“Creative destruction of the status quo…idealistic vision of a better way…fearless, uncompromising, and creative…”
What I love about the Sharing/On-Demand Economy universe is that it is rich with founders who epitomize these words that Jonah Sachs uses to describe “The Rebel” in his book “Winning the Story Wars”. By being “rebels with a cause”, Brian Chesky and Travis Kalanick have not just created marketplaces, but movements. And as Scott Goodson observes in “Uprising”, movements are what attract people “…hungry for meaning, authenticity, sense of belonging, and purpose…beginning to engage with and shape culture around them as opposed to being passive consumers of culture created for them by others.”
It is the movement, not just the marketplace, that enables Airbnb and Uber to defy traditional economic principles of scarcity and operate in a New Era of Economic Abundance. Under the new laws of UBER-nomics (my new term for Copianomics, which I define as the science of choice under abundance, as opposed to scarcity), the following economic forces act as growth catalysts:
- Long Tail of Supply — inventory growth is not limited by traditional time or capital constraints. The companies are able to leverage the passion people have for their cause or mission to attract a long tail of latent/under-utilized assets, goods and expertise.
- Blue Ocean of Demand — revenue growth is not constrained by existing demand. The companies are able to attract new tiers of non-customers to their movements and access new blue ocean market demand, expanding their Total Addressable Market (TAM) beyond traditional categories.
It is fascinating to watch Airbnb and Uber as they are continuously innovating. For example, on October 26th, Airbnb announced the test launch of Journeys — a fully managed travel service. This strategic move has the potential to expand Airbnb’s Total Addressable Market (TAM) beyond the traditional category of accommodation by allowing people to experience curated excursions with locals through democratizing the latent skills and passion of their existing host community. This hints at Brian Chesky’s ambition to evolve Airbnb into a full-blown hospitality brand that provides a re-imagined end-to-end seamless travel experience and further advances his highly inspirational community-focused social mission, “…to imagine a world where you can belong anywhere…”. And on November 16th, Uber announced the launch of Driver Destinations in the Bay Area, which makes commuting more affordable and convenient by enabling its drivers to earn extra income by picking up passengers on their drive to and from work. This strategic move, which is completely aligned with Uber’s accessibility-focused mission, “…to bring transportation as reliable as running water to everyone, everywhere…” further pushes out the boundaries of the consumer value frontier and expands its TAM beyond the traditional taxi market to non-customers accustomed to taking public transport and renting or owning vehicles.
Judging from the fact the top 75 North American Sharing/On-Demand companies raised $9.6 billion in 2015, up double from the $4.8 billion raised in 2014, venture capital investors are also excited about UBER-nomics. Although most of my research has been focused on Uber, I have been personally rooting for the underdog, Lyft, which seems to be its nicer and humbler cousin. I was really inspired by how the company, which evolved in 2Q12 out of Zimride, a ridesharing service company launched in 2007, has stayed true to its sustainability-focused social mission “to take cars off the road, not replacing or augmenting existing systems”. I remember the earnestness and passion of Logan Green, the co-founder of Lyft, as I watched him deliver his keynote speech “Fixing Transportation with Humanity and Technology” at SXSW in March and share his vision for the world of making car ownership unnecessary.
So I was pleasantly surprised when I found out just before the end of the year that Lyft raised $1 billion, more than doubling its valuation from $2.5 billion to $5.5 billion — but I was shocked to discover the lead investor is General Motors. I am struggling to understand why a company whose vision is to eliminate vehicle ownership would enter into a strategic alliance with the world’s largest vehicle maker. As I watched the CNBC interview on Monday morning with Daniel Ammann, the President of General Motors, I was a bit puzzled to see Logan Green enthusiastically endorsing their new strategic alliance. It makes sense that Lyft sees autonomous-driving vehicles as the future but wouldn’t Google or Tesla be a better cultural fit for them? It also seems quite ironic that part of the deal is for GM to supply vehicles under a hybrid rental/leasing contract to people who want to drive for Lyft but whose existing cars don’t qualify. And from a long-term strategic perspective, wouldn’t Lyft have been better off to follow Uber’s lead, which in July launched XChange Leasing, a pilot program whereby Uber directly leases used and new vehicles to its drivers from a wide range of manufacturers (e.g. GM, Toyota, Ford, Hyundai, Nissan, VW, Chrysler). But it is a brilliant move on GM’s part as in addition to providing it with a new distribution channel for its vehicles, it enhances its brand equity and gives it a seat at the table of a company trying to disrupt its vehicle sales business.
I am guessing that Lyft is hoping to avoid the fate of SideCar, which just shut down its ridesharing and delivery operations after raising $40 million since its launch in January 2012. I hope this new injection of capital provides Lyft with the resources to continue to scale its platform and compete against Uber. But I am concerned this could be a red flag that the company is losing its “rebel with a cause” attitude, as this is what inspires people (both drivers and passengers) to join the Lyft movement.
What I love most about researching the Sharing/On-Demand Economy is talking to the “rebel with a cause” founders. I feel fortunate to have had the privilege to talk with inspiring founders such as Cameron Doody, who launched Bellhops in October 2012 to “change the way people move their things”. In November, Bellhops was ranked number four by Entrepreneur Magazine on its list of the “25 Best Large Company Cultures” and the company just raised a Series B round of $13.5 million. I had a great discussion with Rob Biederman, who launched HourlyNerd in February 2013 as part of a Harvard MBA class project with three of his classmates to “disrupt the 100-year old consulting industry by connecting businesses to MBA students”. It was fascinating to talk with Mark Gilbreath, who founded LiquidSpace in January 2010 to “enable everyone to find the workplace that’s right for them” about his plans to disrupt the commercial office space market. When I was down in San Francisco in October I had the privilege to meet with Sander Daniels, who launched Thumbtack back in August 2008 to “help you accomplish the personal projects that are central to your life”. Most impressively, Thumback had just raised $125 million, providing it with a valuation of $1.3 billion. And I am excited to be working on a report on the US Pop-Up Retail Market with Erik Eliason, who launched Storefront in January 2012 to “make retail space more accessible, empower store owners/merchants, and foster local communities”.
The bottom line is that in order to achieve UBER-nomics, a company needs to build more than just a marketplace, it needs to create a movement — and that starts with the company being and most importantly, staying, a “rebel with a cause”.
Note: If you’re a “rebel with a cause” founder of a Sharing/On-Demand Economy company and interested in connecting with other founders to help each other learn and get better, you are welcome to join Joe Nigro and I at our first “Marketplace Meetup” Google Hangout on Tuesday, February 2nd at 10am PT (1pm ET). Please note we are not allowing the press, investors, or attorneys to attend the session.