Hey, taxi company, you talkin' to me?

  @FortuneMagazine September 23, 2013: 2:36 PM ET
travis kalanick uber
(Fortune)

The night before Travis Kalanick took the stage at Fortune's Brainstorm Tech conference in Aspen for an interview this past July, he decided to create a pop-up location for his Uber ride service. There were several hundred wealthy, influential business executives in town for the event, after all, and they needed to get around. What better audience for Uber? One problem: The company had faced some struggles in Colorado, where regulators protecting the taxi and limousine industry had tried to pass a law forbidding Uber cars from driving within 100 feet of restaurants and hotels. Once he landed, Kalanick (pronounced CAL-a-nick) phoned his Denver general manager. "I asked him two questions," Kalanick said onstage the next day. "I said, 'One, is [Governor] Hickenlooper still trying to put us out of business in Colorado? And two, when are we getting Aspen up?' " There were cars on the ground by morning.

The episode is classic Kalanick: confident, cocky, disruptive -- and effective. It's those characteristics that have led him to phenomenal success with Uber, the ride-service app he helped found three years ago that has grown to 42 cities in 18 countries and a valuation of $3.4 billion. His investors include tech world heavyweights like Jeff Bezos and Bill Gurley.

In August the company secured a massive new round of funding: $258 million from Google (GOOG, Fortune 500) and TPG. As part of the deal, Google general counsel David Drummond and TPG's founding partner David Bonderman will join the board.

Whether Kalanick's combative approach will continue to serve him and Uber will be the big test as it grows from a ride-service app into something even bigger. Uber powers smartphone applications that let customers connect directly to drivers for quick rides in nice cars. But with its algorithmic prowess and on-the-ground reach -- all those vehicles roaming around picking up and dropping off people on any given day -- its investors think it can become a hyperlocal logistics network that can transport anything anywhere on a moment's notice, challenging the likes of FedEx (FDX, Fortune 500).

To realize Uber's potential, however, Kalanick must overcome some immediate challenges. Local governments in several of its markets have taken legal action to shut Uber down. The $6 billion taxi industry has declared an unofficial war on the company. Numerous professional limo services have attacked it over its business tactics. Even some of its loyal customers have grown cranky over what some say is an opaque pricing policy.

MORE: 40 Under 40 - The full list

Predictably, Kalanick has fought back at every turn. When the Washington, D.C., taxi commissioner used a public forum to accuse Uber of breaking the law -- he said it was acting like a taxi company but was not licensed as one -- Kalanick rallied customers to send 50,000 emails and 37,000 tweets on the company's behalf. When officials in Cambridge, Mass., tried to shut Uber down, he tweeted, "Cambridge, MA, home to Harvard, MIT, and some of the most anticompetitive, corrupt transportation laws in the country." And when any of the officials in the markets in which Kalanick has launched Uber so far have sent him cease-and-desist letters, he has neither ceased nor desisted. Says Hollywood mogul Michael Ovitz, who invested in Kalanick's first Internet company: "You put him in the ring and he's always going to come out with the win."

This pugnaciousness has landed Kalanick, at 37 years old No. 13 on our 40 Under 40 list, the role of iconoclast and rebel-hero among Silicon Valley's elite -- and friends and backers more powerful than his enemies. Celebrities like Edward Norton and Dave Chappelle use the service. The NFL Players Association recently made Uber its official wheels. Self-help guru Tim Ferriss, an early adviser, says Kalanick "will change the world."

That may be overstating things, but much like the iPhone did for phones and Starbucks did for coffee, Kalanick has already turned riding around in a black car into an accessible luxury and a lifestyle brand. No longer limited to the 1%, anyone willing to download Uber's app and pay its prices can roll like an NFL star, a banking CEO -- or like Travis Kalanick.

Kalanick is a complex figure: a prematurely graying reader of Ayn Rand who prioritizes individualism, and a high-energy, curious-minded prankster who once tramped up and down the California beach near his home collecting signatures for a gubernatorial run. He's hard to contain -- some part of him is always fidgeting, and he once paced for so long on a phone call doing a deal that he got rugburn, says a former girlfriend. "I like to think of myself as The Wolf in Pulp Fiction," he once told a group of Chicago entrepreneurs. In the Quentin Tarantino cult classic, Harvey Keitel's Winston Wolfe is the fixer -- a professional problem-solver with a dark side. In contrast to the more common cerebral, quirky Silicon Valley CEO, Kalanick cuts a different profile: a badass.

MORE: 40 Under 40 - Highest paid

Born to an engineer and a newspaper ad saleswoman in middle-class Los Angeles, Kalanick started coding in sixth grade. He honed his entrepreneurial skills early, first by selling knives door to door and, at 18, by teaming with a neighborhood father to start an SAT prep business and teaching the "1500 and over" course. (Kalanick had scored 1580 out of 1600; he missed two questions on the verbal section.) He enrolled at UCLA to study computer science, but dropped out in 1999 after a company he'd launched with five classmates, a peer-to-peer search engine similar to Napster, took off.

Kalanick did much of the negotiating at the company, Scour, which helped users find music, films, and other content on the web. "He was such a tough negotiator we'd forget he was just 20," says Ovitz, who, with billionaire Ron Burkle, held 51% of the company's shares. Three years in, the company went bankrupt after 30 media companies joined together to launch a copyright suit for $250 billion. Kalanick took his first loss personally, for a long time avoiding going to the movies so he didn't have to see the Universal Pictures logo scroll across the screen.

Failure was short-lived. By 2007 he had moved to the Bay Area and sold his next company, an enterprise software play, to Akamai (AKAM) for $23 million. With the proceeds he became an angel investor. He also bought a big home in San Francisco with a tennis court and sweeping city views. He named the house the Jam Pad for the revolving cast of Valley techies who began popping in for "jam sessions" in which they would kick around ideas. He often hosted entrepreneurs from out of town. In a blog post offering rooms during a tech conference in 2009, he described it as "a place where entrepreneurs regularly come to hang out, to rap on ideas, to jam with other entrepreneurs," and "to have fantastic healthy gourmet meals made by the Jam Pad's in-house chef."

Kalanick's anti-authoritarianism has at times gotten him into trouble. One night several years ago, he was out at a San Francisco club with his friend Sean Parker. As the club was closing, Kalanick waited for Parker on the sidewalk. The bouncers told him to move, but instead he stood at the edge of the boundary they'd demarcated, insisting, "I'm not breaking the law. You tell me how I'm breaking the law," recalls a former girlfriend, Angie You. The bouncers had the cops take him in -- and Parker put up the $2,000 to bail him out.

MORE: 40 Under 40 - Best-kept secrets

In 2008, Kalanick was at a Paris tech conference jamming on ideas with his buddy Garrett Camp, who had just sold StumbleUpon to eBay (EBAY, Fortune 500). Camp's idea: What if they could get together with 100 of their friends and create a time-share service for fancy cars, like the Mercedes S-Class? They could hire 20 drivers and make rides available via a smartphone application. Camp spent the next year prototyping an iPhone app while Kalanick got to know the San Francisco cabby community. They hired a manager, and then, once it looked as if the idea might work, Camp urged Kalanick to become the CEO. In short order, The Wolf stepped in.

Uber's value comes from its ability to act as a broker, matching riders and drivers on a software platform. The company recruits partners -- either limo companies or individual drivers, all of whom own their own cars and take responsibility for the licensing, vehicle, gas, and auto insurance -- and trains them on using the software. Drivers normally take 80% of the fare. That doesn't always add up to the best deal -- they can sometimes make more money with other services -- but they like the flexibility and assignment transparency Uber offers. During a recent Uber ride in New York City, my driver, Rauf, explained that at his last company he had to pay kickbacks to get the good shifts; with Uber he can choose when he works, and in a good week he can make up to $1,200. The cars are held to high standards and rigorously inspected.

Since Uber acts as a software company and not a taxi operator, its capital costs are low. Where it does invest is in the engineers who build the algorithms that help it manage supply and demand. Minimizing slack in the system ensures that drivers have little downtime -- which means they will stay loyal to Uber, which means that customers know they will always be able to get a ride.

MORE: 40 Under 40 - Their favorite things

Kalanick has launched a half-dozen services with different fee structures in various markets, including UberTAXI, a taxi-hailing service; UberX, a lower-cost limo service that has cars like the Honda Civic or the Toyota Prius; and UberSUV, a pricier service featuring cars like the Cadillac Escalade. In Paris, UberMOTO even lets customers call for motorcycle taxis.

Kalanick won't disclose figures, but Uber is said to be on track for $125 million in sales this year. He has said that revenue is growing by 18% a month and that the company is profitable in its first launch cities. It has hired 225 people in the past year; total employees now number 400.

But Uber's status as a software provider and not a taxi company puts it in a funny place in the entrenched, insular world of ground transportation, and its presence has not been welcome. In the three years he has been in business, Kalanick has angered every group of his constituents.

Drivers complain about the tipping policies. Part of the promise Uber makes to consumers is that the ride might be slightly more than a cab ride, but they don't have to tip. In reality, depending on the market and the service, a tip for the driver may be factored into the flat fare. Frustrated with this policy, drivers in Massachusetts, Illinois, and California have banded together to file class-action suits charging that the arrangement cheats them out of money. (When the suits were announced, Uber issued a statement saying the claims were without merit and that "frivolous lawsuits like this" cost time and money better spent on creating opportunities for drivers.)

Drivers can also get caught between local government regulations and Uber's rules. Several UberX drivers were recently ticketed for dropping riders off at San Francisco International Airport after the airport began enforcing a policy that requires them to be regulated as a taxi service. The company blogged about it, saying the rides were legal and airport officials were acting without authority. But that doesn't protect the drivers, who have to choose whether to take airport rides and accept the risk. For most drivers now used to the flexible schedule and decent income, that risk is worth it.

MORE: 40 Under 40 - Ones to watch

Meanwhile, Uber customers sometimes complain about the company's controversial surge-pricing policies. When there are more people who want rides than cars on the road, Uber raises its prices. That can cause sticker shock. (A San Francisco entrepreneur paid $75 for a two minute and 16 second ride on a recent New Year's Eve.) It can come off as particularly insensitive following disasters such as Hurricane Sandy, which put much of New York City's transportation system out of commission last fall. Uber got slammed by the media and its riders for jacking prices up just after the storm. In response, the company put $100,000 into making rides available at reasonable fares. That money went fast, however, and Uber returned to its surge pricing within a couple of days. Kalanick pointed to the extreme situation -- including lines at the gas pump and drivers worried about their own families -- as justification, saying, "If we want [drivers] out there, it has to be worth their time." Riders use the service anyway -- Uber's numbers have continued to climb in New York.

The most problematic of Kalanick's haters are the local authorities -- regulators and politicians who claim Uber cars are breaking the law by not following the same regulatory rules as taxi drivers or limo companies. Uber contends that since it's a software provider and not a taxi or limousine operator, it's not held to the same regulatory oversight and that the responsibility falls on its partners to observe the rules.

To emerge victorious at these showdowns, Kalanick has rallied potential customers to his cause. He has positioned himself as an everyman's superhero, tirelessly fighting unfair rules imposed by the taxi lobby and government bureaucracy. In Washington, D.C., after regulators tried to shut down the company, Kalanick told the city's Uber-faithful that using Uber didn't mean just getting a nice ride; it meant helping to fight for an end to anticonsumer and anti-innovation regulation. He urged riders to take action, sign petitions, and even email the mayor directly. Today Uber services are all operational in Washington, D.C.

This is all part of a broader playbook Kalanick uses to enter markets. First, Uber rolls out an experimental fleet. If there's substantial regulatory risk, the company lets regulators know and watches for 30 days to see whether rules are enforced. If they're not enforced, "we call this regulatory ambiguity," he says. "Then we're coming in."

MORE: 40 Under 40 - When they were young

This past Valentine's Day Kalanick offered customers in 15 cities flowers. For one day only they could select the "rose" button on the Uber app, and for $150 an Uber driver would deliver a dozen long-stemmed red roses to a sweetheart. A few months later it launched another one-day special, offering to send an ice cream truck to whoever hit a special button. Those are more than just brand-building gimmicks: They are subtle tests to see whether Uber can become not just a car service but a delivery service -- an on-the-ground logistics network with the capability to move many types of products and experiences on the fly. Some other things the company has tried: mariachi bands, helicopter rides to New York's Hamptons, boat rides, Texas barbecue. (Not everything has worked. "A Texas barbecue sandwich doesn't taste really good an hour and a half after it's made," Kalanick says.) Recently Kalanick stopped calling Uber "everyone's private driver," the service's tagline. Instead, he's calling it "the cross between lifestyle and logistics."

Immediate delivery is rich terrain for the biggest Internet giants. Amazon (AMZN, Fortune 500), eBay, and Google are all testing same-day delivery services. This is the promise that has attracted Google and TPG to Kalanick's efforts in recent months. It's no coincidence that new board member Bonderman was on the board of Continental and chairs the board of Ryanair. And Kalanick recently made a trio of big hires, adding Facebook's former head of international growth, Google's former chief accountant, and a top Valley deal guy to the team. An IPO is likely on the horizon.

With so many executives joining the company, Uber could soon resemble the system it's seeking to disrupt. Already the board meetings have a different feel. "It's getting professional and more serious," says co-founder Camp, who chairs the board and works on special projects; he says he no longer recognizes everyone at the office.

Kalanick has built his reputation around the promise of being anti-establishment. What happens when Uber becomes the establishment? A more mature company may eventually need a less iconoclastic CEO. But Kalanick's disregard for tradition and his unconventional approach to company building may just be what Uber requires -- and his investors, board members, and a growing number of customers may find it's not so bad to have The Wolf at the wheel.

Additional reporting by JP Mangalindan

This story is from the October 07, 2013 issue of Fortune. To top of page



Join the Conversation
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.