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How RelayRides is making money from long-term car sharing

Ucilia Wang — Wed, 15 May 2013 17:54:11 +0000

This article originally appeared on GigaOM Pro, our premium research subscription service.

Peer-to-peer car sharing service appeals to the urban and young people, and that partly explains why college campuses and large cities like San Francisco have been the labs for companies such as RelayRides and Getaround.

One of the benefits of this type of the service is the ability for customers to rent a car by the minute or hour, something that traditional rental car companies don’t allow. But for San Francisco-based RelayRides, an increasing number of its customers are paying for daily, weekly or even monthly rentals, said Steve Webb, the company spokesman. The majority of RelayRides’ revenues come from those types of rentals, he said.

That trend is good news for car owners who are able to part with their cars for an extended period of time. They could make more money with fewer renters. That also cuts the amount of time the car owners would need to meet with their customers — RelayRides switched to promoting the in-person exchange of keys last year when it pushed for a national expansion.

The peer-to-peer car sharing market is growing but remains very small. To scale up, a car sharing service has to market well and sign up a large network of cars, create an easy way for car owners to manage rentals and get paid and for renters to reserve and find the types of cars they want. A good customer service unit to settle any dispute and resolve insurance and other issues is also a must. As GigaOm’s Katie Fehrenbacher pointed out, getting people to feel comfortable using the service remains a hurdle. Webb said many car owners prefer to meet their renters in person before handing over the keys.

Still, RelayRides decided it wanted a way for renters to access cars without having to arrange for a meet up. It announced yesterday the purchase of a competitor, Wheelz, which has developed software that allows renters to find, reserve and unlock cars using their smart phones. An electronic device installed inside the car makes unlocking with the phone possible.

This automated tech was something RelayRides used to hire people to install regularly. But it was too costly and time consuming that the company largely ditched that effort, though it still offers it to car owners who rent out their cars frequently, Webb said. The device and software aren’t proprietary technology and are designed for running fleet services. Buying Wheelz gives RelayRides its own technology that it can then customize and compete more effectively against the likes of Getaround, which gives the car owners the unlocking device that they can install themselves.

Will the long-term focus for peer-to-peer car sharing be a long-term trend? What do you guys think?

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RelayRides buys up car sharing startup Wheelz for the tech

Katie Fehrenbacher — Tue, 14 May 2013 14:55:23 +0000

With a still small, but growing, market around people that want to rent out their personal cars to their neighbors, some consolidation seemed inevitable. On Tuesday startup RelayRides, which was one of the first companies to jump into the neighborhood car sharing market, announced that it has acquired Wheelz, a startup that had originally focused on building car sharing communities at universities.

RelayRides says it will acquire, among other things, Wheelz’s DriveBox technology, which enables Wheelz users to unlock and drive away in a rented car, without having to meet with the owner and get a key. Picture it basically like one of Zipcar’s unlocking and verification systems.

When RelayRides launched its business, it used to install this type of unlocking and verification technology in the users’ cars, but the installation process was lengthy and expensive. Later RelayRides started working with GM on connecting this type of system with GM’s Onstar technology. However more recently, RelayRides started opting for manual key swapping as a main option.

RelayRides staunch competitor Getaround launched its service around a box that car owners install in their cars themselves and which renters can use to automatically unlock cars using their smart phone. With Wheelz’s DriveBox tech, RelayRides can get back into the business of making car swapping more automated and easier for customers.

RelayRides has raised $13 million from Google Ventures, August Capital, General Motors, Shasta Ventures, and General Motor Ventures. Wheelz has raised at least $14 million from Zipcar and Detroit-based transportation investors Fontinalis Partners. The companies wouldn’t release terms of the deal.

The market for this type of peer to peer car sharing is still very early. Also execution and making people feel comfortable with the systems is key to growing this industry.

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Update: Google expands venture fund to $300 million

Eliza Kern — Thu, 08 Nov 2012 18:13:09 +0000

Google has increased the size of Google Ventures’ fund to $300 million annually, up from $200 million, and the firm’s partners said they expect to increase their involvement in later investment rounds as they grow, Reuters first reported Thursday.

“We were lucky. Larry and I, we just wrote up the check,” Google co-founder Sergey Brin said in an interview. “This is a really exciting way to be really impactful on the world.”

We've increased our fund by 50% to $300MM a year. We plan to invest $1.5B in startups over the next 5 years. #gvsummit—
Google Ventures (@GoogleVentures) November 08, 2012

Founded in 2009, Google Ventures is the venture capital arm of its parent company Google, and does a wide variety of deals, from 40-50 seed-stage investments under $250,000 to a few deals under $10 million. So far, the firm has invested in companies like Nest, which makes connected thermostats, HomeAway, a popular vacation rental site, and RelayRides, the ride-sharing company.

The additional funding will allow the firm to do more deals and especially to do follow-on rounds for companies that are expanding rapidly, but managing partner Bill Maris said the growth in fund size isn’t just about the number of deals they want to do.

“It’s a further affirmation of what we set out to do, which is to find and invest in the most disruptive and interesting founders we could find,” he said. “It doesn’t necessarily mean that we’re going to do a lot more deals, or that we’re going to do a lot bigger deals.”

But Maris said it gives the firm the ability to invest in the right people at the right time, with fewer restrictions on their deal size and scope. He said co-founder Larry Page asked him what he would do with $1 billion, but that it was important to the partners to scale responsibility — just like their startups do — and take on the right amount of funding they could handle for the size of the team.

“A billion a year is not something we can reasonably do,” Maris said. “300 was picked because it was an increment above 200 million.”

Maris said they’re especially interested in investing in mobile, cloud services, and big data. But like most investors, he said they’re betting on smart founders.

“Sergey and Larry are what made Google different from every other search engine out there,” he said. “That’s what we’re looking for.”

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Opportunities and risks in the share economy

Mon, 10 Sep 2012 06:55:27 +0000

Owning physical items — cars, apartments, office space — has both lost some of its luster and will be increasingly inefficient for a global market. It is shifts like these, combined with catalysts like mobile technology, that are driving a greater interest in the share economy, which can broadly be defined as a marketplace where business models are built around consumers choosing access rather than ownership. Key sectors in the share economy include car sharing, vacation sharing, office sharing, and ride sharing. Each has its own set of companies to watch, as well as its own opportunities and risks.

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GM opens up OnStar with peer-to-peer car sharing service

Katie Fehrenbacher — Tue, 17 Jul 2012 11:00:15 +0000

The around 6 million subscribers to GM’s OnStar connected car service can now rent out their cars to other drivers via a deal between the auto giant and peer-to-peer car sharing startup RelayRides. The partnership was announced back in October of last year, and the service is live as of Tuesday.

RelayRides — which raised money from GM’s venture arm — says it is the first third party to use OnStar’s API, and later this Summer GM plans to open up the API to other third party developers, too. OnStar uses satellite-connected on-board units to offer connected services, but the primary application to date has been to summon help in the case of an accident or other emergency. GM offers the service to car buyers free for a few months to try out before initiating a monthly fee — the service can cost $200 to $300 per year — and is looking to offer more services to retain those trial customers.

Using the OnStar system, RelayRides members can use a mobile app to reserve a car and unlock and lock the door. Owners of the vehicles can earn money from renting out their cars, and set the price for how much they want their cars to be rented. Depending on the location of where the car is parked, car owners can earn hundred of dollars per month, says RelayRides.

RelayRides, which first launched in the Summer of 2010, has been building a network of car owners and drivers interested in using cars a service. For much of the time, RelayRides has been installing a communications device in the vehicles to facilitate the reservation process, which can be a somewhat expensive and labor-intensive process. But in the GM cars, the OnStar system acts as that control gadget. RelayRides also won’t be installing communication devices in its customer’s cars in the future, but will use a combination of the OnStar system and will facilitate key sharing for non-OnStar subscribers.

RelayRides isn’t the only peer-to-peer car sharing company out there. Getaround, which sells a kit to its car owner customers, and Wheelz, which has an investment from Zipcar are two other ones. The service can be envisioned as sort of “car sharing 2.0″, in contrast to traditional car sharing networks like Zipcar and CityCarShare, where the organization owns the fleet of cars.

One of the major hurdles with these services is security. HiGear, a high-end luxury peer-to-peer car sharing company was the target of thieves and shut down. Investor Sunil Paul backed away from his idea to launch peer-to-peer car sharing via a startup called Spride Share because of his concerns over insurance and the business model. RelayRides says the OnStar system makes its peer-to-peer service more secure, as the OnStar vehicles can be controlled and tracked in the network.

Auto makers have an interesting relationship with car sharing. Car sharing has been proven to lead to fewer cars being purchased, so in a small part, car sharing is cannibalizing the auto maker’s business. But a variety of automakers are realizing they can benefit from car sharing in various ways, including getting their cars in front of the young and urban who normally wouldn’t be test driving their cars. Other companies, like Daimler, and Volkswagen, are trialling their own car sharing pilots.

RelayRides is backed by over $13 million in venture funding from investors including Google Ventures, August Capital, Shasta Ventures and General Motors Ventures.

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Who’s liable in the share economy?

Adam Lesser — Tue, 08 May 2012 18:45:11 +0000

This article first appeared on GigaOM Pro our premium subscription research service.

Updated: The tragic story, reported by The New York Times’s Ron Lieber last month, in which a man rented a car in Boston via peer-to-peer car sharing company RelayRides and wound up seriously injuring four people while losing his life, raised a familiar question for the share economy: Who’s responsible?

Addressing liability and security have become paramount issues as business models based on sharing items have emerged. Luxury peer-to-peer car sharing service HiGear abruptly shut down at the end of last year after a successful launch just four months previous. A criminal ring had stolen $300,000 in fancy cars and the HiGear founders felt they just couldn’t protect its users’ cars. And Airbnb’s lackluster response last summer to the trashing of two Airbnb hosts’ apartments highlighted how critical it is for people to feel safe before sharing their most important valuables like cars and homes, which also can have the best margins in the share economy.

In terms of peer-to-peer car sharing, RelayRides holds a million dollar insurance policy during the rental period, which is most often sufficient. But in the Boston accident, a lawyer for one victim has suggested total claims for the four victims would be in the $1.2 to $1.5 million range. Liz Fong-Jones, who rented out the car, told The New York Times that RelayRides has told her personal insurance carrier to deny any claims against it for the accident. From RelayRides’s perspective, liability should stop with RelayRides as it feels this is no different from any case where an insurance policy may be exhausted by the claims.

And in places like California, which have passed bills about car sharing, the law is clear. Deputy California Insurance Commissioner Joel Laucher clarified to me that California’s peer-to-peer car sharing bill, AB 1871, states that the car sharing program is the owner of the vehicle for all purposes and assumes liability during rental. On the emerging question of whether someone’s personal insurance carrier could drop them because they’re putting their car in a car sharing network, he added that it’s illegal to cancel or non-renew an insurance policy based on someone signing up for car sharing.

So that’s all well and good for states like California, Oregon and Washington, which have car sharing laws protecting consumers, but what about places like Massachusetts, where the accident occurred? RelayRides founder Shelby Clark recently told my colleague Katie Fehrenbacher that while he thinks state car sharing insurance laws provide clarity, he doesn’t think he needs them to operate, evidenced by Boston being an early market for RelayRides. The company has a deal in place with GM to unlock OnStar equipped vehicles registered in the RelayRides network via a mobile phone app, further opening up the number of available cars. One can only assume that GM also isn’t panicked about the liability issues and imagines this program operating in all states.

On a practical level, while there’s a big focus on what happens if the million dollar RelayRides insurance policy is exhausted, the larger concern may just be about what happens if auto insurance companies start non-renewing policies for folks who put their cars into car sharing services. Lieber reported that auto insurer USAA has indicated that car sharing participation would generally result in non-renewal. If multiple insurers go this route and are able to do so legally, then a larger problem would result.

While I think it’s unfair to single out share economy companies for the liability and insurance risks inherent in their business models (all companies have these concerns), it’s important to note that as these business mature they’ll have to confront the very issues of liability that all businesses encounter.

Airbnb’s initial poor response to the apartment trashing is indicative of a startup’s desire to grow and get traction, not manage customer care. In the aftermath, Airbnb installed a 24/7 customer hotline to report problems and a $50,000 insurance policy against theft and vandalism. Though interestingly, it excludes “personal liability,” meaning that if someone opens your closet and a box falls on them, that’s on you. And Airbnb is clear that its policy is not a replacement for renters or homeowners insurance, which raises the same question that has faced car sharing: how jazzed are homeowners’ insurers going to be about their policy holders renting out their homes?

The reality is that no insurer wants to take on additional risk, perceived or real. Conversely, the concern is that the focus on insurance and liability can be the enemy of truly innovative business like RelayRides and Airbnb. And whatever happens with the lawsuits resulting from the Boston accident, this is just an inevitable case of the business model being tested.

Update: RelayRides’s founder Shelby Clark reached out to clarify that he believes that ultimate liability should rest with the person who rents the car from the RelayRides network, and that RelayRides insures the renter up to $1 million. Meaning that if the renter is found to have caused the injuries in question, and the policy is exhausted by a verdict beyond $1 million, the renter (and not the car owner who rented out the car) is responsible for paying any damages beyond that million. The accident occurred in Massachusetts and California Deputy Insurance Commissioner Joel Laucher noted to us that in California, at least, AB 1871 states that “the personal vehicle sharing program shall assume all liability of the owner and shall be considered the owner of the vehicle for all purposes.” He added that as the statute reads, nothing limits the liability of the vehicle sharing program. These are new business models with new questions, and many of these issues are likely to get resolved by state courts.

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Who’s liable in the share economy?

Adam Lesser — Tue, 08 May 2012 13:00:56 +0000

UPDATED: The tragic story, reported by The New York Times’s Ron Lieber last month, in which a man rented a car in Boston via peer-to-peer car sharing company RelayRides and wound up seriously injuring four people while losing his life raised a familiar question for the [...]

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Why Zipcar is tapping the college market

Adam Lesser — Tue, 28 Feb 2012 14:00:55 +0000

Zipcar’s decision last week to make a strategic investment in peer-to-peer car-sharing startup Wheelz surprised many. But Wheelz is another way for Zipcar to access a young demographic, college students, which it has been courting for some time as a way to build its relationship with not only customers but also automakers.

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Zipcar backs peer-to-peer car sharing startup Wheelz

Ucilia Wang — Wed, 22 Feb 2012 16:37:20 +0000

Will car sharing pioneer Zipcar move into the emerging industry of peer-to-peer car sharing, or enabling neighbors to rent out other neighbors’ vehicles? Well, Zipcar hasn’t launched such a service, but it’s invested in one of the new peer-to-peer car sharing startups Wheelz, the companies announced on Wednesday.

Wheelz, which only launched last September at Stanford University, has raised a Series A round of $13.7 million from Zipcar as well as Detroit-based transportation investors Fontinalis Partners. Other peer-to-peer car sharing startups like RelayRides and Getaround have also found major backing from venture capitalists and auto companies.

While Zipcar buys and owns (or leases) its own fleet of cars for sharing, Wheelz is promoting the use of other people’s cars. Wheelz also is targeting a narrower audience to start: college towns and connecting students who have cars with those who don’t but need them. The idea is to provide money-making opportunities for students, many of whom don’t need their cars often if they live on or close to campus, while making it easier for those who need rides for trips to, say, grocery stores or weekend outings.

Wheelz joins a growing number of companies promoting the idea of collaborative consumption, which refers to the use of the web for sharing goods and services (see GigaOm Pro’s analysis of the trend). It maximizes the use of stuff, while reducing clutter and waste. The concept works not just in sharing cars but sharing living spaces and has spawned a series of startups across verticals, such as RelayRides, thredUP and Airbnb.

While car sharing isn’t mainstream, it has gotten enough traction among consumers, particularly the younger urbanites, to spawn at least a dozen startups in cities around the world. Peer-to-peer car sharing especially has caught the fancy of investors and entrepreneurs, and there were at least five peer-to-peer car sharing businesses here in the San Francisco Bay Area alone as of last fall. The business model also arguably involves more logistics and liability issues because the companies don’t own the vehicles and must ensure that both loaners and borrowers are happy with the service.

Right now, car sharing services like those from Zipcar and City Car Share tend to offer members the ability to rent cars in 15 minute integrals, and cars are parked around urban areas, can be unlocked using a key fob, and can be reserved on the web or a cell phone. In addition, car sharing services often include fuel in the service fee. In contrast, more traditional car rental businesses tend to rent cars through actual stores, mostly rent cars only during business hours, and most of the time, don’t include fuel in the price.

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Green IT 2012: looking for bright spots amid the clouds

Adam Lesser — Wed, 28 Dec 2011 16:01:09 +0000

As we look toward the next year, the cleantech sector faces many challenges, which we examine in detail in this 2012 outlook. Renewable energy generators encounter an increasingly difficult subsidy environment, and key cleantech innovations like electric vehicles face an uphill climb in terms of connecting with a larger market. The effort to build cleaner data centers continues. Meanwhile, low-power chips will get a shot at creating further energy savings at the server level. There remains, however, something of a silver lining, with companies like Nest poised to innovate in the home energy management space and Silver Spring Network’s potentially successful IPO offering a shot in the arm for the smart grid. Additional companies mentioned in this report include ARM, Calxeda, Getaround and Solyndra. For a full list of companies, and to read the full report, sign up for a free trial.

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