosenthal?

  Ben, as you alluded to at the top of the show, the valuation peaks at $72 billion on the private markets. But all of this capital is going into fighting these wars.

• 1:32:54Ben Gilbert?

  And to list sort of the folks that start coming in here, you know, we were talking about this is an era where you would go, go public. I mean, GV made a crazy bet, putting an abnormally huge amount of their fund, if not like all of the remaining. There's, there's a, but there's something wild that happened.

• 1:33:11David Rosenthal?

  Well, I believe GV operates on an annual budget cycle from, from Alphabet. But, but yes, they put in a lot of money.

• 1:33:19Ben Gilbert?

  Yeah. And then you start to see in June of 2014, Fidelity comes in and this changes everything for startups. I mean, we, we talk about the era of stay private longer and why all, all these companies IPO-ing now and why haven't they IPO'd yet? The next set of investors would be Fidelity, T. Rowe Price, Goldman Sachs. Then you start getting into these sort of international, you get Times Internet, Tata Capital, Tiger, SoftBank. I mean, the, the list goes on and on from.

• 1:33:48David Rosenthal?

  When you get the.

• 1:33:49Ben Gilbert?

  Not raising from venture capitalists.

• 1:33:51David Rosenthal?

  The Saudi Arabia Public Investment Fund comes in and puts a lot of money into one of these Uber rounds.

• 1:33:56Ben Gilbert?

  Three and a half billion.

• 1:33:56David Rosenthal?

  Fighting with Didi. That was before the SoftBank Vision Fund. And of course, who is the anchor investor in the SoftBank Vision Fund? It's the Saudi Arabia Public Investment Fund.

• 1:34:06Ben Gilbert?

  Yep. Yep. Yep. I think this is an interesting point. A few people have asked David and I, and I think there's a lot of good answers floating around. But why is this happening now? Like, why is this whole A-plus saga, you know, happening in this like four to six month period at the beginning of 2019? And I think there's a few reasons. One, it's been this bull run for over a decade. And, you know, people want to get out before the, that the music stops. Companies used to IPO, you know, after three or four years after being founded. Especially you look at like Amazon, it was 94 to 97 or something like that. Now they're a decade or more. They've taken private funding for a long time.

• 1:34:48Ben Gilbert?

  But there is a, there is a time limit to the amount of time that private investors are willing to wait before getting liquidity. And we're learning that time is about 10 to 12 years after a company has been founded. So a lot of these companies all were started right around the same time in this two-year window following the 2008 recession. And a lot of them stayed private longer, took private capital longer. And, you know, they're facing pressure from their board, many companies in a less documented way to get some liquidity. But Uber, in fact, signed an agreement with Goldman four years ago that they needed to go public within four years.

• 1:35:29Ben Gilbert?

  Otherwise, if they hadn't gone public, then the convertible bond that they took carries a coupon that will increase over time. And I think that that's, that clock started in January. So they, they have been sort of racking up fees and debt if they, if they didn't go public. And so that's another big trigger of this whole thing is, look, if, if Uber had to go, then lines up the timing for a lot of these other companies to go too.

• 1:35:52David Rosenthal?

  Yeah. Well, I think this is what's, there's, there's that, to me, the most interesting takeaway from doing this, all this research and thinking about it is that this whole era we're in now of all these new sources of capital, late-stage sources of capital coming into the private venture-backed startup market was opened up at really by Uber and by everything we're talking about here. It had been happening slowly before then, but this opens the floodgates. And It opened the floodgates because Uber, because peer-to-peer ride-sharing launched, and it changed the economics, and Uber now needed to raise all this

• 1:36:26Ben Gilbert?

  Yeah.

• 1:36:27David Rosenthal?

  money. And it's just so interesting that like, the narrative has been, uh, these sources of capital came in because they couldn't find growth in the public markets. And like, that's absolutely true. It's 100% true. That is why all these other alternative sources of capital are now, have been over the last decade, interested in investing in private venture-backed startups. But it wasn't like Uber saw this and was like, oh, great source of capital. I'm going to do that instead of going public. They had to. They couldn't go public. They needed all this money to fight these wars.

• 1:36:52Ben Gilbert?

  Mm hmm.

• 1:36:54David Rosenthal?

  And then it's

• 1:36:54Ben Gilbert?

  Really great.

• 1:36:55David Rosenthal?

  That, that trend is now extended to, you know, plenty of companies, even that Airbnb being a great example. They also fought a war, which we will cover when we cover them. But it was a, a much more contained war that they definitively won. Uh, and so they didn't have these same dynamics.

• 1:37:11Ben Gilbert?

  And with Uber for a long time, until very recently, where Uber sort of cut these deals to, to merge or, or, um, um, take large owners to ship stakes in some of their competitors internationally instead of competing. The thought was, oh my God, the global ride-sharing market is one of the biggest markets in history, and it is a single market, and it's going to be winner-take-all, and it is worth just go, go, go, put as much money into this company as you can, because they're gonna, gonna take it all. And then from there, we will get to do all sorts of interesting things in margin expansion over time and whatever else. It turned out that, that wasn't true. Like, it's not actually a global market. They are, you know,

• 1:37:52David Rosenthal?

  Well, it's a global market, but it's not a global network effect.

• 1:37:55Ben Gilbert?

  Well, I, I would say it's a series of markets. It, that, in, in the way that sort of like, uh, information on the internet is a global market, where you can put something out there and it can be consumed everywhere. You don't need to sort of like, go open each market differently and have completely different products and, and marketplace, uh, dynamics. And like, ride-sharing turns out to be a nationally fragmented market, in a way that it's, it's not accessible by one company leveraging their asset to just sort of scale perfectly.

• 1:38:27David Rosenthal?

  Yep.

• 1:38:27Ben Gilbert?

  So I guess that's, that's what I'm getting at here is, so then, then there had to be this, this sort of pivot later on, where this company had, had this huge valuation, had been massively capitalized. If they're just gonna Be the North American winner in ride sharing, then they have to be the North American winner in other things, and they should own other companies that are going to dominate the other parts of global ride sharing. And so I think we saw a pretty definitive shift in strategy when it became clear that it is not one singular large market that they can win.

• 1:38:57David Rosenthal?

  Mm hmm, mm hmm. Yep. Both on the capital raising and then on the mergers and acquisitions and divestitures front.

• 1:39:04Ben Gilbert?

  Yep. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:39:19David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:39:35Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:39:50David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:40:14Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:40:33David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:41:03Ben Gilbert?

  Truly insane numbers, and that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com/acquired and just tell them that Ben and David sent you.

• 1:41:28David Rosenthal?

  Okay, so on a normal acquired episode, I think we would wrap things up here in this already extended, extra-long episode and say, come back for part two the next time, where we tell everything that all of you know happened after this. Unfortunately, we don't have that luxury because today is the IPO day.

• 1:41:47Ben Gilbert?

  Yeah, we gotta get this out.

• 1:41:48David Rosenthal?

  We gotta get this out. All right, so here we go. Extra special. You thought you had enough drama, you didn't have enough drama. What happens next? We fast forward to January of 2017. The annus horibilis for Uber and Travis Kalanick.

• 1:42:06Ben Gilbert?

  What is the reference?

• 1:42:07David Rosenthal?

  In the backdrop of all this.

• 1:42:08Ben Gilbert?

  I'm like not cultured enough to-

• 1:42:09David Rosenthal?

  I think it means it's like a really bad, it's, I think it's Latin for a terrible year.

• 1:42:11Ben Gilbert?

  Ah.

• 1:42:12David Rosenthal?

  A horrible year. Okay, everybody knows what happens in 2017 to Uber. I think having told this whole story, and the story of Travis's background, and what we were just talking about of this new, this new environment that the company suddenly found, they thought they were gonna be the next Google. They thought they were gonna be the next eBay or Amazon. But it turned out, the dynamics changed, and now they are in this incredibly huge market, but that where the, all the dynamics changed and they had to fight all these wars. I can only imagine the toll that that took on the psyche of people at Uber, and in particular on Travis. And just like I think we've seen with Elon, leading up to the episode we did on Tesla,

• 1:42:54David Rosenthal?

  and then after that, with everything that's happened with Elon Musk over the last year, that's a lot of weight to carry, you know? And, and so I think it's, it's important to keep that in mind as we go through all of these horrible things that are about to happen. And honestly, horrible things that Travis either did or was party to at Uber.

• 1:43:13Ben Gilbert?

  Yeah, we should, we should not, because at this point, I think we've, we've played the narrative of,

• 1:43:20Ben Gilbert?

  Everyone else has said terrible things about Uber and Travis, and we want to talk about a lot of the amazing things that the company and he did, and a lot of the redeeming qualities. We by no means want to say that he had a clean slate. And like, lots of people made really bad decisions and did really bad stuff. And I think like, we should, we should just make sure we're super clear on that.

• 1:43:41David Rosenthal?

  Totally, totally. At the end of the day, everybody, everybody's a human, including and especially founders. And humans are capable of being very fallible.

• 1:43:51Ben Gilbert?

  Listeners, you should know that the header in David's notes for this section is, "Chapter 4: The Systems Broken."

• 1:43:58David Rosenthal?

  Yes.

• 1:44:01David Rosenthal?

  I was actually inspired by Kanye West lyric there, but that's another human for another day. Okay, January 2017. Donald Trump has just been inaugurated as the President of the United States. I'm living in Paris. We're recording acquired episodes remotely over the internet across continents. We have Brad Stone on the show to talk about everything we're just talking about with Uber and the, the, and Didi and the Uber-Didi merger. What is the first thing Donald Trump does in his first week in office? He enacts the travel ban.

• 1:44:35David Rosenthal?

  A terrible, terrible thing, in my view. Not that this is a political show, but I, that's like, I will 100% stand by that statement forever. What happens because of the travel ban? People are stranded at airports, and particularly people are stranded at JFK in New York. People who have been flying to and from countries with a travel ban, predominantly Muslim countries where the travel ban is enacted. Demand for Uber and Lyft spikes off the charts, particularly at JFK, because everybody's stranded there. They're trying to get home, they're trying to figure out what's going on. This completely throws off the market, and Uber has, you know, surge. Surge is how they respond to, to imbalances in supply and demand. They're trying to do the right thing, like, the drivers are getting screwed here, and the drivers are like, putting so much pressure on Uber.

• 1:45:16David Rosenthal?

  They geofence the JFK Airport in New York and enact surge pricing for JFK. The reaction to this among the public is not good. Now, interesting, this is a super interesting story. The Lyft, of course, does not go into primetime, is Lyft's version of surge in JFK. Apparently, at the time, I don't know if it still is, Lyft's technical infrastructure was not architected to be able to turn on and off surge, like draw arbitrary geofences. And so their options were either turn on surge on like all of New York, or don't turn on surge. And that was kind of how one of the inputs into how they made their decision not to turn on primetime

• 1:45:59David Rosenthal?

  when this happened. But so Uber does Lyft doesn't, you can imagine how this looks. The public, you know, excorciates Uber for for what happens here, that they're gouging, they're taking advantage of the travel ban, they're gouging people, immigrants who have been been stranded, they're charging them hundreds of dollars to get where they're going. People also realize, hey, we, Trump has enacted this technology advisory council. Travis is on Trump's advisory council. Is he in league? Is he in league with Trump? Is he like trying to profit? Is Uber trying to profit over this on this travel ban? Definitely was not the intention or the case. And Travis puts out a statement that like joining the group, he says, joining the group was not meant to be an endorsement of the president or his agenda,

• 1:46:42David Rosenthal?

  but unfortunately it has been misinterpreted to be exactly that. There are many ways in which we will continue to advocate for change on immigration, but staying on the council was going to get in the way of that. And he resigns from the council immediately. But like the damage is done. And what emerges out of this is hashtag delete Uber.

• 1:46:57Ben Gilbert?

  And David, this geofencing thing, I think that's a pretty underreported little tidbit. I also think like, people still, when they hear the delete Uber,

• 1:47:11Ben Gilbert?

  they link it to all the events that would follow here. And they remember something happened at the airport. But I think there was sort of a massive misconception and misunderstanding between the company, what they were able to do, what they were trying to do, and then what they got roasted for.

• 1:47:24David Rosenthal?

  Yep, totally. I genuinely think they were, they were trying to do the right thing. And they were already under so much pressure from drivers about driver earnings massively declining in this new peer to peer world. They were trying to do the right thing for drivers. I really think that is the case. And this was also not like a Travis decision. This was, you know, this was. Way farther down in the company, and I think they were trying to do the right thing.

• 1:47:45Ben Gilbert?

  However, I will say, the company deserved everything that was coming next. And on this initial spark, you can't start a fire unless there's a bunch of fuel around the spark to catch. And so they had accrued a whole bunch of non-goodwill from the public, from drivers, from, you know, all sorts of people that, you know, it could have been any number of sparks, but they had, there was latent bad will.

• 1:48:12David Rosenthal?

  Yeah. And worst inside the company. So very shortly after this, within a couple of weeks, a female Uber engineer named Susan Fowler, I believe was was Time's Person of the Year in 2017, I believe, because of this, publishes a blog post announcing that this is this is mid-February, that this is her last day at Uber. She's leaving the company and she tells her story in this blog post about how from day one, when she was hired, her boss at Uber in the engineering organization tried to proposition her for sex and tried to do it over text, over chat, in recordable ways within the company, within company systems. She reported it to the company, she reported it to HR.

• 1:48:57David Rosenthal?

  And what followed is all too common in many industries, and especially the tech industry. Nothing happened to him and she was punished. And HR gave her the choice, according to her, and she documented all of this, to either switch teams and not work for this boss anymore, but he would be fine and she would have to change her career. Or she could stay and on the team, continue working for him, continue putting up with this and probably be given a poor performance rating, probably because she wouldn't have sex with him.

• 1:49:25Ben Gilbert?

  Just horrifying, like at.

• 1:49:26David Rosenthal?

  Totally, totally horrifying. There's literally nothing else that can be said. And what's even worse, things got even worse from there. She continued interacting with HR. She did end up eventually transferring to other parts of the company. This continued to be a case. HR did not acknowledge it, did everything wrong. And it went up to senior levels of the company who continued to do everything wrong. She writes this blog post, it is, that is the, if the spark was delete Uber at the airport, this is the bomb that goes off. And.

• 1:49:57David Rosenthal?

  The next week, Travis meets with a group of female engineering leaders within the company. An audio recording of this meeting surfaces and it's basically not particularly flattering. Travis doesn't say anything like particularly bad, but he's also not like really empathetic to what's going on here. And it's not helped that Travis himself had made plenty of public comments over the past years about how his own sexual conquests, his own partying, you know, back to the Garrett and Travis days going out in San Francisco that started the company and you know, he, he referred to Uber by a homonym that implies that it allowed him to, to sleep with lots of women. Not good. On the back of this, the company and the board hires the former attorney general of the US Eric Holder to,

• 1:50:42David Rosenthal?

  who had just left, who was in the Obama administration to come in and lead a thorough investigation into the company, into HR practices, harassment, everything going on. Okay, that's bad. Next thing that happens, we're now like a week later in the end of February, Google, remember, Google is a major investor in Uber, they sue the company. They sue Uber because Uber had acquired a company called Auto, which was led by Anthony Levandowski, who was a former employee within Waymo, Google's self-driving car division. And according to Google in the lawsuit, he took most or all of his intellectual property that he had developed at Uber, brought it illegally into Auto. Uber acquired Auto and now had illegally Google intellectual property around self-driving cars.

• 1:51:26Ben Gilbert?

  And what was especially a bad look for, for Uber here was that Auto was bought for a good amount of money and hadn't built much. And so then the question was like, what do you, okay, why'd they do that?

• 1:51:36David Rosenthal?

  They basically spent, I think it was $650 million to acquire Auto, Uber did, and it was, it looked, and probably essentially was, that they spent that money to acquire Google trade secrets. Not good. Okay. Things keep getting worse. February 28th, Bloomberg publishes a video that has been leaked, a dash cam video from an Uber driver of Travis in this Uber with probably intoxicated on a night out on the town, getting into an argument with the Uber driver. The Uber driver realizes it's Travis in the back of the car and starts talking to Travis about how his earnings have gone way down on Uber and Travis just starts berating him and yelling

• 1:52:16David Rosenthal?

  at him. It's terrible. That comes out. That's the next body blow. And several days later, it comes out that Uber sponsored a trip to Escort Bar in Seoul, South Korea, with several senior Uber executives participating in this. And this has come out as part of Holder's investigation into the company. It gets leaked to the press. Executives start resigning immediately and they're resigning for two reasons. One, so Jeff Jones had just come in from Target to help kind of clean up the image at Uber here. Is this what's starting to happen? He was, I believe, CMO or COO. He leaves immediately and he resigns and he says, I do not want to be, this is not who I am. I do not want to be associated with this company. I do

• 1:53:01David Rosenthal?

  not want to be associated with this culture. I'm out of here. He doesn't even negotiate an exit package. He's like, I don't want any stock in this company. I'm gone. Other executives start resigning because they know that they did really bad things and the investigation is coming for them. All told, something like six or seven senior executives leave Uber, like within the month of March. Next thing that comes out in May is the New York Times reports that Uber has been using software that it called internally gray ball to mask its activity. Uber was continuing to operate in cities with peer-to-peer operate in cities that shut down peer-to-peer ride sharing. Uber was continuing to operate and using this software to mask regulators and police from seeing that they were operating. That's pretty bad. And an abrupt turnaround from several years earlier, the company was committed to pushing

• 1:53:46David Rosenthal?

  the rules, but operating within the rules. Then in late May, tragedy strikes. Travis's parents are involved in a terrible boating accident and his mother is killed in this boating accident in California. His dad's severely injured. Again, you know, you can imagine what's going on in his head through all this and the pressure he's dealing with. In June, it comes to light that this is the next month. It comes to light that Uber, there was another terrible tragedy that had happened in India, where a woman was raped and assaulted by an Uber driver during an Uber ride. The company and India investigated into it and as part of the company's investigation into what happened, they illegally accessed the woman's medical records, basically stole the woman's medical records and they wanted to confirm that she was indeed raped because

• 1:54:31David Rosenthal?

  the implication was Uber didn't believe that what she was saying was true.

• 1:54:35Ben Gilbert?

  I have not thought about this in a while and like, I mean, it's uncomfortable to just like hear it blow by blow by blow.

• 1:54:43David Rosenthal?

  Oh, totally. Well, and it's like, these are just facts, you know? This is terrible. On June 11th, right after this, the Holder Report is issued to the Uber board. It's really bad. The very next day, a senior executive in the company named Emil Michael, who was involved in many of these incidents and who for a long time had had a reputation at Uber and within Silicon Valley as an effective operator, but it was no surprise that he was involved in these things. He'd been involved in a confrontation with the journalist Sarah Lacy a few years earlier. He resigns the next day under pressure from the board based on what was in the Holder Report. Two days later, on June 13th, the board convinces Travis that he needs to take a three-month leave of absence from the company.

• 1:55:26David Rosenthal?

  A, because of everything that's going on and, you know, B, his mother was just killed tragically. His father's in critical condition. They ask him to leave the company. He agrees to a three-month leave of absence. On that same day, this is incredible. I remember when this happened, I was just like watching a train wreck. The same day, there's an all-hands meeting at the company led by several of the Uber board meetings. This is the worst. During this all-hands meeting, the purpose of which is to talk about all these problems stemming from, you know, the Susan Fowler, what she reported within the company, everything going on to talk about the outcome of the Holder Report. David Bonderman, co-founder of TPG, who is on the board from TPG's investment in Uber,

• 1:56:10David Rosenthal?

  is onstage alongside other board members, including Arianna Huffington, who I believe is the only female board member at this point in time at the company. And Arianna says to the company, quote, "There's a lot of data that shows that when there's one woman on the board of a company, it's much more likely that there will be a second woman on the board." And Bonderman makes just like the most awful, awful, awful comment that he interjects here to what Arianna just said. He says, "Actually, what it shows is there's much more likely to be more talking." And this is just like this total sexist comment, like what?

• 1:56:43Ben Gilbert?

  This meeting was called to try and ease everyone's concerns that we are not a bunch of sexist, horrible, like, what on earth?

• 1:56:52David Rosenthal?

  The worst. Thankfully, Bonderman immediately is kicked off the board, like that day. That, I mean, how you could even, even go there is just beyond the pale. He's kicked off the board that day. And that is, I think, you know, while secondary to Travis, I think that's kind of the last straw, that like, something very, very, very fundamentally needs to change in the company. And the only thing that is going to do that is a new CEO and completely new, you know, a decapitation of old leadership and new leadership coming in at the top.

• 1:57:24Ben Gilbert?

  Yep. And so this, this whole thing started in January. It's now June.

• 1:57:31David Rosenthal?

  Mid-June.

• 1:57:31Ben Gilbert?

  And, and we should like, take a quick moment and say, you recall from the Lyft episode, they were on the ropes, like they were dead. Uber was beating them. They raised so much money, like they were, who would fund Lyft? They lost. And then this happened.

• 1:57:43David Rosenthal?

  Lyft had tried to sell itself, Lyft had tried to sell itself to Uber at least once, if not multiple times at this point. Uber and Travis believed that they would just crush them. They wouldn't have to buy them. They could continue operating and all the problems would be solved. And then all this happens. And so on June 20th, at this point in time, Benchmark and Bill Gurley as kind of lead investors have been at their wits end trying to deal with this and just this terrible situation. Bill had stepped off the board, fellow Benchmark partner Matt Kohler had taken his place on the board to try and broker some kind of relationship moving forward here. They decide they've had

• 1:58:24David Rosenthal?

  enough. So they organize a group of the core investors, core venture investors in the company, Benchmark, First Round, Menlo, lowercase capital, and then they get Fidelity involved too. They write a letter, they all sign a letter, and Matt Kohler and fellow Benchmark partner, Peter Fenton, they fly to Chicago. Travis is in Chicago. Remember, he's supposed to be taking a leave of absence from the company. He's interviewing a COO candidate for the company, and supposedly behind the scenes, he's agitating to try and come back as soon as possible and stay super involved. They fly to Chicago, they meet Travis at his hotel, and they present him with this letter. The letter demands that he resign from the company. And there's several hours of negotiation, at the end of which Travis signs the letter and he does resign

• 1:59:04David Rosenthal?

  as CEO of the company on June 20th. Part of the discussion was that as part of him resigning, he would be able to say it was his decision, it was part of everything personally that was going on. He takes some responsibility, but he could say, you know, this was my decision. All of this gets leaked to the press in real time, and it becomes clear this is not his decision. This was the investors led by Benchmark forcing this upon him. This is after he's signed that this becomes clear. And so he, as one might expect, knowing his history and mental state, he kind of revolts and he starts calling other shareholders within the company to see if he has their support for a vote. By the way, this is all reported in the press by great reporting by the New York Times and by Bloomberg and by Brad and his team. And he calls for,

• 1:59:49David Rosenthal?

  starts drumming up support for a vote to come back as CEO of the company.

• 1:59:55David Rosenthal?

  It's just sad to talk about, but I think we have to talk about this. A, because it's, it's, I don't think there's any debate that this actually happened and B, this is part of the story. So Benchmark in response files a lawsuit to Travis. So once again, you have investors suing a CEO of a company suing Travis while they're investors in the company.

• 2:00:14Ben Gilbert?

  Again, unheard of for, you know, a firm like Benchmark to be suing a founder of a company that they had backed.

• 2:00:21David Rosenthal?

  But this is what it had come to. And honestly, you know, these were, this is the end of the days of founder friendly, you know, and, and I think that's a good thing. Like it's great to be friendly founders, but there's certain behavior that just cannot be tolerated. So Benchmark sues Travis for fraud and, and breach of fiduciary duty. The way that that all plays out is in negotiations over who is going to replace him as CEO. So Travis realizes he doesn't have the support to come in as CEO, but he thinks he can bring somebody in who's going to be supportive of him and his interests in the company as the CEO, and he still has several seats on the board. His choice is Jeff Immelt, who until recently was CEO of, of GE. Benchmark's choice is Meg Whitman, who was CEO of eBay and one of, one of their, you

• 2:01:05David Rosenthal?

  know, best investments and that has played a big role in this story. There is a dark horse candidate though. And so everybody.

• 2:01:12Ben Gilbert?

  Like I know what Meg Whitman at least like tweeted, like, yeah, I'm not like, I don't know what you guys are talking about. I'm not taking this job.

• 2:01:19David Rosenthal?

  Right.

• 2:01:20Ben Gilbert?

  They both independently confirmed to the press, like, no, I will not be the CEO of Uber. And so everyone's sort of scratching their heads like, well, who's he going to be?

• 2:01:27David Rosenthal?

  Who, who is going to be the CEO? And it's ama, it is, it is amazing like that this does not get, not come out, does not get reported until the announcement is made on Sunday, August 27th, 2017, who the new CEO of Uber is. And it is Dara Kazrashahi. He had been the CEO of Expedia since 2005 and really is an incredible story and an incredible kind of choice to come out of all of this and, and lead, uh, lead the company through, um, what was probably the most public mess of a venture backed startup to play out, uh, in the press, um, probably ever.

• 2:02:04Ben Gilbert?

  Yep.

• 2:02:05David Rosenthal?

  So Dara's story, like we said, is incredible. He. Grew up, he was born initially in Iran. His family was a wealthy Iranian family in the pharmaceutical industry. In the late 70s, though, during the Iranian revolution, the company got nationalized. They had to escape persecution. They moved, they immigrate to the US with nothing. They restart everything. It was the whole family. He grows up in the suburbs of New York. When he's 13 in 1982, his father has to go back to Iran to care for his grandfather. He didn't see his father again for six years. Incredible. Despite all this, he goes, he excels in school. He ends up going to Brown. He then does banking after school at Allen and Company, where his brother also worked at Allen and Company, is now an

• 2:02:49David Rosenthal?

  MD at Allen and Company. He joins IAC after Allen and Company. He becomes the CEO of IAC. Of course, Barry Diller's media and internet holding company. In 2001, IAC buys Expedia, with a lot of Dara's work on that. Dara, a couple of years later, becomes the CEO of Expedia. And he is the anti-Travis. He is a super outspoken critic of Trump and the immigration policies that Trump was putting in place, obviously because of his family history, and also because that's like, the right thing. And the board tasked him with basically three things to come in and do. Three easy tasks. One, fix the culture at Uber. Two, stem the losses that we've been suffering in these wars all around the world,

• 2:03:31David Rosenthal?

  and focus on core markets. And three, take the company public and get this done. And so this is August 2017. I think unquestionably, he has done about as good a job as you can imagine with part one, fixing the culture. I think there's still, of course, problems and things to be solved. But like, he comes in and pretty immediately, he revises the core values of the company. He settles the Google lawsuit. He retains employees. He makes great hires. And I think, you know, again, still more work to be done. But certainly, compared to the trajectory that Uber and Uber's culture was on, an unquestionable turnaround. Also, on point three of taking the company public, they just went public today. But that really starts in January 2018. He orchestrates a deal. There's all this fighting on the

• 2:04:14David Rosenthal?

  board and with Travis and everybody. He orchestrates a deal with SoftBank to come in. And so SoftBank, leading along with Dragon Air, Sequoia, and Didi itself, they do an almost $9 billion transaction with Uber. Same size as the IPO that just happened last night and this morning. 7.7 billion of secondary sales, much of which comes from Travis directly, but also from other existing shareholders, including the venture investors, that SoftBank and others buy at a $48 billion valuation. Another $1.25 billion of primary equity from the company at a $70 billion valuation.

• 2:04:49Ben Gilbert?

  Yeah, so some investment into the company to give them cash, but mostly taking money off the table. And at a, what a discount. Like, that previous round with the Didi merger had been a $68 billion post. This is a $48 billion offer. You know, hey, take it or leave it. We'll buy your shares at this share price. You know, it's a, it's a pretty wild way to buy up to 15% of a company.

• 2:05:09David Rosenthal?

  Totally. They get, so SoftBank gets 15%, but more importantly, this cleans up all the problems. So Benchmark agrees to drop the lawsuit as part of this. Travis lays down his arms and everybody unites behind Dara as the unquestionable kind of leader of the company going forward.

• 2:05:23Ben Gilbert?

  Amazing peacemaker. I mean, given the circumstance he was coming into there.

• 2:05:27David Rosenthal?

  I mean, kind of coming from, you know, his banking days in IAC and Barry Diller and then Expedia, like, you can see how, as great as Jeff Immelt and Meg Whitman are, like, very few other people could have executed this, you know?

• 2:05:39David Rosenthal?

  As well as Dara had. Now, number two on his task list of getting to, you know, stemming the losses,

• 2:05:47David Rosenthal?

  more questionable. And that takes us to today. So, obviously, yesterday, Thursday, May 9th, Uber priced its IPO at $45 a share towards the bottom of the range, or equal to an $82 billion market cap. Open trading today on Friday at $42 a share, or a $76 billion market cap. As we speak, I believe they are trading at...

• 2:06:09Ben Gilbert?

  43.84.

• 2:06:11David Rosenthal?

  Oh, wow, no, I have down to 41.76.

• 2:06:15Ben Gilbert?

  Oh, whoa, I just refreshed and saw that, too.

• 2:06:18David Rosenthal?

  Yeah, so, still slightly below that opening of $42 a share.

• 2:06:23Ben Gilbert?

  Down 7% off the opening.

• 2:06:25David Rosenthal?

  Yeah, we'll see what happens in the coming days.

• 2:06:28Ben Gilbert?

  Yeah, we should say, like, the first day of trading is a pretty terrible predictor of...

• 2:06:33David Rosenthal?

  As we learned on the Lyft episode.

• 2:06:35Ben Gilbert?

  Yeah, yeah. Or even the next year, right? Like, we all saw sort of Facebook's trough after IPO.

• 2:06:43David Rosenthal?

  Yeah. So there we have it. The history and facts. Wow.

• 2:06:49Ben Gilbert?

  Oh, man.

• 2:06:49David Rosenthal?

  What a story.

• 2:06:52David Rosenthal?

  What a story. I mean, I don't think it's any exaggeration to say like the, certainly not the whole story of the time, but like a, one of the biggest, if not the biggest stories of our time right now in, you know, the, in the technology startup and venture capital world. Like this is unprecedented on almost every front.

• 2:07:12Ben Gilbert?

  Yep. Well, David, should we, now that we're done with the first section of the show.

• 2:07:18David Rosenthal?

  Yeah. I think we've probably covered the narrative, the bull and bear case narrative is pretty, pretty thoroughly here.

• 2:07:25Ben Gilbert?

  But let's nail them though, because I feel like it's, let's get crystal on, on sort of what, what different folks would paint, because I think we've alluded to a lot of things, but I think it's important to, to sort of paint what different people were saying about the company going into the IPO. So the fascinating thing was in the Uber Roadshow, they were comparing themselves to Amazon. And one of the reasons was not only are we, you know, going to develop into this massive global market, but Amazon famously didn't make a profit for, you know, had this razor thin. They never really made any profit for the longest time. And when they IPO'd, they were generating losses. Now, of course,

• 2:08:06Ben Gilbert?

  the fallacy there is they were not generating $3 billion of an operating loss. But that is sort of the way that they were positioning it to IPO buyers. They've also shown like incredible growth in Uber Eats. So it's already more than 13% of Uber's revenue. It's only a few years old, but last year they did one and a half billion in revenue. The year before was only half a billion in revenue. So just wild, you know, bright star there for, for Uber Eats. And I have massive personal gripes with the way this S1 was written because it made my job researching this, this episode just terrible. And they intentionally did

• 2:08:49Ben Gilbert?

  this. And, you know, it feels not dishonest, but in a gray area, it is extremely difficult to figure out how the ride sharing business is doing because Uber has chosen to create Create a metric called monthly active core platform users and they group core platform as ride sharing, Uber Eats and new methods of multimodality transport, so scooters and e-bikes and micro mobility. So the bull case is that their monthly active core platform users continues to to rise. I think a lot of that growth is Uber Eats, but really hard to to read into that. But to the extent that that's the number you're looking at, users continue to rise and.

• 2:09:35David Rosenthal?

  Yeah, I think the other part of the bull case here is that we're still less than two years into Dara being the CEO of Uber and his ability, both through his personality, but also through his background to be a peacemaker and a dealmaker around the world and return the dynamics, the unit economics and dynamics of Uber's core operations to something much more profitable and sustainable versus all the wars that they've been in.

• 2:10:02Ben Gilbert?

  So yeah, the thing that you I think have to believe is, well, look, globally across all these fragmented markets that is ride sharing, it's one of the largest Uber markets of of all time. And, you know, they are really well positioned to be the main player in the space and own big chunks of these companies in other other markets. And at some point when they are able to ramp down marketing spend, they're they're going to generate, you know, a lot of money. The thing you have to sort of ask yourself is, okay, well, when is the knife fight going to end? Like, how, what will be the catalyzing event for all companies involved to start making money instead of spending to steal share?

• 2:10:44David Rosenthal?

  Yep. And with the Lyft IPO, you know, six weeks or so ago, and them now being a public company, I don't see that happening in most US markets any anytime soon.

• 2:10:55Ben Gilbert?

  Yeah. Yeah. Yeah. Okay, well, let's go into bears. This may take a little couple of minutes. So revenue growth has slowed pretty dramatically. If you look at the ride hailing business from 2016 to 17, it grew 100%. From 2017 to 18, it grew 42%. And then over the last two, maybe three quarters, it's been basically flat. So the growth is not coming from the ride hailing business. So if you want to believe that this is a growth company, and it is, because they're on a lot of vectors, it's not coming from ride sharing. And you have to really be honest with yourself and acknowledge that.

• 2:11:37David Rosenthal?

  Well, and a big problem there is that there probably is a lot of growth happening in ride sharing, but they've also been losing share in the US in their core markets to Lyft over the last year. So there's growth happening in some markets, but attrition happening in others.

• 2:11:51Ben Gilbert?

  Yes, so this is something that was a little buried also in the S1, but you can find where they come out and say, "In 2017, our ride sharing category position in the US and Canada was significantly impacted by adverse publicity events," which we covered. "Although the rate of decline in our ride sharing category position has since 'moderated,' our ride sharing category position generally declined in 2018 in the substantial majority of the regions in which we operate, impacted in part by, of course, heavy subsidies and discounts by our competitors in various markets that we felt compelled to match in order to remain competitive." And so the takeaway here is, I think the important word there is moderated.

• 2:12:36Ben Gilbert?

  They are still losing share in these core ride sharing markets. So anyone who wanted to blame Delete Uber for Lyft's resurgence and say, "But we're all good now, we're growing share again," it's just not the case.

• 2:12:48David Rosenthal?

  Yep.

• 2:12:50Ben Gilbert?

  Another thing, so that's looking at growth and of course, the way that these IPOs tend to get valued as growth stocks, we're early in a company's life, there's lots of growth ahead, you know, they're going to get more profitable over time, they're going to both get more profitable over time and continue to grow at these great rates that they've been growing, not like a little 10% public company growth rate, but like a, you know, these, these sort of startup, you know, growing 30, 40% per year growth rates. So I said, get more profitable. Now let's dig into that and specifically into contribution margin. So the contribution margin for the core platform business, which is of course, the

• 2:13:29Ben Gilbert?

  ridesharing and Uber Eats, which was 18% a year ago, was actually negative 3% in Q4 of last year. So really sort of dangerous trend there where we start to see them, you know, even-

• 2:13:43David Rosenthal?

  And that's a direct reflection of, of the subsidies and competition.

• 2:13:47Ben Gilbert?

  Completely. It's that and it's because this is all lumped together into one category here, it's also very likely due to the, the aggressive marketing spend for the rapid expansion of Uber Eats.

• 2:13:58David Rosenthal?

  Yep.

• 2:13:59Ben Gilbert?

  But nonetheless, it's, it's, you know, I don't, you don't want to see a contribution margin shrinking as a company is getting more mature.

• 2:14:07David Rosenthal?

  Yep.

• 2:14:08Ben Gilbert?

  So I think those are the two biggest things, the growth and the contribution margin that are scary from a bear perspective. One thing to flag is that a lot of very high-profile investors, including Founder Collective and SoftBank, are selling big chunks of their shares in the IPO, sort of, they, they sold them last night to new investors as, in a secondary transaction rather than sort of waiting for the lockup period. This, I wouldn't read too much into this because they're, the money's been tied up for a long time, they're trying to get liquidity, and this is not unprecedented, but it's certainly not an encouraging sign if you're a sort of potential buyer.

• 2:14:42David Rosenthal?

  Yeah, I agree not to read too much. I mean, these are shareholders that have been holding the shares for a very long time.

• 2:14:49Ben Gilbert?

  Yes, super fair.

• 2:14:50David Rosenthal?

  But no, I think the question is, a lot of the questions that emerged when the dynamic changed for Uber, both nationally in the US and globally with the emergence of peer-to-peer right sharing, you know, the hope was that the massive amounts of capital raised and the operational investments would have settled those questions over the last four or five years. They're still very much open questions. Doesn't mean the market is still enormous and massive and the potential is there. And relative to the way, way back in the beginning of this episode, where there were 1,500 taxi cab medallions in San Francisco, this market is so much bigger and open. But who will win and how it will play out and the unit economic impact of that is still an open question.

• 2:15:36Ben Gilbert?

  Yep. The other thing is, there's a, this isn't really a bull or bear, but it's interesting to just think about this. 20% of the value of this company is actually a holding company. They own 15% of DD in China, 38% of Yandex Taxi in Russia, 23% of Grab in Southeast Asia. And that's, that's $18 billion of equity that they own in these other companies. And if everyone remembers the Altaba episode with Yahoo and Alibaba, being a holding company that owns a bunch of other assets, you don't get to value the assets at exactly what they're trading for because there's sort of inherent risk in, well, is this entity going to be able to get liquid on those assets if they ever

• 2:16:18Ben Gilbert?

  needed to. And so, you know, a good chunk of Uber's valuation is actually holding these foreign right sharing companies.

• 2:16:24David Rosenthal?

  Yep.

• 2:16:25Ben Gilbert?

  All right. So that's bull and bear. Let's go and grade this thing.

• 2:16:30David Rosenthal?

  Long pause.

• 2:16:32Ben Gilbert?

  I'll make a couple of points first before we paint sort of what an A+ would look like if, you know, we had six to 12 months to reflect back on this thing. And then, of course, what an F would look like. It's worth noting that every shareholder who bought shares since, gosh, end of 2015, including everyone who bought in the IPO last night, is now underwater. They had a pretty terrible narrative leading up to this thing that was really botched, where a year ago, investment bankers were rumoring that there would be a $120 billion market cap for this company when it IPO'd. And a couple of months ago, the rumor sort

• 2:17:14Ben Gilbert?

  of changed to 100 billion. And then they gave guidance that they were going to have an IPO range that went somewhere from, you know, mid 80s up to low 90s. And then they priced at the very bottom of that range. So coming into this IPO, it already felt like it had been sliding. I mean, the sort of public sentiment was, I'm buying something on the way down. So it's not surprising that there wasn't a big pop on the first day. Uber, to their credit, was conservative on pricing, which I think was a good idea. But the question is, what do you have to believe to love this right now? And one is that ride sharing will somehow get less competitive, marketing spend will decrease.

• 2:17:54Ben Gilbert?

  And, you know, the other is that they've built this incredible infrastructure, and now they can really light it up with Uber Eats and other things on their infrastructure that are great businesses. But of course, Uber Eats is also wildly competitive with DoorDash and Grubhub. So that's also not a, not a smooth sailing market. What this section really tries to get after is, great, they just raised $9 billion. Are they going to be able to effectively use that? And what will it look like if they effectively use that? Well, they needed to raise a bunch of money. Like, I will say, it went well by the criteria of, oh my God, they needed to raise a bunch of money and get it into

• 2:18:35Ben Gilbert?

  the company's coffers, and they did. There's no pop, so people who bought the IPO, at least so far, did not see an immediate benefit, although, you know, they should be holding for a long time anyway, and we'll see what happens in a year. But Uber got basically the most money that they possibly could have out of this IPO.

• 2:18:54David Rosenthal?

  The capital markets, yeah.

• 2:18:55Ben Gilbert?

  Yeah, if they're taking an operating loss of $3 billion a year. Oh, and by the way, they said they think that will continue to increase this year. Like, they need a lot of money in order to start to pull out of this thing. And it wouldn't surprise me again if we saw a secondary offering at some point where, when they felt good about their share price, they tried to sell more of the company.

• 2:19:14David Rosenthal?

  Yeah, it very much could happen. And I think, I think the question is, yeah, when will, when will it turn? But you know, it's, it's so funny. The scale is orders of magnitude larger than Amazon. But I will say, this is the Amazon story and the Amazon history. And so I think, yeah, the A plus case is exactly what Uber, what Dara and the company have been saying on the roadshow and through the IPO process, which is, this is Amazon. We are bleeding tons of money, but we are building this infrastructure across multiple businesses that will, that will be extremely defensible and profitable in the long term. And I think that is a credible story. It's a very credible story.

• 2:19:56Ben Gilbert?

  It's a credible story, but this company's worth $20 billion and they're however, 10 years old. Like, can we get more than a credible story?

• 2:20:05David Rosenthal?

  I know, I know. But that's the, so I think that's the, that's the, that's, that's the A plus. Yeah, 100%. And

• 2:20:12Ben Gilbert?

  And so let's get more specific on what that looks like. They are contribution margin positive on the ride sharing business, some small number of years from now, and Uber Eats continues this great, great growth rate that they're on and also gets profitable.

• 2:20:26David Rosenthal?

  Well, and because they, I think the other part of the story is because they share the same infrastructure and supply side across both of those businesses and potentially other businesses in the future, that is going to be a very strong battleship, if you will, that will turn the tide in their fight with competitors, that their economics will be fundamentally different than others.

• 2:20:46Ben Gilbert?

  They can afford to spend more on the infrastructure than Lyft or any of these players that don't have something like Eats.

• 2:20:51David Rosenthal?

  As they acquire the supply side that they're spending to acquire drivers, they're leveraging that spend across multiple businesses, whereas competitors are only leveraging it across one business.

• 2:21:01Ben Gilbert?

  Yeah. My other favorite structural advantage of that that I saw was somebody pointed out that if you can keep a rider, a driver busy 100% of the time between Eats and the core ride sharing business, then they have less of an incentive to multi-home on, on other apps. And then if you reduce the supply on Lyft, then it's a worse driver, a worse user experience, et cetera.

• 2:21:20David Rosenthal?

  And you can start to tip the field. And as we talked about on, you know, another company that Bill Gurley was intimately involved in on our Rover Dog Vacay episode and that I saw firsthand. That is absolutely true. If you can tip unit economics in a market in favor of one competitor over the other, they will tip. So I think the A-plus scenario is this capital infusion gives them the resources to be able to do that.

• 2:21:45Ben Gilbert?

  And the F scenario is it just takes too long. They go for this and I think it's more likely that like, given an infinite timescale in dollars, they'll actually be able to do this. I think all the fundamentals hold. I think the F scenario is they're not able to access the capital that they need to. And I think investors stop signing up to put more cash in before the music stops. And I think that there's a very, you know, that could also happen. I don't know what happens to Uber at that point, but you know, that's definitely the downside scenario is they can't get it done in a short enough timeframe to not need to go and access new capital in a really either dilutive or

• 2:22:30David Rosenthal?

  Or potentially not accessible.

• 2:22:31Ben Gilbert?

  Company challenging way. Yeah.

• 2:22:32David Rosenthal?

  Yeah. Well, I think that's the, so yeah, if I'm in the shoes of Dara and the Uber Board and SoftBank, given their influence here, I think I would imagine like the $9 billion that they just raised in the IPO, like that's my timeframe. I think you have to believe there is no more capital coming.

• 2:22:50Ben Gilbert?

  Yep. That's a great point.

• 2:22:52David Rosenthal?

  So, all right. Well, the F obviously is that doesn't work. I'm sure there will be some follow-up episodes we do on this, various transactions along the way. So stay tuned to Acquired in the coming years. But this is, just to put a bow on this, you know, and thank you listeners for bearing with us through this super extended piece, just like the Lyft IPO, we had to do this here. Like this is the, you know, this is the, not the only, but this is one of the key stories of our time. And we wanted to do it as justice and be as fair from all sides as I think we could. So hit us up with any feedback, but we're super excited to see where things go from here.

• 2:23:34Ben Gilbert?

  Indeed.

• 2:23:36David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 2:23:42Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 2:23:53David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 2:24:13Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 2:24:26David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:24:37Ben Gilbert?

  Well, if you aren't subscribed and you like what you hear, you should. We will be continuing to cover all of these big upcoming IPOs. And if you want to go deeper on what it's like to build a startup, get interviews with expert operators and VCs, and explore some of David and my personal beliefs, you should become a limited partner. You can click the link in the show notes or go to glow.fm/acquired. And I promise you'll be overjoyed with how buttery smooth it is to get more acquired right here on your favorite podcast player. And everyone gets a free trial. So don't be afraid to give it a shot. We've got some awesome, awesome episodes coming up. And we'll see you next time.

• 2:25:13David Rosenthal?

  We'll see you next time.