One of the consequences of the startup unicorn phenomenon is that the success of the rare few who manage to scale effiencetly overshadows the sheer difficulty involved in getting to that point at all.
Just take the “Uber of X” catchphrase and how effortlessly it implies growth, profitability and even more growth in industries that present categorically different challenges than ride-hailing.
Even when the industries have overlaps, success is still far from guaranteed. That’s the lesson, perhaps, to be learned by the failure of Zirx, the San Francisco-based “Uber of parking” that shuttered its consumer-facing on-demand valet service in February. In an interview with Fortune, Zirx CEO Sean Behr explained how they just couldn’t make the math work out for anything but it’s B2B service – when too few valets were on staff, it was hemorrhaging money in wages; when too few were, customers grew frustrated with long wait times.
And while it’s not an impossible proposition to balance supply of labor with the demand of consumers, Behr said that rousing up enough interest and getting to that point was too expensive a proposition for Zirx in the first place.
“In the consumer business, you’re on the hook for customer acquisition, you’re buying ads on Facebook, you’re giving out fliers,” Behr told Fortune. “When you launch a new on-demand market in the consumer side, the choice of the market and the responsibility of getting the revenue to come all rests in the on-demand company.”
But Zirx hasn’t completely folded – it’s still running what Behr described as an enterprise service that requires more resources than the company was able to provide while operating both sides of the on-demand valet coin. There’s still the issue of scaling in B2B, but it’s not quite so unpredictable. Behr noted that because companies tend to reserve the parking spots and services they require well ahead of time, Zirx is better able to allocate resources and respond accordingly. In addition, the company also doesn’t lose out on the deposits it paid to parking facility operators in rough estimations of their need for curbside space on a given day running its consumer-facing business.
This minutia of getting a unicorn off the ground has largely been lost in the haze of uber successful startups like, well, Uber. As MPD CEO Karen Webster noted in her weekly column, Uber didn’t get to where it was by dreaming up a ride-hailing service and pressing forward unilaterally without any care for the details. In fact, lost in its rapid rise to the top is a keen eye for when and how to moderate its scaling process – both as a way to onboard new riders and drivers and to sustain growth years down the road.
“Uber has threaded this needle repeatedly over the years,” Webster explained. “When it lowers prices to attract more consumers during off-peak times of the year, some drivers balk and threaten to quit. When Uber started, it took a lower percentage of the fare from drivers than it does now — as a way to get them on board. Uber also has to worry about launching line extensions to monetize its platform without cannibalizing its core business and losing drivers and passengers.”
The apparent inevitability of Uber whitewashes the trouble it took to implant itself to so thoroughly in an industry it may well have created. But the more Uber attracts an aura of inevitability, whether it wants it or not, the more each successive Uber of X might run into problems with scale and consumer acquisition that it never knew existed – or at least thought its “groundbreaking” business model could steamroll right over.
Just like Uber did – or didn’t – do.