For about a decade, Uber was the poster-child for the excesses of the venture capital model. It was seen as the ultimate ‘millennial lifestyle subsidy’ – where wealthy investors funded unprofitable startups that offered discounted services to their mostly-young users. Uber spent tens of billions of investor money to offer below-cost rides in an effort to expand quickly around the world and fend off rivals like Lyft, Didi and Ola.
But Uber has turned that story around the past few years, under the stewardship of CEO Dara Khosrowshahi. The most recent quarter was Uber’s best financial result to date. As Khosrowshahi explained:
Our strategy remains to build best-in-class verticals across Mobility and Delivery and our Q2 results demonstrate that strategy is working. We reached two important milestones: our first-ever GAAP operating profit, $326 million, and our first quarter of free cash flow of more than a billion dollars, $1.14 billion to be precise.
The fascinating thing about this story is that the early VC thesis has played out. The thesis came under a lot of criticism: raise more than you think you need, spend faster than you think you can, expand aggressively and establish a dominant market position before your competition can catch up. Then, and only then, worry about profitability. Uber spent a lot of money pursuing that strategy. But as they sit today, they own 74% of the ride share market in the United States. The thesis played out, now they are preparing to start paying their investors back.
This article is a deep dive on how Uber has turned itself around and what is coming next for the world’s dominant ride share and food delivery player.
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