According to Uber cofounder Travis Kalanick, the contest quickly moved beyond riders and drivers and became a fierce competition for venture capital. Speaking on the TBPN podcast on Saturday, Kalanick said the rise of ride-hailing was shaped as much by fundraising strategy as by product innovation.
Describing Uber as more than a ride-hailing platform, he said, “At Uber we were building the network for the physical world in the form of digitised transportation.”
As Uber’s growth accelerated, investors who had missed the opportunity to back the company began funding its rivals, Kalanick revealed. “Uber was doing so well and then all of a sudden a whole bunch of VCs were like, ‘I want a piece of that and I didn’t get Uber, so I’m funding the competitor.”
Lyft went public about six weeks before Uber, becoming the first major US ride-hailing company to list.
Lyft’s market valuation reached approximately $19.6 billion following its IPO in March 2019, whereas Uber was targeting valuation between $90 billion and $100 billion that April. This was expected to be the largest IPO since Alibaba Group Holding went public in 2014.
Uber shares listed at $45 per, versus Lyft’s $72.
Capital strategy
During Kalanick’s tenure, “Capital became a strategic weapon,” he said. “Which means you must be the best at getting capital in order to win.”
That philosophy helped drive Uber’s massive late-stage funding rounds. By 2016, the company had reached a private valuation of $68 billion, making it the world’s most valuable startup less than seven years after its founding in 2009.
To manage intense investor demand, Uber turned fundraising into a system. In its New York office, the company once ran four parallel investor rooms for an entire week, Kalanick said.
Each room catered to a different class of investor, from institutions writing cheques of $250 million or more, to smaller allocations of about $25 million, handled by more junior team members.
“We were oversubscribed. So we started putting multiple investors in the same room. We were just out of slots.”
Uber even experimented with an IPO-style book-building process for private fundraising. Interested investors submitted how much they wanted to invest and at what valuation, allowing Uber to aggregate demand and set pricing internally.
“It was like an IPO book,” Kalanick said, “but done way better because you don’t have the bankers.”
He added that Uber was not alone in pushing private markets to new extremes. Founders such as Drew Houston of Dropbox and Brian Chesky of Airbnb were also redefining how late-stage startups raised capital.
CloudKitchens to atoms
After leaving Uber, Kalanick turned his focus to food delivery infrastructure. In 2018, he launched CloudKitchens, initially under the parent company City Storage Systems, with the goal of building real estate and technology infrastructure for delivery-only restaurants, often referred to as “ghost kitchens”.
On Friday, Kalanick announced Atoms, a new venture that absorbs CloudKitchens and expands into additional business lines, including robotics and automation. The firm’s core premise is delivering prepared meals so efficiently that their cost approaches that of grocery shopping.
Under the new structure, Atoms will focus on specialised industrial robotics rather than general-purpose humanoid robots.
“We’ve been quiet for eight years with thousands of employees who couldn’t even list us on LinkedIn,” Kalanick said, referring to the company’s secretive operations.
Microsoft participated in an $850 million funding round for CloudKitchens that closed in November 2021.
Following the investment, the company expanded rapidly across the United States, Latin America, the UK, and the Middle East, employing more than 4,000 people globally.
However, the Financial Times reported that the company faced internal cultural challenges and relatively high employee attrition following issues reminiscent of those previously reported at Uber during Kalanick’s tenure.
Also Read: Uber founder Kalanick’s KitchenPlus has made a tepid start. How long can its ‘cloudy’ future simmer?
Dara Khosrowshahi
Uber’s trajectory changed when Kalanick resigned as CEO following a series of corporate governance and workplace culture controversies.
He was succeeded by Dara Khosrowshahi, the former chief executive of Expedia Group, who took charge of Uber Technologies in August 2017.
Despite the leadership change, Khosrowshahi in an interview with ET in 2024, acknowledged the foundation laid by Kalanick, and said he was “the right person for Uber in its founding,” noting that the company’s core service, customer proposition, and driver economics were already strong when he took over.
“The core and the bones of Uber that he built were incredibly strong,” Khosrowshahi said, describing their leadership as a “tag team” across different phases of the company’s growth.
