Uber’s Challenges Continue to Mount

Ride-sharing pioneer Uber is in many ways a start-up’s dream. It is operating in 570 cities around the world, did $6.5 billion in revenue last year, and has been given a valuation of $70 billion by venture capitalists, higher than most automakers around the world.

Uber’s impressive growth, though, has not hindered it from being a frequent target of criticism, some of it leveled at it’s CEO Travis Kalanick. Ride-sharing has been deeply opposed by taxi drivers since companies like Uber and competitor Lyft have existed. More serious concerns have included the safety of passengers, particularly female ones, as well as the company’s classification of its drivers as independent contractors and not employees. Earlier this year, a former Engineer accused the company of tolerating sexual harassment within its workplace and a subsequent investigation by The New York Times accused the company of having a broader culture that tolerated harassment as well as drug use. All of this suggests that Kalanick, a founder of an innovative company, might not be ready for primetime as the CEO of a major business.

The headaches for Uber do not appear to be going away either. Europe seems to be poised to rule that Uber is a transportation company and not an app, a distinction that means the company would face substantial regulation that would include increased training and certification for its drivers.

In order to navigate the increasingly difficult worlds of public relations and regulatory compliance, the company has been searching for a COO to help Kalanick, but his reputation and behavior have made that search challenging. Mr. Kalanick’s ownership of super-voting shares means that he cannot practically be forced out of his position without acquiescing.

While Uber’s valuation is based, in part, on its massive market share in an industry with enormous network effects, a very small percent of the population are currently using ride-sharing services. In the United States, that figure is only about 6%. That could leave Uber vulnerable to losing its position if newer users do not also migrate to its service. Uber currently controls about 74% of the market in the United States. If that figure should fall, perhaps Mr. Kalanick will step aside to preserve his investment. Until then, the owners of closely held Uber will hold their breath that a capable COO can be found and that Kalanick will get the “leadership help” he says he needs.

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