PDF Summary:The Upstarts, by Brad Stone
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1-Page PDF Summary of The Upstarts
Curious about how Uber and Airbnb grew from seedlings to internet juggernauts?
The Upstarts covers the history of Uber and Airbnb, from their founding in 2008 to present day of 2016. Learn how each company started as just a side project, gathered momentum, and grew exponentially throughout the world. Learn how neither Uber nor Airbnb was the first idea of its kind, but through strategy and will, they came to dominate. Also learn how Uber and Airbnb attracted the ire of government, incumbents, the collaterally damaged, and its own customers.
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- More drivers caused less wait time and cheaper fares, which caused more riders to join and more rides to be taken, which stimulated more drivers.
Airbnb had natural international virality built in. Travelers who used the service would consider listing their own places.
- More users encouraged more inventory which encouraged lower prices which attracted more users.
Both circumvented local laws.
Uber
- Most cities regulate cabs and restrict the number of cab medallions available. By law only taxis can pick up people who hail on streets. Uber bypassed this regulation, allowing pickups by electronic hails, and using the phone as a fare meter.
- California wanted Uber to register as a limo company, but Uber argued it was not a fleet operator but rather an intermediary, much like Expedia wasn’t an airline.
- New York City required drivers of town cars to be affiliated with a base, like a professional fleet. Initially refusing to register Uber as a base, Kalanick eventually acquiesced.
Airbnb
- Large-scale property owners circumvented hotel laws requiring registration and taxes if they didn’t live in the unit being rented out for most of the year.
Both used popular consumer support to fight regulation.
Uber
- They fought local legislators by mobilizing users. Uber published phone numbers, email addresses, and Twitter handles of politicians and asked users to make their voices heard.
Airbnb
- Created a group called Peers to hold meetups among hosts to influence lawmakers.
- Generally, Airbnb didn’t have the same firepower Uber did. Hosts only rent out apartments a few times a year, unlike Uber drivers whose full time job could be to drive. And travelers by nature travel outside the city they live in, thus local regulation doesn’t affect their well being like Uber regulation would.
Both seeded the market with hacky growth tactics.
Both companies leaned on aggressive marketing tactics to gain market share and deal with competitors.
Uber called competitor cars en masse, sent them invitations to join Uber, then canceled rides.
In 2009, Airbnb used Craigslist, one of its main implicit rivals: 1) email anyone who posts a rental property on Craigslist asking them to join Airbnb; 2) in the reverse, allow Airbnb users to cross-post their listing to Craigslist frictionlessly. Craigslist eventually sent a cease-and-desist in 2012.
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You’ll also appreciate the vast amount of controversy both companies dealt with, from regulators and incumbents to the local community and their own customers - all while trying to keep the wheels from falling off of their rocketship growth.
PDF Summary Uber History
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June 2010: UberCab goes live in iOS. They get rejected by most investors, including 150 investors on AngelList. They raise $1.3MM at $5.3MM valuation.
- A handful of notable investors come in early (Chris Sacca, Mitch Kapor, Jason Calacanis, Alfred Lin, David Cohen, Naval Ravikant) but many investors still had serious doubts about Uber.
July 5 2010: TechCrunch writes about UberCab.
Fall 2010: Uber is growing virally. If you step out of a black car, your friends will ask what in the world you’re doing.
October 2010: state and SF government officials give Uber a cease-and-desist, threatening penalties of $5,000 per ride and 90 days in jail for each day the company remained operating.
- This fight is the impetus for Kalanick to join Uber full-time, recalling his legal fights at Red Swoosh (a peer-to-peer file-sharing company). He negotiates a 23% stake in Uber for joining.
- Ultimately government officials agree with Uber’s claim that it was merely an intermediary between drivers and riders, not...
PDF Summary Airbnb History
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- Beforehand, Nate and Seibel are dismayed, thinking it’s a dumb idea and a distraction. Paul Graham later uses this as an exemplar of grit.
Winter 2008: Airbnb enters startup incubator YCombinator. In what is now part of startup lore, Airbnb notices that hosts in New York aren’t advertising their properties appealingly. Constrained by budget, Chesky and Gebbia personally visit hosts in the guise of professional photographers and take photos to improve listings.
March 2009: Greg McAdoo at Sequoia convinces Airbnb not to pitch at YC demo day, instead investing $585k for a 20% stake.
Through 2009: Chesky feels success isn’t coming quickly enough. “When you’re starting a company it never goes at the pace you want...You start, you build it, and you think everyone’s going to care. But no one cares, not even your friends.”
Late 2009: Airbnb starts two growth campaigns centered around Craigslist: 1) email anyone who posts a rental property on Craigslist; 2) in the reverse, allow Airbnb users to cross-post their Airbnb listing to Craigslist frictionlessly. It also optimizes Google and Facebook...
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Learn more about our summaries →PDF Summary Commonalities Between Uber & Airbnb
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* Failure diagnosis: timing was too early
- Zimride
- In fall 2005, Zimride was founded to enable carpooling (literal ridesharing). With Facebook’s recent rise, they established real identities to overcome the trust barrier. Popular in college campuses, users used it mainly to carpool on long-haul rides.
- In summer 2009, they took funding from Floodgate. Their model was to sell custom versions of the app to universities and companies.
- By 2011, they realized Zimride wasn’t going to be huge. Most users didn’t use Zimride more than a few times a year. Carpooling on commutes or long hauls just wasn’t frequent enough.
- In early 2012, they pivoted to allow short-distance travel within cities. Seeing a giant orange mustache in a cubicle, they gave each driver a pink mustache to stand out and look friendlier. They became Lyft.
- Lyft and Sidecar were actually earlier to market with ridesharing (unlicensed drivers with their own vehicles). They paved the way in regulation for Uber with UberX in 2013.
- Taxi Magic
- Taxi Magic began in 2007 to allow booking taxis on-demand. In June 2008 (when the iPhone launches), Taxi Magic received tens...
PDF Summary Miscellaneous Notes
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* Chris Sacca: “You can’t say out loud, ‘Fucking get over it,’ you have to be like, ‘We are working on it, good feedback, we’ll improve the app.’”
- In response to the EJ incident, Chesky writes “we have really screwed things up” and appended his personal email to the letter. Read the original letter.
- In response to 7x surge pricing, Kalanick tweets defensively, arguing the price is always visible.
Miscellaneous Notes
- Negative churn
- Uber saw that users who joined were more likely to stay with it and increase their usage over time.
- Forcing good host behavior
- A challenge was getting hosts to reply to guests’ messages. The solution was to make the host’s response rate publicly visible (eg “this host responds to 50% of messages”), thus affecting their chance of being approached.
- Arguments and analogies
- “Ridesharing will cause terrible accidents to uninsured drivers.” “That’s like restricting wireless phone service because people are afraid they’ll be cut off from 911 if their cell phone batteries die.”
- Both took advantage of macro economic trends.
- ...
PDF Summary Notable Quotes
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“The great companies, the PayPals of the world, don’t get scared by regulation.” - Kristin Sverchek, Lyft’s counsel.
On meetings between Chesky and Kalanick: “Brian would come back saying, ‘We have to be tougher!’ and Travis would come back saying, ‘We have to be nicer!’”
“The minute your car becomes real, I can take the dude out of the front seat. I call that margin expansion.” - Kalanick, on Google’s self-driving car.
“Grow really, really fast. You either want to be below the radar or big enough that you are an institution. The worst is being somewhere in between.” - Chesky, on how to combat regulation.
“You need to be willing to partner with cities and tell your story. We found the most important thing to do is to go and meet city officials...It’s hard to hate up close.” - Chesky, on how to combat regulation.
“When this community is empowered to be a movement, we cannot be beat.” - Airbnb head of policy Chris Lehane, at Airbnb open, to hosts.
“We could tell from the way they looked at us that they thought of us as just another local taxi app from Sichuan. Foreign companies see China as a territory to be conquered.” - Cheng Wei, Didi founder, on meeting with Kalanick and...
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