Six years ago, Uber launched a test run to help hail cars in a few cities. Freelance drivers, who needed work in a deep recession, and customers, lured by cheaper rides and cashless transactions, together bankrolled Uber into a tech unicorn — a private company with a valuation of at least $1 billion.
But the era of cheap money is easing as valuation expectations adjust. Some start-ups have discreetly cut staff. IPOs remain weak. And it turns out the Uber business model — this broad idea that any sector might be disrupted by an army of freelancers, overlaid across a mobile platform — doesn't necessarily translate.
Uber and other start-ups in the on-demand economy have been dogged by questions about freelance-worker background checks. There are accusations that start-ups are basically skirting regulations and related licensing fees that apply to traditional businesses, including taxis, limousines and hotels.
But beyond Uber, more new companies are reimagining the on-demand business model. New ventures are coupling flexible schedules with more traditional workplace benefits including health insurance and a chance to buy a company stake — a privilege usually reserved for founding members and deep-pocketed investors, not rank-and-file employees.
More start-ups are also converting 1099 independent contractors to W-2 employees. And other companies are offering base wages above the federal minimum of $7.25 an hour. Some employees also get health insurance.
"Uber was the first game in town," said Rebecca Smith, deputy director of the National Employment Law Project, or NELP.
But San Francisco-based juggernaut Uber stands by its strategy and says the company is growing, co-founder and chief executive Travis Kalanick told CNBC on Monday. "We've just been watching literally hundreds of cities go profitable. We've just tightened up the operations," he said.
Uber has a presence in some 400 cities worldwide, from San Francisco to Shanghai. "We're getting good at running profitable cities," he said.
Kalanick added he does not expect his company to go public anytime soon. "I'm going to make sure it happens as late as possible." He added Uber has raised around $10 billion during the last 18 months.