20Growth: Uber's Expansion Playbook for Scaling from 10 Cities to $10BN in Revenue | How Uber Acquired 1M Drivers | How Uber Solved the Chicken and The Egg Problem in New Markets and What Uber Would Be Like with Travis Still There with Scott Gorlick

0:00So, I remember we saw almost every city as it's all started up. The right team that we were hiring for pre -rolls, one was we'd send in the launcher, and the launcher would be responsible for higher team. In a general market, we would want a general manager who acted as like the CEO of the city, overseeing both driver and rider, and then the second role that we hired was an operations manager that would oversee sort of the driver area of the operation and be responsible for drawing that. And we'd also work on getting a marketing ad that would oversee the writer side, BG partnerships, building out the early grassroots efforts in the community.

0:35This is 20 growth with me, Harry Sebbings. Now, on 20 growth, we sit down with the best growth leaders in the world to unpack their playbooks for scaling incredible products and communities. Today, we're joined by Scott Gawlik, employee number 99 at Uber. And today, he unpacks two incredible playbooks that Uber had. He unpatched their driver acquisition playbook that allowed them to scale to a million drivers And then he unpatched their city expansion playbook that allowed them to scale from 10 cities to 10 billion dollars in revenue Scots also a prolific angel ambassador having written early checks into Lyme and standard cognition to name a few and this episode is Incredibly granular.

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3:22That's why 90 % of the Fortune 500 use Canva. Start designing today at canva .com, designed for work. You have now arrived at your destination. Scott, man, I am so excited for this. I said to you before, I'm a fanboy of your Twitter threads. I think they are fantastic. So first, thank you so much for joining me, stay, man. Thanks Harry, excited to be here. Now I would love to start just with a little bit of context before we dive into the incredible stories that are coming. Tell me, how did you make your way into the Wild of Growth? Join Uber. I believe as employee number 99. Harry, it's a crazy story.

3:56So I finished up school in 2011 and when I finished up school, there were really only two things that people did. They either went to investment banking or they went to consulting. I chose consulting and very early on, I realized that it was like for me. probably on like week three. But the silver lining of the experience was on the weekends, I could go out and fly to San Francisco as long as I was back at the client site on Monday morning. So this was 2011, 2012, and I was going out and meeting companies like Airbnb, Square, Fairly Early, along with like 50 other companies, but nothing really clicked until I was in Chicago one night.

4:35I was trying to give to a work dinner and I was trying to find a taxi. It was branding. And I had heard about this app where if you press the button, you'd get a ride. So I downloaded the app and two minutes later, my first Uber showed up. It was an escalated and I was immediately at a lot, an absolutely magical experience. So that night was working on a deck pretty late at night, probably wrapped around at night or 1 a .m. and had this during a fire moment where I was like, huh, I need to be a part of this Uber thing. What's the most like simple thing to do? So I decided to email Travis at Uber .com, not thinking that I would hear anything.

5:08And I got me a mail back and over the next few weeks I got to know the team eventually took an analytics test, took a creative test, and then flew up to meet the team probably a couple of weeks later. And because I was so young when I got in the room, I said, don't worry guys, I'm old enough. They seemed to think that was really funny. I was 23 and didn't know about anything. But they sent me back to Atlanta, the launch uber's Rocklead Tent City as employee number 99. I mean, I didn't know the context there when I asked that question. I did not know that it was like a direct, cold email to Travis.

5:40That is awesome. And that's also a lot of responsibility on the shoulders of a 23 year old to open a city. How did you build in Atlanta then? You go back, take me to that. Yeah, so it was an incredible experience. I was living in Atlanta at the same time, so I didn't really have to move. But when I got back to Atlanta to launch Uber, it was really about building the operation from scratch. When you're starting a marketplace you really need to do two things. You need to get supply and you need to get demand. So for Uber the hardest thing was the driver's side and we need to get a lot of drivers very quickly.

6:19So when we went into the initial market we got a yon list of all the drivers in the city and sort of like call it through and try to get them the side up with Uber and you know got our initial list of drivers that way and launched a few weeks later, with something we call a rider zero. What did you say to them when you called them up? What did they say? What percent said yes? Just take me to that. So I'd be like, hey, this is Scott. I work at Booper in Atlanta. We're starting a new ride sharing service where you can pick up riders between your trips to the airport. And we help you fill your downtime.

6:53Is this something you might be interested in? And you know, when most drivers had a perv Uber and were a little bit skeptical, they were willing to give us a shot because it didn't cost of anything in join, right? They would come to our office and you know we give them an iPhone, which is a story at some point, when we get in the iPhone they'd be able to pick up a rider 20 minutes later, right? So we'd say, hey, if you don't like this, bring it back and know it's going to hardback. So you cool up say 100. What does that say yes? Probably like 75. Okay, so we're onboarding our first 1020. Take me to the onboarding of the drivers.

7:26You fix supply and then demand just floods in the door. Just take me to that. Yeah, so we on board of the drivers they show up at the office we do like a 60 minute on warning we check out their cars We tell them a little bit about the company and then we would kind of take them through the training on how to use the app And then we put them out there right and for the first two or three weeks of the city, dude. I was nervous It was zero out of ten cars utilize one out of ten two out of ten and then one Friday night I always out and I think I was actually out of town at like a Uber related summit and you know I'm sitting next to some other guys there at different cities and they're like it's gonna happen and it's going to happen.

8:01And within like 10 minutes span, we went from like two out of 10 cars to utilize to all 10 cars to utilize. And like 100 people opened the app. And it just totally flipped. And from that point forward, we just needed more cars. It wasn't about the man's side. Yes, we had to do the partnerships. Yes, we had to be the integrator of ourselves in the community. But it was really about getting as many drivers on the board as possible. How did you retain the drivers when it was one out of 10, two out of 10? Because the whole thing is like the symmetry of timing, making sure it's aligned. How did you keep them when there was nothing coming?

8:32Yeah, so we saw what I guess people called the chicken and egg problem or the cold start problem in marketplaces, but you may have a couple things. In the early days, we wanted to make sure that drivers when they were sitting around were kind of like paid for that time. So in the early days, we pitted drive our 20 or $30 an hour to sit there. And you know, this lasted probably 60 or 90 days into a market launch. And then after it became clear that the driver's making more than 20 or $30 an hour, we removed that guarantee and sort of let the marketplace flip naturally, right? We also did things like we put drivers near places where we knew we'd have high demand in cities and then we made it really easy on the demand side to work for your friends.

9:13So if you were riding in a car with somebody and they hadn't used to who we are yet, by the time you got out of the car you would have referred them and you each would have gotten like $10 off your next ride. You have this moment where you're like holy shit. We have a hundred people on the app. We're fully utilized How do you ramp supply at scale then and are you doing paid marketing at this point? No, so in terms of scaling up drivers We did things that didn't scale for a lot longer than people would think what did you do that didn't scale? I'm just intrigued. Yeah, so for probably the first million drivers that we onboarded a lot of our processes were manual So we weren't doing a lot of like paid spend on Facebook.

9:51We were doing a little bit on Craigslist. We weren't doing a ton on Google. But it was really the operational teams going out with finding drivers. It was that cold calling. It was getting drivers to show up the office and batching on more eggs first with like one driver at a time and five, then 10. Then you would basically get a conference room at a hotel on more 25 drivers at a time or 100 drivers at a time. And it just kind of like scaled up. Other things that we did that I think were like super effective where we go where the drivers work, right? Like, we knew that we had a captive audience on Monday mornings and Thursday afternoon so the drivers picked up and dropped off people from the airport.

10:26And we knew that if we went there with snacks or coffee or rented sort of a conference room or like a chillout between rides, we could pitch them on driving Uber and, you know, we saw it as a very incremental to what they were building. So, every city at Uber was kind of like running a playbook but if we found something that worked in one city, we'd bring it everywhere else too. What were the biggest things that worked in cities that you brought everywhere. So, renting a hotel room, giving it to them for downtime and then pitching. What else? Honestly, people underestimate how effective cold calling was.

10:55Cold calling was an incredible mechanism to get people through the door. And then the other thing, Harry, that worked super well is referrals. When we started doing referrals of drivers, we would, you know, pay like a $25 or $50 bonus for a driver to bring their friend and then when they completed like their first tent trucks we pay out about it on both sides. Obviously, as the business scaled up, the referral belties got quite a bit bigger, but we found that when we tapped into a specific driver community, they all kind of knew each other and we're very happy to refer each other because Uber allowed them to buy more cars and expand their business, and it really just helped them grow as sort of business at large.

11:33Can I ask, what didn't work? What was some early mistakes in driver acquisition, specifically actually that will I off that was a bad one. Yeah, so we made a lot of mistakes, right? So I would say like the number one mistake we made in a lot of cities is we probably got kicked out of every office that we joined early because you know we were renting like space in like co -working spaces and a lot of these co -working spaces were too happy with drivers coming by like all hours of the day and sort of disrupting the flow. So I think that was sort of a major era that we met early on. I think other things that we did that were kind of a little bit challenging in markets is I think that where we messed up was it was a very like 24, 7, 365 operation where people in cars every single hour of the day and we probably understaffed a little in the early days, right?

12:28So, you know, for the first year in Atlanta, I was the only person handling the driver's We had Keith overseeing the city as a general manager and he was incredible. When we had a marketing manager, I probably had like a thousand or 1500 drivers that were just me and like, you know We didn't have any of the AI tools that we did today It was just like all on a Google voice and sort of back and forth texting and desk We let a lot of things slip through the cracks, but the business on the foundations working Well, you concerned at the time that the economics were upside down. Obviously when you start a city The economics are always gonna be pretty ugly in the early days it takes a while for these new cities to mature.

13:03Were you concerned in the day to day that the economics did not look good? I think when we talk about unit economics, I think at scale, we always kind of knew that the margins would correct themselves at scale if we could kind of rationalize the competitive playing environment, right? Can I ask in terms of those kind of margin improvements, how did you see margins and economics change as the company progressed in new cities? Like did the maturation rate become much quicker? What was some lessons from that I'm just intrigued? Yeah, so I would say the biggest difference on the unit economics over time was we had to play the game on the field.

13:39There were a lot of competitors in different markets. And at the same time as we were raising money, soft bank was pouring money into all different competitors, right? So even though we were in 2014 and the business was five years long, like the unit economics as we launched UberX had more competitors actually got worse over time because you started spending so much money to acquire drivers, to acquire riders, and until the competitive market like rationalized, right? And Softbank sort of like pulled back a little bit or decided, or Cooper decided exactly like we're going to want to deploy it.

14:09It was very challenging to basically be like, Hey, Harry, we're going to cut all driver incentives tomorrow. We're going to cut all rider incentives because we would have seen that market share reflected and that would stop the driver. With the increasing competition and increasing cash to competition, Did you actively see it become harder to acquire drivers? Yeah, there was a point in San Francisco and don't quote me on this number is over time, right? Like we were paying $25 or $50 for referrals in Atlanta and then we started paying like $250 to each side, the driver that referred and the driver that signed up.

14:43And then we escalated to $500, $500 and I think there was a point in time where in San Francisco with a couple of other very competitive cities. We were paying $1 ,000 each side. So $2 ,000 for driver acquisition, we would put some sort of threshold around that, right? The new driver would have to do XML to trevves and maintain this quality rating and do this sort of acceptance, right? But who's a period of time, probably like 2014, 2015, 2016, where things got very early? How did you define a retained user? You know, with Facebook, they always said, it's like, off to five friends, then you're a retained user.

15:16What was the metric to understand, use a satisfaction retention as a core north star? Yeah, so I think on the right -hand side, we were looking at total spend, right? What's the monthly spend and how is that growing over time? And we would look at rights per week and rights per month and be able to understand how we're mapping into their data -date routines. I would argue that right -ass spend is not a true reflection. I can take one long trip and it doesn't mean that I really love Uber, but if I do velocity of trips, tan trips, it means that I do. What, which one did you really focus on? I think it rides for a month, this probably the most important and understanding rides for me and sort of how it maps the people's routine.

15:58Because some days, like you said, you might have a long airport trip and that like distort the co -work hours of your time. And then on the driver's side for retention, what we were looking at is like, hey, how far are they retaining it? Like 28 days, you know, 56 days, 96 days, and just understanding like, if a driver stays with us for three months, they're likely to stay with us longer. And sort of looking at the underlying trip metrics, how many trips they're doing for the how many like what the ratings are. And then also like how many hours they're pretty yet right? Some people this is a full time thing.

16:28It's for like 90 % of drivers. It's very part time right? Less than like 10 hours a week. What was good retention on the driver side? Say 28, 60, 90 days. How did that vary? I would say if you started the year with a hundred drivers, I think you would probably have 25 or 30 of the last at the end of the year, that would be good. Not hugely dissimilar to consumer subscription, to be honest. How did the product offering look when you were doing Atlanta and the subsequent city roll out in terms of the different tiers of Uber's in terms of luxury? What did that look like? Yes, so when I started at Uber, we were only black cars.

17:03And what was challenging about that is there only a certain number of black cars in a given city, right? Like in Atlanta, there might have been a thousand black cars. And while you can create more and get more on board, you're never going to build like the massive 10 business unless you open it up for BRACs. So we started launching UberX more probably in late 2012, late early 2013. And then sort of as we started rolling out UberX in more markets, that was probably 2013, 2014, that's when the business really started to explode. Well, did it explode from pretty much day one? Was there immediate product market fit on UberX?

17:38There was a media product market fit on UberX and what was really interesting about UberX is when we launched UberX And this was the operational nightmare and who on cities we actually did free UberX week So for an entire week we would get free UberX it was a marketing expense, right? And we were basically running it probably 80 90 100 % utilization all the time and we knew that When we did it that it would be hard to kind of fill that demand like people were really excited about UberX and like a better faster cheaper option to use Uber, overtime we were able to build more supply, right? That is impressive.

18:15How much money did that cost? But the idea is then you get a habit in the consumer, they build a habit of forming exercise with it and then retain. Yeah, the idea in terms of ROI on free Uber X -Weat was previously Uber was just a black car product. And by launching Uber X, we could do better faster cheaper than a taxi. and we kind of wanted to come out with a bang, right? And to be able to do that, we were comfortable saying, hey, this free Uber X week is gonna cost us X trips in a week times X dollars. And, you know, we were comfortable with that spend because if we look forward six months, this is what's going to be a lot bigger.

18:53Would you say now with the benefit of hindsight, free Uber X week was incredibly, incredibly instrumental to the success of Uber X? I think it would have worked no matter what. I think like we had strong product market fit, but I think like what was particularly interesting about free UberX. We're looking back on it 10 years later in hindsight was the competitive dynamics, right? So in a lot of ways, when we launched UberX, the main competitor was Lyft. And Lyft's flagship product was UberX. And what a lot of people don't know about Lyft is when we started launching UberX, we let Lyft go first.

19:31And we had a policy that said, Hey, if with launches in a city, we are going to wait 30 days to see if the law enforcement comes after them and then we're going to launch after that. So as you probably know from Uber, that was a very abrupt, it was a very different tack that we had taken on other launches and it didn't last very long, right? We probably did that for like three or four or five cities and then and we just started launching at the same time. So when we launched Uber Axe, it was about market share and it was about getting as many drivers as possible, as quickly as possible, so that we could win that market and carve out a position that we felt really confident in going forward.

20:11Was it very clear when you were winning a market early on? I think what was interesting about the Uber Lift Dynamic is when we went into a market, like Atlanta, we had been operating for 18 months before we launched Uber Axe, or 12 or 18 months and Liv was kind of new on the scene. So they didn't necessarily get the brand that we did. So for us, it was a brand extension of saying, hey, now it's the same Uber, but better faster and cheaper. And Liv had to come in and sort of build that brand equity. So I think that was challenging in Atlanta for them. And some of the markets were Uber was more established.

20:48But if you go to a place like the center of the country where both services are launching at the same time, like in Oklahoma City, it was more dogfight near really is. and we certainly cranked up our spend to make sure that we were winning early market share and getting the drivers quicker. I think the big differentiation in Uber versus Lyft is that we had on the ground teams in every market, we had in Atlanta City team, we had at Philadelphia team, we had a Chicago team and Lyft operated completely out of San Francisco. So, while they would fly in launchers to a city who would stay for a couple weeks or a month or pop in and pop out, we were the drivers every single day and sort of working closely with them.

21:28So I think our speed and proximity to them gave us the edge because Harriet wasn't really about growth marketing in terms of growing the rider side. It was just how many drivers can you get and that sort of drove the network affected and helped you get bigger. Talking about the differentiator that being like being on the ground, being in person, when you launch a new city, can you just talk me through that city playbook rollout? Do you just pick round and people and send them? how many do you pick? What's the organization? Can you just walk me through that? Yeah, so I remember we saw almost every city as it's all in startup.

22:02That was an incredible leaf -free thing for people that were young in their 20s and 30s to kind of go into a market and create a scratch. And the playbook was probably 180 steps. We should probably open to our sit at some point. It's on the Nesata checklist somewhere. How we thought about it was we wanted the right team. You know for us the right team that we were hiring for pre -rolls one was we sent in the launcher that would kind of pop around from city to city We had launchers that started out in LA that did Philadelphia and did Atlanta and sort of the profile of a launcher was MBA tied private equity banking and you know the launcher would be responsible for higher teams So in a general market we would want a general manager who acted as like the CEO of the city overseeing both driver and rider.

22:49And that person was a very similar background to the launcher banking private equity consulting, MBA Stanford Class of 2012 with very good to us. And then the second role that we hired was an operations manager. And that was more like anger consultant types like being the would overseas sort of the driver area of the operation and be responsible for drawing that. And then we'd also work on getting a marketing manager that would oversee the rider side, BD partnerships, building out the early grassroots efforts in the community. Okay, so they're sitting in an office day to day and they have complete free reign over the city.

23:24How does that control and decision -making look like from their perspective? Yes, everything was pretty autonomous, right? In the early days, every city had the freedom to experiment and try things. And I think we had a pretty flat work structure in the early days. Everybody reported into graves. was your first CEO and later became the CEO out. And what's really interesting sort of about that is we all kept each other accountable, right? We were all doing really hard things. And every week we would get on like a city call where in all hands call and every city would go down the list and say how much gross book games he did it last week, how many trips he completed, how many drivers who onboarded and sort of general highlights from the city.

24:08And we had everything in a dashboard, where everybody the company could see exactly what city was doing, what who was growing vastess. And it became like a really competitive dynamic that all just kind of like pushed each other forward, which was a really interesting approach. Well, that city's that were clearly behind in struggling and what were the reasons for those struggling cities? I think there were definitely cities that fell behind, but in a lot of cases, like the teams were just incredible. It was more a function of the regs. So, a lot of times, you know, if the city was struggling, you know, it would be due to the regulations and the laws.