the ‘adult in the room’ who steered Uber to profit
About two years before his 2017 appointment as chief executive of Uber, Dara Khosrowshahi, then head of travel group Expedia, turned down the chance to invest in the fast-growing but scandal-tainted ride-hailing group.
“We were looking at it and there was almost no financial information, and I said, ‘we’re definitely not going to invest in this’,” said Mark Okerstrom, Expedia’s chief financial officer under Khosrowshahi, who was also offered the investment opportunity by the pair’s wealth manager.
Khosrowshahi, who declined to comment, this week hailed an “inflection point” in Uber’s history as it reported its first full-year operating profit after racking up more than $30bn in losses since it was founded in 2009.
Seen as a safe pair of hands and a stark contrast to his predecessor Travis Kalanick, Khosrowshahi has pushed Uber into new businesses including grocery delivery and high-margin advertising, while user numbers have ballooned to 150mn from 45mn seven years ago.
Whether the company, once a symbol of Silicon Valley excess, has truly matured and can maintain a healthy level of profitable growth will now be at the top of investors’ minds.
Khosrowshahi grew up in a wealthy household in Iran before his family fled to France ahead of the country’s 1979 revolution and then moved to the US. After studying bioelectric engineering at Brown University in Rhode Island, he took a job as an analyst at Wall Street firm Allen & Company.
From there he moved to investor Barry Diller’s internet and media group IAC, where he spent seven years, before taking over as CEO of Expedia, which Diller has chaired since its 2005 spin-off from his company.
In Khosrowshahi’s 12 years as chief executive, the travel group’s share price trebled. He remains on Expedia’s board and also sits on the investment advisory board of venture capital firm the Autism Impact Fund.
While still running Expedia, Khosrowshahi was approached by a headhunter as a potential replacement for Kalanick at Uber. News of his appointment broke on a Sunday in August 2017 even before he had been informed.
“Everyone was surprised,” said Okerstrom. “By Friday he was fully in the seat . . . it was very Dara. He does not get flustered, and he likes a challenge.”
Co-founder Kalanick had propelled Uber from a San Francisco start-up to a global business, raising vast amounts of venture capital in an effort to dominate the ride-hailing market. But he also presided over a series of crises, from allegations of workplace misogyny and sexual harassment to a scandal over a software program that was used to mislead regulators.
That left numerous challenges for Khosrowshahi, including how to prepare Uber for its 2019 listing on the New York Stock Exchange.
Nelson Chai, who Khosrowshahi recruited as chief financial officer to help turn the business around, said it was “in no shape” to go public. “It was a huge lift.”
The initial public offering did not go well. Uber failed to meet expectations of a $120bn valuation and recorded the worst-ever first-day dollar loss for a US company.
This week, however, the company’s market capitalisation hit a high of about $147bn.
People who have worked closely with Khosrowshahi say he is compassionate and a good listener but is not afraid to take tough decisions and should be credited with pushing the company to work in a leaner, more efficient way.
Khosrowshahi is “the adult in the room, but he’s not a boring adult”, said Okerstrom. “He can be aggressive in terms of taking risks, he’s not someone who’s always going to play it safe.”
During the pandemic, Uber laid off a quarter of its staff, with Khosrowshahi working closely with Chai to offload non-core businesses. These included autonomous vehicles and bicycles in which “the unit economics didn’t make sense,” said Chai, who added: “When I joined the company, it was the Uber of everything.”
After the pandemic, Khosrowshahi worked to lure drivers back to the platform, in part by improving their experience, and even drove some rides himself to better understand what worked.
Uber’s 2023 performance marked “quite a turnaround”, said Citi analyst Ronald Josey. “It all comes down to a greater focus within the mobility business . . . When they decided to go after drivers and make them as productive as possible, that was a strategic decision.”
Looking ahead, Josey said the company would need to demonstrate growth in gross bookings, or the value of fares paid, which accelerated slightly in the final quarter of 2023 compared with the previous quarter. “We’re looking for that to be driven by greater overall frequency.”
But Thomas Monteiro, an analyst at Investing.com, said Uber was “too dependent on user growth” that was naturally limited, and that he would be watching for how the company planned to innovate for efficiency.
Meanwhile, the chaos of a fractured board and allegations of a toxic workplace culture during the Kalanick era appear to have subsided.
Bill Gurley, an early investor in the company, said it was impossible to overstate how good a job Khosrowshahi had done “in terms of getting the company on the right track, putting out all those fires, getting the brand moving in the right direction again. It’s night and day.”
Yet Uber still faces a patchwork of labour-related regulatory challenges from authorities unhappy with the way it classifies its drivers, and what that means for benefits such as sick pay.
Camiel Irving, vice-president of Uber’s operations in the US and Canada, said Uber was working on its relationships with regulators as it sought to address worker rights concerns. “I think we’ll hear less about those legal challenges,” she said.
All eyes will now be on next week’s investor update, what Uber signals then about its strategy, and whether it will launch a share buyback.
“My leaving was the end of Uber 2.0, which was getting the company to where it is today. Next week is the start of Uber 3.0,” said Chai. “Is it the same disrupter pirate ship” as under Kalanick? “No. Do I think Khosrowshahi was the right person at the right time? I think history shows that he was.”