I find a paradoxical problem with many startups.
On the one hand they have this grand vision and don’t understand the baby-steps they need to execute on in order to be able to reach -and deliver on for users- that vision of their shiny idea. You can’t just functionality-build your way to a user base or owning a market, which so many startups (including one or two of my own in the past) have tried to do.
The flip side is that often the vision itself isn’t big enough, or perhaps articulated well, or clearly enough. And this is about big problems and big markets, not necessarily about the specific revenue mechanism.
With this in mind I wonder what vision Uber is selling to its investors. Certainly it got the baby-steps right. i.e. A basic app with flashing read dot, serving a handful of users in San Francisco. Iterating the service -and no doubt discovering how addictive users find it, as I did to my shock horror when I had my first credit card statement in month one of using it- they executed on the next steps to deliver their vision, for sure dominating taxi servers in all major cities across the globe over the coming years. A multi-billion dollar market opportunity.
How is Uber worth $42+ bn?
I wonder though whether they’re selling something even bigger. Google self-drive cars (and others) are poised to revolutionise transportation – and upend society in the process – in a way few people are yet to realise. If I were Travis (aside from making some different decisions around my company culture!) I would be selling the potential to own an individual’s car travel beyond use of taxis in their traditional form but to become the complete and entirely (likely cheaper) replacement to owning a car at all.
Why own a car if they can drive themselves, are serviced by someone else and are precisely everywhere? Automated driving means less traffic jams, better economy for fuel/electricity, not paying a driver, no maintenance headaches. In fact, driving becomes a leisure pursuit almost exclusively, not for travel A to B.
With $4bn+ in funding (and no doubt more to come) that potential blue sky opportunity starts to be a real possibility over the next 10 years.
STOPPRESS 4th Feb 2015: Seems I predicted correctly, since this post was published Uber to open self driving car facility
Selling Blue Sky
Selling that vision to an Angel or Series-A, or even B, would likely never have worked though. You have to get to first, second, third base first. That was Ubers simple want to own the world of taxi’s. With that strategy in full flow, any future share price may well be driven by what once seemed like blue sky thinking.
When you’re selling in your vision, thinking really BIG is important (I don’t invest in any startup which isn’t a potential future $1bn company) just make sure you understand how you’re going to get there.
In the extreme, that means how can your shiny new app be useful and solve a problem for it’s first 10 users, or you’ll never reach critical mass, because that’s the bit most startups -including in the past my own – seem to fall down on.
The answer is babysteps – that’s how Usain Bolt (and Uber) started too.