September 30, 2023

With a Start-Up Company, a Ride Is Just a Tap of an App Away

Uber, a start-up based in San Francisco, offers a cellphone application that is aimed at making using a car service quick and painless.

The service has already found success in its hometown, where some have welcomed it as an antidote to notoriously sluggish public transit and a dearth of cabs.

But as of Wednesday, Uber is coming to New York, where it will face the task of wooing locals who already have a good subway system and, at most times, a decent supply of taxis.

Uber is not a taxi or limousine company. Instead it operates as a dispatch service, working with local owners of licensed private car companies. Uber provides each car with an iPhone and software that manages incoming requests. When an Uber user needs a ride, the dispatcher and the closest car are notified, and the system sends back an estimate of the pick-up time. While they wait, users can monitor the car’s location on their phone.

Travis Kalanick, who co-founded Uber with Garrett Camp, said the concept was inspired by their personal transportation troubles.

“The idea at the very beginning was to figure out a better way to get a cab in a city like San Francisco, which as anyone knows who lives here can be a nightmare,” Mr. Kalanick said.

“Garrett wanted to get a garage, hire a driver and split the cost among friends,” he said. “At first, I told him he was crazy. I thought about it and realized maybe we could work out a service where everyone has access to a private driver.”

Uber says that since last June it has brokered tens of thousands of rides in the Bay area and attracted hundreds of cars to join its fleet.

Julie Rajagopal, who works at a tech start-up in San Francisco, tried Uber earlier this week when she was running late for work and had trouble hailing a cab.

“After flailing my arms for 20 minutes, I decided to try Uber,” she said. The car showed up within two minutes, she said, and delivered her to work on time.

“I don’t mind paying a few dollars more,” she said. “Not waiting 30 minutes and being late to work is worth a few extra dollars.”

Uber charges a base fee of $7 in San Francisco, or $8 in New York, and then a rate for the time or distance traveled, depending on the car’s speed. There is a $15 minimum for each ride, and the company includes tips in its calculation. An average trip in New York, with tip, should cost about 1.75 times as much as a taxi, Mr. Kalanick said, adding that he hoped people would find Uber’s convenience and ease of use to be worth it.

For some, the cost is a hurdle. Zhao Lu, who lives in San Francisco and works for a wireless carrier, said he had signed up for Uber at the recommendation of a friend and was not pleased with the premium pricing.

“I thought it was outrageous,” he said. “I would use it if I couldn’t find any alternatives, if it were cold or late at night.” But otherwise, he said, “it’s too expensive.”

Uber, which is available for the iPhone and Android devices, requires users to enter their credit card information when they sign up. When they reach their destination, they can simply hop out, and the ride is charged to the card. Uber gets a percentage of each fare; the rest goes to the car services and drivers.

New York is a different beast than San Francisco when it comes to public transportation, and in much of the city there is often no shortage of ways to get around. But Mr. Kalanick said that in coming to New York, Uber was responding to the interest of its users. The company noticed that more than 1,000 people in the city had signed up and put their credit cards on file without knowing when the service might be available to them.

“We decided to respond to the demand,” he said. “We were coming to New York eventually — why not now?”

When those early fans opened the Uber app, the company made note of their phone’s location. That data helped it figure out the areas where demand might be highest. The densest pockets were in downtown Manhattan, including SoHo and the Lower East Side, and parts of Brooklyn. The company also tries to keep fleets near neighborhoods where high volumes of bookings are expected, lowering wait times.

Nationally, Uber faces competition from TaxiMagic and other services that let users book cabs and car services online. And it may get pushback from city agencies that have ironclad rules about how transport services must operate.

Late last year, Uber received a cease-and-desist order from the San Francisco Municipal Transportation Agency, which said customers might be confused and think the company was running its own car service. Uber, then known as UberCab, responded by shortening its name, which appeased the authorities.

Dan Ackman, a New York lawyer who often represents taxi drivers, said he did not think a service like Uber would run into too many legal problems in the city. “It’s not that different from using Google or a directory to find a car service,” he said.

But Mr. Ackman said there might be legal nuances. The city requires booking requests for car services to be relayed from a central office, and Uber could be challenged if the city somehow decided it was circumventing that, he said.

Allan Fromberg, a spokesman for the Taxi and Limousine Commission, which oversees New York’s taxis and black cars, declined to comment on Uber. The company says it is working with the agency to ensure that it is complying with regulations.

Investors seem to think the Uber idea has promise. The company has raised $12.5 million in venture financing from noted investment firms including Benchmark Capital, First Round Capital and the Founder Collective. And it has its sights set on expanding to cities like Boston, Seattle, Washington and Chicago.

Mr. Kalanick said the car service business would benefit from a revamped approach. “Don’t underestimate the power that efficiency and elegance of experience can have on a stagnant market,” he said.

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