Uber Drivers Up Against the App

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Harry here.  It’s been a tumultuous few weeks of news stories revolving around Uber but it seemed like we finally got a bit of a break this week.  

Today, RSG contributor John Ince takes a look at what NYC Uber drivers are up against, a great interview with Juno founder Talmon Marco, and can you take a guess which Uber competitor just raised another billion dollars?

Uber Drivers Up Against the App

Uber Drivers Up Against the App

Uber Drivers Up Against the App

Sum and Substance:  Class-action lawsuits have been filed against Uber, including in federal courts in Brooklyn and San Francisco, which seek to make the drivers full employees.

If the suits are successful, they could cripple Uber’s business model, though some legal experts have said they are skeptical that the drivers could prevail when they use their own vehicles and decide themselves when and whether to pick up passengers.  That leaves the traditional route of union organizing, which, in the case of the strikers in New York, has become chaotic.

About a year ago, the Uber Drivers Network approached Local 1181 of the Amalgamated Transit Union, one of whose organizers has been helping them plan rallies and collect union cards. The New York Taxi Workers Alliance, an advocacy group for yellow cabdrivers, claims to have signed up nearly 5,000 Uber drivers in the city. And on Feb. 2, the International Brotherhood of Electrical Workers, Local 1430, filed a petition with the National Labor Relations Board asking to represent another 600 Uber drivers who work at La Guardia.

In addition, a team has been working on a secret weapon: a driver-owned app to compete with those from Lyft and Uber, those from other ride-hailing companies like Gett and Via, and the taxi industry’s own two e-hailing systems, Way2Ride and Arro. The drivers designed the app themselves and have hired a company called Swift Technologies to build it. It could be ready as early as next month.

My Take:  This New York Times piece is the most comprehensive major media story I’ve encountered on what’s happening on the battlefront between drivers and Uber.  It recaps much of what has happened in recent attempts to organize a resistance against Uber, but just towards the end of the article, in the section I’ve put in bold italics above, there’s a kicker that jumped out at me.

Apparently in addition to the Juno venture (see below), there’s a driver organized venture that’s developing an app to compete with Uber, Lyft, et all.  Don’t know much more about it, but to effectively compete they’d need deep pockets, unless they form some kind of alliance with one of the non-Uber incumbents.  My my, how interesting this whole space has become.  Could a co-op/driver owned app ever compete with Uber?

Juno founder: “Everybody we talked to, they hated Uber with a passion.”

Sum and Substance: New ridesharing service Juno wasn’t planning to do any press for a few months. But when you put an app in two thousand cars in the media capital of the word and threaten to target the glaring weak spot of the highest valued company in Silicon Valley history… well, word tends to spread. 

Yesterday we speculated about the prospects and pluses and minuses of what we knew of the app. Soon afterwards, Juno’s founder and CEO Talmon Marco emailed me, arguing that my speculation– particularly that the company’s data collection on active Uber drivers was “creepy”– was wildly unfair. Despite his intention not to do press this early, Marco and I spent an hour on the phone yesterday afternoon as he explained details of Juno’s plans. The call was followed by a lengthy email exchange.

At the very least, Juno seems determined to have a different relationship with journalists than Uber. To be clear: Marco’s effort is still in the very early stages. Juno hasn’t yet picked up a single passenger. He’s raised money from just the cofounders of his previous company, himself, and friends and family, and is staying silent on the funding details. It’s “in the eight figures” he told me before apologizing for the broad range in what that could be. Let’s assume the $10 million-ish low-end. That’s still a hefty amount for an unlaunched business funded by founders and friends and family. Marco’s last company– Viber– didn’t raise outside capital and was sold to Rakuten for some $900 million. So he can certainly afford to bootstrap for a while.

And that’s another part of his differentiation: Unlike Uber’s would-be “baller” culture, which has maximized valuations damn the consequences, Juno’s founders say they aren’t motivated by personal enrichment, because they’ve already made plenty. Proof? They setting aside half of the founder’s stock to give to drivers.

My Take:  This is Sarah Lacy’s (of Pando Daily) follow up to last week’s big story on Juno.  Sarah spent an hour  on the phone with Juno’s founder and CEO Talmon Marco and came away with a gold mine of information about this new startup in New York City.  To me this is the most exciting development to come along in ridesharing since, well, ridesharing.  Basically Marco comes across as a tech savvy, and highly principled entrepreneur.

He’s doing things that really could shake up this industry, especially reserving 50% of the founder’s shares for drivers.  This is the stuff of revolution.  It has the potential to entirely re-order the incentive structure.  Instead of pitting drivers against the company and against the passengers, it creates an alignment of interests.  Very powerful stuff … much more powerful than most of the failed efforts to organize strikes and protests by honking horns and clogging city streets.

So what could go wrong?   The biggest hurdle Juno faces is building their brand, and that’s where Uber’s big bucks is a key competitive advantage.  Juno would need to have a key victory early, not unlike in the presidential race.  One key win catapults a candidate or a company into the game.

It’s just like Frank Sinatra sung years ago in New York, New York, “If Juno can make it there, they can make it anywhere.”   Investor’s will be watching this very closely. If they see Juno making headway in New York, they’ll make a move too – and invest.  Watch this one closely: this ridesharing race is still in the early stage of the primaries.

Drive with Uber 3

China’s Didi Kuaidi Is Raising $1 Billion More To Battle Uber

Sum and Substance: Didi Kuaidi, the company that has left Uber eating its dust in China, is currently in the midst of securing $1 billion in additional fundraising, according to the Wall Street Journal and Bloomberg.

We’ve corroborated those reports with a source close to the deal, who told TechCrunch — like both publications — that round is not yet closed, is apparently over-subscribed, and will value the company at over $20 billion.

Didi Kuaidi is no stranger to investor cash. Last year, it raised $3 billion (at a $16.5 billion valuation) to push on with its battle against Uber. That 2015 round started out at $2 billion before additional interest pushed it up, and we understand that the same could happen with the round that is currently on the burner.

Didi Kuaidi, which was formed a year ago when China’s top two on-demand services merged, is ahead of Uber based on total coverage of China among other metrics. The company’s array of transportation options — which includes registered taxis, Uber-style peer-to-peer rides, shuttle buses, and chauffeur services — are available across more than 360 cities and towns in China. Uber, by contrast, was in 22 cities at the end of 2015, although it recently kicked off a series of aggressive expansions aimed at increasing it to 100 locations by the end of this year. Further, Didi Kuaidi is also ahead on rides completed per day.

My Take:  This is just one more indication that the companies that survive in the ride sharing space, will the ones with the strongest balance sheets.  Uber is strong there, but so is Didi Kuaidi.  Even Lyft has raised huge amounts of investor capital for a startup.

Lyft settlement with drivers still in play as judge asks questions

Sum and Substance: A proposed settlement between Lyft and its drivers came under close scrutiny from the U.S. judge overseeing it on Thursday, an indication that the agreement that maintains drivers as independent contractors is still in play. 

U.S. District Judge Vince Chhabria in San Francisco issued several written questions about the deal, including some on the key issue of whether drivers for Lyft should be independent workers or employees. 

Lyft and larger rival Uber face separate lawsuits brought on behalf of drivers who contend they are employees and entitled to reimbursement for expenses including gas and vehicle maintenance. The drivers currently pay those costs themselves. The issue of employment status is a critical one for the so-called sharing economy technology companies. 

The planned Lyft settlement, filed last month, provides for Lyft to pay $12.25 million, as well as give drivers notice if they are to be deactivated from the platform and other benefits. Chhabria, who must approve the proposed class action settlement, noted that the deal would move drivers closer to independent contractor status. “If that is correct,” he wrote, “is this aspect of the settlement agreement contrary to the original goal of the lawsuit?” Chhabria directed both sides to answer his questions in writing, and a hearing is scheduled for March. 

The Uber and Lyft cases have been closely followed because a determination that the workers are employees rather than contractors could affect the valuations for other startups that rely on large networks of individuals to provide rides, clean houses and other services. While the settlement will involve some costs for Lyft, classifying drivers as employees would have been much more expensive and complicated. Chhabria also asked if other “sharing economy” companies classify their workers as employees, and if “there any factors specific to Lyft’s business model that preclude it from classifying drivers as employees.”

My Take:  Without being a lawyer, although I did audit classes at law school for a few years, it looks to me like the judge here is concerned about the legal precedent of this proposed settlement.  While Shannon Liss Riorden,  who I spoke with last week, may be interested in expediency here, knowing that she won’t get class action status for the Lyft lawsuit, the judge wants to make sure that the outcome of this case doesn’t undercut the driver’s arguments in the much bigger trial next June versus Uber.  That’s the real show.   Stay tuned, it’s looking like it’s going to be a blockbuster.

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The Ticking Time Bomb of Uber

Sum and Substance:  Like the villain Harvey “Two-Face” Dent in the Batman comics, there is a dark, scabbish side to Uber’s pretty face. Driven by Kalanick’s pedal-to-the-metal tactics, Uber has lurched from scandal to scandal, which not only has undermined its popularity but also has served to obscure the merits of the ridesharing industry.

Few people are going to shed tears over a torpedoing of the taxi industry, which has long been known for cartelism, political payola and lousy service. In fact, as the US plunges headlong toward a freelance society, and average Americans start casting around for any kind of reliable way to “monetize” their lives and bring in some income, peer-to-peer ridesharing holds potential – but only if it’s properly regulated.

Drive with Uber 3

As Kalanick fully knows, the supply of drivers and cars on the road is the bottleneck in this industry, and those drivers’ needs are in direct conflict with Kalanick’s ambitions. Uber’s business model seems to depend on driver exploitation and legal loopholes. Even as Uber pugnaciously fights any type of common-sense regulation, this ridesharing service is crying out for well-targeted oversight that minimizes exploitation of drivers, ensures the safety of the public, reduces price gouging and cracks down on abuse of the new ridesharing technology and its surveillance capabilities. Yet all the warning signs indicate that Travis Kalanick is not interested in building such a company.

My Take:  This is a very well written article by New American Foundation fellow and author Steven Hill.  It’s an excerpt from his new book: Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers. He’s an author worth following because he has a lot of to say about into the sharing economy that will resonate with most drivers.

The article takes particular aim at the Uber culture – a hard charging intense corporate environment where employees at all levels exist in a state of perpetual insecurity.  This jives with my personal experience.  I picked up a guy last week who had dinner with a woman works at Uber.  He said she spent two thirds of the dinner talking on the phone with her boss at Uber, and this was on a Sunday evening.

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 Drivers, what do you think about this week’s stories?

-John F. Ince

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John Ince

John Ince is a former Fortune reporter and Wall Street banker. He has about 1000 rides under his belt driving part time for Lyft and more recently Uber.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all – For a sneak peak visit: www.TravelsWithVanessa.com

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