@Uber CEO Wasn’t Fired For Scandals
Uber, valued at $69.8B as of Feb 2017, is still the top dog in ride-hailing service worldwide. No doubt its dominance has influenced many businesses and locales. To “Access (P2P/gig) Economy”(Read ref.8) and social structure, a few gained but most took a loss. It’s hard to judge or justify Uber’s model as a disruptive innovation, but it does revolutionize the taxi hailing industry and food delivery logistic (#UberEat) at some points; And provide a new income source to whom needed; Also, a new sales & branding channel to businesses like Shell and McDonald (#McDelivery).
On Aug 1, 2016, Uber sold its China operation to Didi Chuxing in exchange of receiving a 5.89% share of the combined entity with preferred equity interest, which is equal to a 17.7% economic interest and becoming their largest shareholder; And both founder CEOs will also join each other’s board. The decision made was believed that Uber’s China investors would like to eliminate their continuous exponential loss, a matter of fact Uber as a whole has then recorded US$1.2B negative profit in 1H16 and more than half of that loss ($750M) accrued in 2Q16; And $800M furthermore in 3Q16 (a $3B total loss in 2016). This is only a small observable molecule in its gigantic financial black hole. Today, the 21 days after the Uber’s co-founder Travis Kalanick has resigned from his CEO position, Uber just announced its withdrawn from six additional countries include Russia, and will join a partnership with its rival Yandex, the Russian search giant and operator of the ride-hailing service Yandex.Taxi, to form a new entity operating the Russia and other Eastern Europe markets. And this deal is valued at $3.4B, now pending for regulatory approval. Sound familiar? The competition Uber faced in Russia is very much alike what they had in China but even more brutal; The operation of Yandex.Taxi is twice the size of Uber Russia, a very unfavorable condition for the 7 years-old not profitable unicorn to compete with. Without a concrete IPO roadmap, where can Uber hunt for more money for its capital intensive and high-subsidy business model? Seemingly not possible from its existing investors (Latest Round: $1.15B Debt Financing from Lead Investor Morgan Stanley and 3 other bankers) already pooled in billions and billions of dollars.
In a few weeks before Travis’ resignation, his parents were very unfortunately died in a boat accident, and sequentially, he requested the leave of absence. But there’re already many press media pointed out that his decision was persuaded by the board to doing so. Strangely enough, in a long period of time, the position of COO, CFO, CMO, and CTO were all vacant for various reasons, in which it’s extraordinary to any corporation, especially to a 2016 reported $6.5B net revenue company cross-operating globally; All major decision making and report chains have been streamlined to Travis himself. Besides that, the acquisition of Otto Motors, a self driving truck startup founded by the star engineer, Anthony Levandowski, from the Google self-driving car spinoff Waymo, alleged downloaded 14,000 confidential files before leaving GOOG, caused the Uber vs Waymo Court Showdown, is going to cost the company a very expensive settlement. There’re also other scandals like India Rape Case Medical Record, Uber CEO caught on video arguing with driver over falling fares, the Greyball Investigation, and AAPL CEO Tim Cook personally warned Travis about their misbehavior in tracking customers and authority (Read ref.4). Upon all scandals, the most controversial one is its CTO Thuan Pham had knowledge of Susan J. Fowler’s sexual harassment allegation at Uber and her manager’s threatened retaliation, and did nothing. According to different journalists, this is the tripping point where Travis Kalanick was forced by the investors to leave for his inability effectively cultivating the Uber’s culture. But I would rather say this incident has given an excellent excuse to the Investors Board to cut off the billions dollars loss business model Travis insisted on. Perhaps, Travis might have long detected the negative synergy and dissatisfaction from his investment bankers, and attempted to protect himself for such a doomsday happened but which comes too late.
Silicon Valley’s long-known “Hustle-Oriented” culture is always circulating inside the blood veins of every startup, and Uber is no exception; This has also buried a ticking bomb within Uber waiting to explode. Perhaps, all these dramas could have avoided by filing IPO or keeping the company away from bleeding billions of dollars and declining valuation no investor (79 Investors funded $8.81B in 14 Rounds) wanted to accept (Read ref.9). The bottom line of every investor is nothing but “Positive Return on Investment (ROI)”, also the root cause set Travis Kalanick fired today.
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9. Inside Travis Kalanick’s Resignation as Uber’s C.E.O. (The New York Times)