It's an exciting time. New company, great prospects, money invested, lawyers signed off the paperwork. Money transferred. What now? Start adding value to the company. It's fun meeting people, promoting the product/service. More customers. More income. Break even. Sell the company, lots of money for everyone. That's the picture Business Angels buy into. But is it the reality? What's the impact if you are not focusing on the exit from day zero?
While I was in the States I decided to try out Uber for the first time – in total I had 3 rides in Uber and 1 in a standard taxi. That’s a very small sample so how did it go?
First the taxi took me from San Francisco Airport to Google. That cost $110 in total, I don’t think the driver did spoke much English but he certainly was very grumpy. I tried to engage some conversation but learned nothing.
So what was the Uber experience?
For a start, the software is easy to use, works well and it is comforting to see the selected car approach. Well, this was the case once I got it to accept my money. Three debit cards and Paypal were refused and (in common with a lot of software these days) I got a message saying “refused” and no help to indicate what the problem was.
The cars arrived within five minutes and were very clean and comfortable and all the drivers were interesting and engaging. One even offered me a small bottle of water during the ride.
One was a Nepalese man who had been in Sydney for two years and was doing Uber when he wasn’t working at the hotel so that he could earn money to send home to bring his wife and two children to the USA for a safer life. Uber provided him with the change to “top up” his earnings in his spare time.
The last driver was an Indian with a wife and two kids who was working 12 hours per day, 7 days per week doing Uber. He rarely saw his daughters because he was driving all the time. He was frightened to refuse any offered job because he believed that he would not be offered any more and he really needed the income. His plan was to continue another six months until his wife’s papers came through so that she could do some taxi work and share the load while he got back into the hospitality business (he used to run a hotel). But it would be a long six months without a break.
He took me on a longer journey than the taxi – 30.24 miles or 32:25 minutes – for which I was charged just $37. Of that he received around $25 (Uber does not tell the customers the amount the driver gets so he told me). The fees to Uber were 32% of the ride cost. In fact I found out that they have dramatically increased recently from around 5%. What does he get in exchange? He paid $12 for a platform that matches customers, insurance, and flexibility of working hours.
So after the cost of the car, petrol, car maintenance, etc. what does that leave him? I did some internet research but couldn’t find anything that helped to answer this question. I did find that the minimum wage in California is $10ph per hour ($17,600pa) and while he will receive more than that I can’t see him getting that much more after all these expenses are accounted for. While this driver did have a job (where the only qualification is to be able to drive and have a car) he felt trapped. He was working long hours to house and feed his family and therefore didn’t have time to pursue other options that may be more lucrative. He didn’t have much good to say about Uber or its CEO, Travis Kalanick, either. In fact he informed me that it was challenging to get Uber in San Francisco because the consumers were “boycotting” it and there are alternatives – Lift charges just 5% but doesn’t have the market exposure. I didn’t have the opportunity test this service.
Personally I’d rather pay a little more than Uber so that those who work hard are rewarded for their effort, have someone who can speak English and is happy to talk. The ideal exchange is somewhere between Uber and the Taxi. One solution (which I used) was to tip the Uber driver something towards the difference!
So Uber, good or bad?
Good that anyone can earn some extra income if they have a car.
Bad for those whose only source of income is Uber. It is even more challenging to make a living with Uber than with a standard Taxi and I thought Taxi drivers had it hard!