Lessons from the Rideshare Giants
September 23, 2020
The state of California and rideshare giants Lyft and Uber engaged in a remarkable display of political brinksmanship last month. As the state moved reclassify rideshare operators from independent contractors to employees, the two firms threatened to shut down their operations in the nation’s most populous state. Just as the firms were about to sever their services, the courts intervened, allowing Lyft and Uber to resume operations as usual while litigation took place.
Politics aside, this saga offers an incisive case study into the ways that firms like these—which were founded initially as startups—impact our daily lives.
As an entrepreneur, venture capitalist, and CEO of Spectrum Business Ventures, I always find it fascinating how innovative startups like Lyft and Uber have developed innovative, novel products that are now societal staples.
Thinking back just a decade ago, the rideshare concept was alien and unthinkable. The idea of catching a ride in a private citizen’s vehicle for a quick trip to the grocery store or a night out at a local restaurant was, for many Americans, frightening at first.
But both firms were able to overcome this initial concern by addressing an acute need in many communities—access to safe, clean, reliable transportation.
Americans needed new ways to get around, and Taxis simply weren’t cutting it. Often expensive and inaccessible, Americans needed access to quicker transportation at a lower price point. As they began to look for options, Uber and Lyft offered solutions.
In many ways, both firms embodied the entrepreneurial mindset that I think is integral to Spectrum Business Venture’s unique approach to investing.
At Spectrum Business Ventures, we have always sought to closely observe emerging market trends and the preferences of young consumers. While ventures of these sorts may not be immediately profitable, we are always willing to accept a loss in the short-term to secure a foothold in the most prolific firms, industries, and products of the long term. Investors in Uber and Lyft did just this—and it’s one of the reasons for which I admire them.
I believe the success of rideshare firms can be boiled down to a few factors. The first was a present need—Americans needed transportation and were hungry for innovations in this age-old sector. Second, was innovation from millenials. Uber and Lyft were able to harness the latest technology to marry transportation with the increasingly prevalent smartphone. By using their iPhones to hail rides, consumers now had a new way to secure taxi-type services for the first time since the advent of the automobile. Third, were innovative venture capitalists, whose foresight identified a problem and developed a solution.
Ridesharing, of course, quickly caught on with younger populations who were more tech-savvy and who were already accustomed to using their phones and the internet to streamline everyday processes. Shrewd investors closely followed emerging market trends, understood the increasing prevalence of personal technology, and realized that the rideshare model—while maybe unorthodox in the moment—could be the way of the future. It was this combination that ushered in a new wave of creative destruction, giving us, the consumers, access to a great new product.