Harry here. It seems like more and more companies are shutting their doors these days than opening them. I can’t say I’m surprised since it really speaks to the disconnect between a lot of start-ups that fail and the people (in this case drivers) they’re trying to serve. I see this a lot with employees at Uber, but if you’re a start-up like Breeze looking to scale (doing the exact same thing that Uber does with Xchange Leasing) you have to do things differently than Uber. You can’t go out and offer a crappy product with questionable recruiting tactics and expect drivers to stick around. I’ve actually gotten a couple e-mails this week from employees at Breeze and it seems like they were also treated pretty poorly as the ship was sinking. More to come on this as we learn more.
Today, senior RSG contributor John Ince takes a look at a couple companies that are closing shop, the cottage industry around training drivers and an interesting UberPool promotion in NYC.
Sum and Substance: Breeze, a San Francisco startup that leases cars to drivers for Uber, Lyft, and delivery services, has suspended its service, according to the company’s website.
Born ZephyrCar in late 2013, Breeze’s business model was to lease out cars, by the week, to people who want to work for ride-hailing or delivery services like Instacart and Postmates. Starting in San Francisco, the startup eventually expanded to a total of six U.S. markets, including Los Angeles, Seattle, and Boston.
However, it appears that after more than two years, the company has hit a wall. “Due to recent business developments and broader market trends, we at Breeze have made the difficult decision to suspend our car leasing program,” a message on its website’s home page reads. The company is no longer accepting new customers, but current ones will remain unaffected.
When Breeze began operating, ride-hailing services like Sidecar, Lyft, and UberX, which involve regular people ferrying passengers using their own cars, were relatively new. Lyft and the now-defunct Sidecar launched in the summer of 2012, with UberX, Uber’s version of the service, following later that year. For Breeze’s co-founders, two of whom had previously worked at Uber and cleaning startup Homejoy, it was the perfect opportunity: help the companies recruit more drivers by renting cars to folks without one.
Eventually, both Uber and Lyft debuted their own programs for leasing and renting out cars to their drivers, likely taking away a lot of Breeze’s business. Today, Uber offers both longer term car leases as well as short-term rentals through partnerships with car rental companies Hertz began offering rental cars to Lyft drivers as part of its investment in and partnership with the ride-hailing company. Competing services like HyreCar and Evercar also sprouted up.
My Take: The driver message boards were abuzz on this one. “what does it mean for me?” was the most common fear based response. If you’re using Breeze, don’t panic. This development doesn’t affect you … at least for now. They may have suspended operations, but surely someone (Uber maybe) with deep pockets will step in to service the loans and leases. There’s too much money to be made in this business and the vultures are always circling above looking for distressed situations like this.
Sum and Substance: FlightCar raised $40 million to solve airport parking with an Airbnb-like sharing model: let a stranger drive your car while you’re away on a trip and in return avoid parking fees and even make a few bucks. Travelers will have to find a new solution.
On Thursday afternoon, the San Francisco-based FlightCar will announce that, effective immediately, it is closing operations at all 12 of its airport stations around the U.S. and has sold its technology platform to Mercedes-Benz Research & Development North America, where it will become part of Mercedes’ innovation lab for mobility services.
The price Mercedes-Benz paid for the four-year-old startup is unknown at this time, but FlightCar’s last financing, a $20 million Series B in September 2015, gave it a $100 million post-money valuation according to venture capital data firm Pitchbook. Some of FlightCar’s more than 90 current employees plan to join Mercedes-Benz, including 21-year-old cofounder and CEO Rujul Zaparde.
FlightCar had a wide range of investors, including venture backers GGV Capital, First Round Capital, General Catalyst Partners, Comcast Ventures, and Andreessen Horowitz, as well as strategic money from Softbank, Priceline, and Tencent. It also attracted high-profile individual investors: Facebook’s Eduardo Saverin, Airbnb’s Brian Chesky, and Hollywood personalities Ryan Seacrest and Ashton Kutcher.
Zaparde started FlightCar in 2012 with friends Shri Ganeshram and Kevin Petrovic. They built the company through The Brandery, a startup accelerator in Cincinnati, OH, before graduating from Y Combinator’s Winter 2013 class. FlightCar expanded to 17 airport locations and around 150 employees at its peak last year, but quality didn’t scale with growth. Reviews of the customer service were frequently negative. So after its Series B, FlightCar closed five locations and laid off a large chunk of its staff, including several key members of its executive team.
The company turned off its marketing efforts earlier this year while it brought on Amazon veteran Robert Gash as VP of Product and Engineering to help re-engineer the experience. In May, FlightCar released all new apps with overhauled technology on the back end and service and policy changes on the customer-facing side.
FlightCar also updated its branding, but none of the changes were enough to influence the ultimate trajectory of its business.
With the twin forces of autonomous technology and electric vehicles set to disrupt the industry, the old school auto companies have increasingly sought out transportation service startups. From General Motors investing in ridesharing platform Lyft, Hertz investing in valet parking app Luxe, or now Mercedes-Benz buying FlightCar’s technology, there’s a race on to learn from startups and use them to augment traditional expertise in manufacturing. Mercedes, a division of parent company Daimler AG, has experimented with ridesharing, car rental, chauffeured services, and even a long distance bus network.
My Take: So it’s beginning to look like a pattern here. Startups in this so called “sharing economy” just can’t seem to make the numbers work. After all the hype and excitement over initial growth figures starts to wear off, the entrepreneurs and investors are left with some hard cold decisions. Do we continue to bleed red ink or look for a graceful exit? Looks like they found one here. This acquisition may not have been a home run for the investors, but it’s not a wipe-out either. For the entrepreneurs, it’s probably a pretty good payday for a few years work. Would you settle for a few million of cool cash in lieu of driving the streets of the city? Darn right you would.
Sum and Substance: There are three guys dressed like Lincoln gazing in my direction as I circle the Public Square, Cleveland. The third Lincoln from the left is really giving me the business with his eyes. That’s what they do when they’re looking for you, for their Uber. They try to lock eyes. Cool, I think. Maybe that’s my guy. Maybe I get to drive Abraham Lincoln…. I don’t know what the Lincolns are there to do, what they want to assert by slapping on those lipless fake beards. From my seat behind the wheel, it feels something like a none-of-my-business thing. I’m just an Uber driver.
It’s hard to register the tenor of the demonstrations at the Republican National Convention from the front seat of a moving sedan. From where I sit, things rise, unfold, get loud, crowds seethe, faces press in, chants start, drums, invectives are thrown, megaphones, rock and roll, weird hats, someone, something, gets publicly excoriated.
Late night, suit crumpled, tie askew, one guy speaks from my backseat. “It’s not what I signed up for,” he says of Trump, whose candidacy was cast in stone mere hours before and only a few hundred yards from the corner where I picked him up. “But people voted for him. More votes than anyone in history. So I gotta get in line.” Are you voting for him?
“Probably not,” he says. So. Hillary? He laughs. “No, never,” he says. This is the refrain in Cleveland. “I’m a Republican okay? A real Republican. That’s why I’m here. That’s why I’ll be here in four years. Until then, I’ll suffer this guy.” So why not vote for him? “For me it’s the immigration thing,” he says, “And that friggin’ wall. I mean, my wife is Mexican. There’s too much to explain about the guy.” We stare at the yellow-white thread of streetlights along Cedar Road. Late at night, Cleveland is a small city again.
My Take: This is a well written and fascinating first person account of an Uber driver’s experience at the Republican convention in Cleveland this week. The writer has a dry wit and an ability to capture some of the excess and absurdity of this circus. Sure sounds a lot more interesting to me than sitting inside Quicken Loan arena and listening to a lot of boring speeches.
Sum and Substance: In San Francisco, Washington, D.C., Los Angeles, and a handful of other cities, a company called 7×7 Executive hosts sessions for low-rated Uber drivers. It promises “techniques designed to enhance customer service skills” and “detailed reviews of local neighborhoods and key routes,” purporting to boost drivers’ performances.
According to Uber’s company protocol, drivers whose ratings fall below 4.6 are deactivated and must attend these sessions, where available, in order to reclaim their jobs. At a glance, the policy seems fair; underperforming drivers should take measures to improve. Yet two fundamental problems lurk: drivers must pay $40 to upwards of $65 out of pocket to attend them, and drivers are scarcely given any training in the first place, rendering the sessions mere reactionary Band-Aids.
Uber and Lyft aren’t required to provide proprietary driver training given their drivers’ legal status as independent contractors, and the fear of triggering regulatory bodies to view drivers as employees further prevents them from doing so. Uber’s training approach, consequently, consists primarily of a short series of videos, including 13- and 16-minute tutorials outlining how the driver-facing app and ratings systems work, as well as basic tips on communicating with passengers and earning a high rating.
Uber competitor Lyft’s training includes optional videos and articles and a brief tutorial and drive with a designated “Mentor.” As a result, some drivers are leveraging this lack of training into a short-term cottage industry. Perhaps the best-known example is The Rideshare Guy, an informational blog for rideshare drivers. Operated by Harry Campbell, a former engineer and occasional Lyft and Uber driver, the blog generates revenue from affiliate marketing and a $97 online course covering such topics as capitalizing on surge pricing and maximizing tax writeoffs.
My Take: How does that old story go about the San Francisco gold rush? The ones who made out best were the ones who sold the shovels and pitchforks. Levi-Strauss, who made the jeans, didn’t come out so bad either. So we’ve got this new gold rush now in app-enabled urban transit, and there’s a whole new industry of support services growing up around it. You’re reading the blog now of someone who saw an opportunity and seized upon it.
Sum and Substance: Here’s a great deal: Uber and Gilt City are teaming up to offer a packages of unlimited uberPOOL rides in New York City. The deal is being called a “commute card” and can only be used Monday through Friday during commuting hours (7-10am and 5-8pm) in Manhattan. These are the same hours during which Uber offers $5 flat rate uberPOOL rides in NYC.
As a refresher, uberPOOL is Uber’s carpool product where the company matches you with riders headed the same direction. The packages are either two-week unlimited for $49, four-week unlimited for $79, or eight-week unlimited for $159. These prices equal saving of up to 60 percent off (the packages would normally be $100, $200, and $400 respectively, assuming you take two $5 POOL rides a day). Better yet – this deal means commuting in an uberPOOL is cheaper than taking the subway. A monthly unlimited MetroCard is $116.50 (compared to Uber’s deal of $79), although an unlimited subway card can also be used outside of commuting hours.
My Take: So this is what Uber is doing with all that money ($15 billion and counting) that they’ve raised from investors. This is an unbelievably attractive promotion for riders. As someone who used to commute in New York City, the thought of driving in an Uber is infinitely more appealing that jostling with sweaty people on a subway … but with this promotion, it’s actually cheaper.
What concerns me about this from Uber’s standpoint is that it’s clearly unsustainable. Uber seems to be sweetening deals for both drivers (bonuses and hourly guarantees) and passengers at the same time. This means Uber can’t be making money. This is great for boosting growth rates, and remember Uber is still a distant second to taxis in New York City in terms of gross ridership, but taxis are doing it while making money. In other words, what are winning with a sustainable business model, and Uber is losing with an unsustainable business model – and yet investors keep throwing money at the company. Go figure.
Readers, what do you think of this week’s round up? Did you ever use Breeze or FlightCar?
-John @ RSG
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