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Where Will Uber Go on Venture-Funded Wheels?

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Why health care might make sense for the company revolutionizing transportation.

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Hype over venture-funded start-up Uber has revved up in recent weeks. The luxury-car-on-demand app could be valued as high as $3.5 billion in a fresh round of funding led by TPG Capital, reports AllThingsD. Google's (NASDAQ:GOOG) venture-capital arm Google Ventures is believed to be participating, too, following in the footsteps of past investors like Jeff Bezos, Menlo Ventures, and Goldman Sachs (NYSE:GS).

There's undoubtedly a lot of weight being thrown behind the tech sector's latest rising star. Uber's third round of venture funding is expected to raise $100 million, certainly enough to further the San Francisco-based company's meteoric rise. Since 2009, Uber has gone from solely servicing the City by the Bay to operating in 38 cities across 10 different countries (according to Uber's website), with little loss of momentum. Recent job openings at the company suggest Uber is now planning to expand into Africa, the Middle East, and Latin America. Founder and CEO Travis Kalanick has publicly said that Uber's revenue is currently growing 18% month-over-month, and that the company has become profitable in its earliest locations, including San Francisco and New York. Uber's expected total revenue this year is $125 million.

That's serious growth for a company that started as a way for its founders to find available rides for themselves and their friends. Now, Uber's GPS-enabled app -- available on Apple (NASDAQ:AAPL) iOS, Google Android, BlackBerry (NASDAQ:BBRY), and Microsoft (NASDAQ:MSFT) Windows Mobile -- is pairing passengers with luxury limousines worldwide, and through its competitively-priced UberX service, with cheaper non-luxury town cars, too. In addition, Uber has also begun connecting users with local taxi services in New York, Boston, Sydney, and five others cities via UberTaxi.
A screen shot of the Uber app taken at Minyanville's offices

But as Uber continues its expansion, with an expected tank full of venture money, will it remain parked solely within the taxi and limousine space? Many signs point to no.

Before understanding what Uber could be, it's important to understand what Uber is not. Uber is not a taxi and limousine company. Instead, Uber is a logistics company, one which has become very good at quickly moving into new markets, converting local transportation providers, and coercing -- and sometimes even circumventing -- local governments. It's earned a reputation for meeting opposition head-on, and ceaselessly working to get its way. Writing in this month's Inc Magazine, Christine Lagorio calls Uber's "ability to present itself as a force of modernization and freedom and against bureaucrats and politically connected interests" its most "potent weapon."

Take California for example, Uber's home state. Last October, Uber received cease-and-desist letters from both the San Francisco Municipal Transportation Agency and the California Public Utilities Commission (CPUC), claiming Uber was operating without the appropriate licenses and permits. This June, the Los Angeles Department of Transportation delivered its own cease-and-desist letter on the same day local yellow-taxi drivers gathered outside City Hall to protest Uber unfairly encroaching on their businesses. However, Uber never stopped operating in the state. Instead, it won the favor of local politicians like LA Mayor Eric Garcetti, and worked very closely with CPUC to ensure it was operating within the limits of the law. CPUC suspended its cease-and-desist in January, and is set to vote on legalizing services like Uber's throughout the state on September 5.

(In addition to troubles in LA, Uber has recently faced hurdles including but not limited to: Colorado regulators trying to make it illegal for Uber taxis to come within 200 feet of bars, hotels and restaurants; the French Prime minister considering a new rule that would require Uber-booked cars to wait 15 minutes before picking up a passenger; local taxi drivers in Milan storming Wired's Next Conference -- causing it to temporarily shut down -- in protest of Uber's encroachment on the Milanese taxicab marketplace. One can only imagine the maneuvering currently underway by Uber to stay in business in these cities.)

When contacted to speak about what other areas Uber is seriously considering expanding into, a representative from the company avoided a direct answer. Instead, he offered a recent interview with Kalanick, conducted at the Fortune BrainstormTech conference in Aspen, Colorado, last week. It took some prodding from Fortune's Jessi Hempel, but Kalanick finally delivered a straight answer on whether or not Uber is seeking to enter other product markets.

"So the answer is, yes, we're thinking about it," said Kalanick. "What we're doing right now is we're in the experimentation phase where you sort of find some interesting ways to do promotions like Uber Ice Cream."

One the company's latest in a long list of promotional offerings, Uber Ice Cream, was a one-day event on July 19 that saw on-demand ice cream trucks roll out in 33 global cities including Atlanta, Phoenix, Munich, London, Singapore, and more. Uber enlisted local ice cream trucks in each partner city to pull off the stunt, charging groups of five to six customers anywhere from $30 to $40.

Other promotions include UberCHOPPER -- running throughout the summer -- which provides a $3,000 helicopter ride between NYC and East Hampton, with Uber car service on both ends. Often, these exploratory services are location-specific, like recently-announced on-demand canal boats in Amsterdam, via Uber Sloep, or motorcycle pickups in Paris. Other single-day offerings, like barbeque delivery in Austin, Texas, or rose delivery on Valentine's Day, demonstrate further non-transit applications.

Additionally, Kalanick has admitted to "informal" talks with a big e-commerce company about optimizing drivers' time in between rides to deliver products to consumers.

Which of these might signal a viable future for Uber is left up for debate. Fudgesicles are delicious, but are they worth $100 million in venture fund pocket change?

Babak Hafezi, founder and CEO of HafeziCapital International Consulting & Investing, believes Uber's future viably lies in two markets. One of them doesn't come as much of a surprise. The other's a bit of a curve ball.

"Uber makes its money on volume," Hafezi tells Minyanville. "Yes, they are now in the helicopter business, but those [stunts] are more to get publicity. The real growth market is providing taxi services in smaller suburban areas rather than in large cities."

Hafezi's Washington, DC-based business management consultancy firm has advised numerous small, medium and Fortune Global 500 companies and CEOs, as well as angel investors, private equity, and venture capital firms. In the tech space, Hafezi notably advised Morgan Stanley (NYSE:MS) Private Wealth Management on the Groupon (NASDAQ:GRPN) IPO. Eighteen months ago, Hafezi was contracted by a large taxi fleet management company to conduct an entire firm analysis and provide concrete data on the taxi industry in the United States. (An NDA restricts Hafezi from sharing the company's name.) The company had developed a fleet-management software now being sold within the industry, making it an indirect competitor with Uber.

The information provided by this research, Hafezi says, is pertinent to the entire fleet-management industry, and could indicate Uber's future direction.

Of the 2,942 taxi cab companies in the United States registered with the Census Bureau, 66% have fleets of less than five cabs, Hafezi's research shows. Twenty-two percent have fleets of less than 20 cabs. While there are exceptions like Washington, DC (where most cab companies are owned by smaller players), in cities like Boston, New York, San Francisco, Chicago, and Las Vegas, taxi medallions are all owned by large corporations. Smaller players can't compete in these markets, Hafezi says. So, they tend to operate in the suburbs where there are no conglomerates to push them out of the marketplace. This makes non-metropolitan areas ideal for Uber's lower cost services like UberX and UberTaxi as Uber can provide computer infrastructure to a class of drivers who previously could never afford it.

"It's a very, very open market of individuals who don't have the capability to invest $100,000 in backend support," Hafezi says. "Uber can play a very big part in that marketplace."

In metropolitan areas where UberTaxi is available, local cab drivers have been quoted saying they are happier with Uber because they can make more money and are safer. That could potentially translate to suburban areas, where, as Hafezi points out, taxi driver often struggle to get by.

"There are cabbies driving cars from the early '90s with 500,000 miles on them, just waiting for them to break down."

A backend network to support small cab companies and individuals who couldn't otherwise afford mobile infrastructure feels like it could fit within Uber's line of offerings. That is, if Uber intends on moving away from its "luxury brand" image. However, Hafezi's second suggestion seems completely uncharacteristic of the brand Uber has put forth thus far -- at least at first blush.

Based on his research, Hafezi says telemedicine -- the use of information technology to deliver health-care services at a distance from hospitals, doctors offices, and other medical care centers -- would be a lucrative marketplace for Uber to extend into. He believes the capabilities of Uber's software make it ideal for an industry slow to adapt to technological innovation.

"Anything that requires a nurse to come to your home or location, including hospice care, applies," Hafezi says. "Organizations providing those services are still using old-fashioned paper models, with a centralized computer system and a calling system. Systems like Uber have the ability to take the nurses and patients and bring them much closer together."

It's no secret that the health-care industry is playing catch-up in the area of IT -- a recent survey estimated US hospitals lose $8.3 billion annually because they are using outdated infrastructure technology. But spending is ramping up, with a $100 billion expected to be doled out on health-care IT in the US between now and 2017, according to Insight Research. The telemedicine industry is expected to grow 55% in 2013, and it will grow sixfold by 2013, reaching 1.8 million people, predicts IMS Research.

Hafezi imagines a scenario where patients can use their phones to pull up the closest available hospice nurses and call them to their location. Once there, nurses will be able to use the same back-end infrastructure to access patients' secure records, and perform services like placing orders for medication and assistive devices.

Sure, it might seem like a far-fetched idea. But, when you look at the marketplace, it really isn't.

Companies like Verizon (NYSE:VZ), Qualcomm (NASDAQ:QCOM), IBM (NYSE:IBM), Dell (NASDAQ:DELL), and Cisco (NASDAQ:CSCO) all offer their own eHealth cloud platforms, which allow health-care professionals to share patient records and information and collaborate in real time.

Then, there are slew of companies that are beginning to define what's being called the mobile health-care space.

Atlanta-based start-up Medicast, which has styled itself as the "Uber for health care," connects patients with close-by on-call doctors who go to a patient's home, workplace, or hotel room to deliver emergency or routine care, all within two hours; it currently only services Southern Florida. ZocDoc allows users to find doctors and make appointments online, and, if using the mobile phone app, utilizes GPS to find doctors close by. Teledoc goes a step further, allowing users to talk with a physician at any time via a Skype-like video-conferencing service.

"If Uber can define the market and be able to create a niche, it can get major traction into this industry," Hafezi says. "Furthermore, it can also go into the paratransit industry, which is government-regulated, and can create major efficiencies for small providers of paratransit services."

But does an 'UberHospice' service really fit a company that's made its name selling a luxury transportation service?

Here's Kalanick one more time at the BrainstormTech conference:

"If somebody goes, Travis, you've got this great lifestyle brand. Uber is, you know, so awesome and high-end and all this. When are you going to do concierge services? Or when are you going to do hotels? And I'm like, we're not going to do hotels because we're not delivering a hotel building to you, right? So we know what we are."

He continues:

"I think we're the Uber of stuff. But I think those in the investment community...see a lot of 'Uber of blanks.' If it's in our wheelhouse, right, we'll ultimately do it...But there are a lot of things that don't work for it."

With that muddled message from Kalanick, it seems only time will tell where Uber is headed next.

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

Follow me on Twitter @brokawbrokaw and @minyanville.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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