Uber Hits Boston With Its Tech for Luxurious, On-the-Fly Rides

10/19/11Follow @xconomy

This is not your average cab company. In fact, it’s not a cab company at all. It’s a tech startup enabling urban luxury car services to function a bit more like cabs, while retaining their swank.

It’s called Uber (formerly UberCab but renamed to avoid confusion) and it is up and running in Boston as of tomorrow. Why?

“It’s a smart city,” says Uber general manager and vice president of operations Ryan Graves. “Uber is a smart kind of service for someone who wants to live in this evolved, on-demand-service world. Plus there’s transportation nightmares galore here.”

Uber recruits professional luxury drivers to join its network. Consumers, meanwhile, can book rides on the spot, pushing a button on a mobile app to find the nearest driver. Their geographic coordinates are sent out and translated into an exact address for the drivers, who then make their way over for the pickup. Consumers can trace their drivers’ progress as they’re waiting for the rides, and no cash is exchanged. (Consumers input their credit card information for billing when they sign up for the service.) The aim is get a driver to the passenger’s location within five minutes of booking, though it may take longer initially during the break-in period in Boston, Graves says.

Uber was founded in San Francisco, and now has services in New York, Seattle, Chicago, and next, Washington, D.C. The plan is to hit a total of seven cities this year and climb to 20 to 25 cities next year.

Graves says the team aims to make the luxury car service market a bit more accessible to consumers and a bit more lucrative for drivers. Traditionally, to get a nice ride to an event like New Year’s Eve festivities, consumers would have to spend upwards of $800, booking a luxury car service for a minimum of a few hours, with drivers spending much of that time waiting. With Uber, Graves says, passengers can book a car for just the amount of time they need, while drivers get to spend more of their day or night gainfully employed.

Uber is still working on exact pricing for Boston, but its service has averaged out to run about 1.6 times the price of a cab, Graves says. The company reaps a 20 percent commission from drivers for each ride booked through the system. Uber doesn’t carry the lucrative price per single ride that the old luxury car ride system does, but Graves says overall it ups the income for drivers.

“It’s a better deal for drivers,” he says. “They’re working harder, but making more in the process.”

As it’s developing its Boston launch, Uber is working on accurately calculating the supply and demand for the service in the city. One potentially unsettling aspect of the service is that users can’t make reservations for rides ahead of time; it’s all done in the moment the ride is needed. “That’s a behavior change for most people,” says Graves. “If we can get the on-demand thing right, you don’t have to do reservations.”

That’s where Uber’s math department comes into play. It consists of (literal) rocket scientists, statisticians, and other computational gurus who develop algorithms meant to predict how many cars must be ready to meet demand in the different cities, and how factors like holidays, time, and weather will affect all that, says Graves.

About half of the company’s 32-person headcount is made up of engineers, all of whom are located in San Francisco. Operations staff across Uber’s different city locations account for the remainder. The company has raised about $12.5 million in funding, from investors like First Round Capital, LowerCase Capital, Benchmark Capital, and angel investors.

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