A company once supposedly valued at $120 billion in the most optimistic projections now has a market cap of $54 billion. (Eric Risberg/AP)
SAN FRANCISCO — Tech IPOs have long been viewed as a boon for Silicon Valley workers, ushering in a new era of corporate stability and stock-driven wealth.
That’s not been the case at Uber, where the stock price has fallen roughly 30 percent since going public in May and employees say they’ve noticed cuts to amenities as basic as the brands of coffee available for brewing.
Uber is changing as it shifts from a closely held unicorn start-up to a publicly traded company that appears to be losing investors’ confidence, according to interviews with current and former workers. Those changes include laying off more than 800 workers over the summer.
Meanwhile, stock units are valued at a fraction of what many employees were led to believe. And executives are imposing workflow changes aimed at improving the company’s efficiency, adjustments that strike some employees as stifling innovation.
“We need to ship more quickly and operate more effectively and efficiently than we are today,” Uber CEO Dara Khosrowshahi said in a recent company email following the announcement of engineering and product team layoffs. “We are not doing this for Wall Street. We are doing this for Uber. It’s critical we get our edge back and continually push ourselves to do better."
[Uber announces 435 layoffs on its product and engineering teams]
Uber was the second of what was supposed to be a blockbuster summer of public offerings. But many haven’t gone as expected, raising questions about a potential tech bubble. Rival Lyft was the first. Its stock price plunged in the days following its $72-per-share opening, rounding out the summer more than 40 percent below that price. WeWork, which was set to go public this month, was forced to postpone its IPO date amid billions in losses and conflicts of interest for its embattled chief executive, who stepped down from that role Tuesday.
In fact, the wave of 2018 and 2019 IPOs largely driven by the tech sector have been among the worst performing since the dot-com bubble in 1999, according to Goldman Sachs analysts.
“In terms of profitability, IPOs from the current cycle look more like Tech boom IPOs than offerings completed during the 2001-2009 period,” they said in a report that examined 4,481 U.S. IPOs over a quarter century.
At Uber, the company’s initial market value was roughly two-thirds of the top end of what was expected. A company once supposedly valued at $120 billion in the most optimistic projections now has a market cap of $51 billion. And many are questioning whether the money-bleeding company can succeed amid slowing growth, when investors are holding it accountable.
As a result, Uber is “turning [into] an operations company — not a product/tech company,” said one former senior employee, who declined to be named publicly, citing a separation agreement with the company.
Executives inside Uber have told employees they will devote fewer costly resources to user experience and research — including teams who worked on those issues — and conduct more direct testing of in-app features for riders and drivers.
“We will deliberately rely less on user research for tactical features and instead rely more on experimentation,” Uber’s chief of product, Manik Gupta, wrote to employees in an email the day of this month’s layoffs. “We will focus on fewer projects with more direct business impact.”
The new strategy surfaced at a product event in San Francisco on Thursday, when Uber announced a redesign of its app that will place the menu of mobility and food delivery options — bikes and scooters, ride-hailing, transit and Uber Eats — all together. It’s an effort, Khosrowshahi said, to make Uber the “operating system for your everyday life.”
Uber will test out the redesign on some, while maintaining the classic version built around the map for others in an effort to see how users respond. Gupta, in an interview at the event Thursday, acknowledged the growing pains that accompanied going public and the ensuing layoffs, adding it was difficult.
“From my standpoint the important thing is we’re all focused on execution,” Gupta said in the interview. “What people who are really motivated, what they really want, is a set of problems to work on which are very exciting, they are world changing. I think we have a lot of them and we just have to make sure that we continue to build incredible products.”
[Uber rang in its IPO with champagne and mimosas. Then the hangover began.]
Workers have paid close attention to the scrutiny the company has attracted in the months since its IPO. They’ve grown agitated as top-down changes have been imposed that they saw as stripping away their autonomy, and they’ve become vocal at increasingly contentious all-hands meetings, where the tensions between workers and management have manifested.
For example, Jill Hazelbaker, Uber’s senior vice president of marketing and public affairs, was asked at a team meeting this month what her team would do about the company’s reputational crisis, particularly as a new book focused on the company published.
“I think we need to put our heads down and execute,” she said, according to excerpts of her comments provided to The Washington Post. “I’d just say we’ve got to get a bit thicker skin about this stuff.”
The mantra doubles, perhaps, as a guiding light of the Uber of new.
Uber declined to make Khosrowshahi or Hazelbaker available for comment.
Uber went public in May at a time when it had spent a decade establishing itself as the dominant player in ride-hailing. Since then it has slashed its staff of 27,000 by more than 3 percent. The company announced a restructuring in June and let go a third of its marketing department in July. It imposed a hiring freeze on some U.S. and Canada engineers. Uber’s bike business also appears to be under pressure, after pulling out from several cities and hiking up prices elsewhere.
Inside the company, executives became consumed with its reputation, which hadn’t improved since the #DeleteUber scandal, and focused on telling a new story.
[Internal data shows Uber’s reputation hasn’t changed much since #DeleteUber]
At the same all-hands meeting this month, Khosrowshahi was pressed on whether the job cuts were over.
“I have asked every single [executive] team member to take a look at their particular teams and their particular structures,” Khosrowshahi said, reiterating the charge he had made clear to managers after the IPO. “I do think that the worst is behind us.”
But morale suffered as the company seemed to crack down. It stopped letting people anonymously ask questions at all-hands meetings. Starbucks showed up in coffee dispensers, and craft coffee from Stumptown, a roaster based in Portland, Ore., went away. Office supplies like giant sticky notes dried up, and the company no longer hands out “Uberversary” balloons.
Even as a hiring freeze for some U.S. and Canada engineers was in effect, Uber had already ramped up its efforts to tap the global market for employees, a move that struck some employees as a sign of further corporatization. It looked to other engineering outposts, including India, to sweep up new talent at a lower cost. LinkedIn searches showed several dozen job postings for design and engineering-related positions in Bangalore and Hyderabad, India, where Uber hosts offices, just in the past several weeks — as the hiring freeze elsewhere was in effect. But employees were laid off in India as well.
Uber declined to say whether more layoffs were forthcoming, or what department any such action would target. Khosrowshahi has instructed managers to review their departments for cost efficiencies.
Employees also said they were upset by some of the new business strategies employed by Uber to appeal to drivers in the wake of the IPO. One was a survey offered within the app that hinted the company was looking at offering a new service to give loans to drivers, which the employee saw as a cash squeeze.
“We have morals,” one former employee said, calling the survey on what was regarded as a potential payday advance program “painful.”
[When rides go wrong: How Uber’s investigations unit works to limit the company’s liability]
Meanwhile, those who are no longer with the company, who joined thinking they’d accumulated a nest egg in stock options, are left with the downsides of a floundering IPO. The former employees, who received restricted stock upon joining, said those close to them are now saying they should sell.
One former employee had been hoping to pay off their house. Now that person says they will be lucky to buy a bike or two.
It’s a common pattern for tech start-ups to slump as they enter maturity, says Mike Maples Jr., founding partner of venture capital firm Floodgate Fund, an early investor in Lyft.
“The early employees want to change the rules and be aggressive and make things happen,” he said. “The later employees may be attracted more to the security of the job and more the conventional trappings of having a job. That’s going to obviously slow down a company’s willingness to take risks and do new things.”
https://www.washingtonpost.com/technology/2019/09/30/inside-new-uber-weak-coffee-vanishing-perks-fast-deflating-morale/
2019-09-30 10:03:33Z
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