I would like to introduce the idea of a new car sharing service, which will allow the customers to share their ride with strangers by using existing transportation services, such as Uber, Lyft, and “regular” taxis.

 In my vision, the new car-pooling service will reduce the price for each passenger, allowing cheap public transportation for all. The new service will offer the customers the shortest available option to reach their destination (by finding the closest driver and the best shared route), together with the freedom to choose the ride service provider by the price, driver rank, partners for the ride, type of car, etc.

The use cases for such a service are endless: driving from an airport to a nearby city or town (or vise versa), going out to (or from) the popular places in the city downtown, and driving to a show or a sport event. Of course, in addition to the abovementioned examples, where one of the destinations is a public place with many potential passengers, the service can be relevant for any other ride, but will require many more users to match with one another.

The envisioned system will match between riders and drivers according to their location and destination, and will take into account the riders potential routes, optimizing on shortest time to destination or on the price (according to the rider preference). A key advantage over similar services such as Lyft Line[1] and UberPool[2], will be the option to choose between different services, including option to share a taxi ride. This will encourage all the existing players to raise their service standards, and lower the prices.

For a new player, offering this ride-pooling service could be a promising entry strategy to the ride-sharing market, which, as noted by my classmate Abhishek Sharma on his post from Nov 3, 2014[3], is currently dominated by two giants. The new player should avoid direct competition with the current players, and focus on offering low prices and expanding the market to new riders whose willingness to pay is lower. When a price of a bus or train ride will be almost the same as to price of the suggested new service, these knew potential customers will be more inclined to use a ride-pooling service.

In order to launch a successful service, several main conditions must be met:

Large user network

The service has a strong network effect: more users lead to more potential riders to share a ride with, which in turn attracts even more riders to join the service. The strength of the new service is that it is not a “two sided network,” as the service does not require the cooperation of the drivers or the service providers (Uber/Lyt/Taxis) and can be offered independently. To attract new users to the service, it should be heavily subsidized by the new player, at for the first few months.

Ability to decline partners for the ride

One of the key challenges of the offered service is the hesitation of potential riders to share a car with a stranger. Indeed, the driver himself/herself is a stranger, but some background checks are being made to ensure the riders safety. To deal with this issue, a rating system for passengers will be put in place. To protect the riders from revenge by a violent rider who get a low rate, one will not be able to see his reviews. Riders will have the option to decline other drives from joining, but in this case the price would be the full price for a single rider. In addition, an emergency button will be added to the new app (similarly to what SaferTaxi, a ride-sharing company in Latin America, offers to it drivers).

Prevent avoiding the additional payment for the service by “bypassing” the system

There is a potential risk that riders who have been connected by the service will try to avoid payment and take a taxi/Uber/Lyft not through the system. Therefore, the system should collect the payment prior to the ride, upon a successful match.

Strong legal standpoint to prevent blocking by current players

According to my preliminary research, the existing players APIs and user agreements don’t prohibit the suggested service from operating. However, these players may try to change them and/or technically block the new service from using their systems. The new player should make sure it can protect itself from law suits, and use the other player public available data in a legal manner. In should also be mention that if more riders will use the current players services thanks to the suggested solution, it will reduce the risk that current players will take actions again the new player.

 As described above, there are many challenges in the establishment of a new ride-pooling services, but I believe that with the right entry and pricing strategies there is a huge potential for a new player in the ride-sharing market. I hope and believe this vision will soon become a reality, and look forward to use such a service in the near future.

[1] https://www.lyft.com/line

[2] http://blog.uber.com/uberpool

[3] http://www.onlineeconomy.org/ridesharing-in-us-a-two-horse-race-of-uber-lyft

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The entry of app-enabled ride-sharing services, such as Uber and Lyft, has solved several pain-points for us – the consumers. I often feel, consumers have gained significantly not just on reduced cost of mobility but also on a better customer experience – friendly drivers, better and cleaner cars, removed hassle to carry cash or credit cards, and most importantly, complete control over when and where the service is needed. As my billing statements suggest, since Mar ‘14, I have taken 98 Uber and 20 Lyft rides (excludes rides paid for by friends) spending over $1,200 on transportation. Almost on every ride, I have loved to chat with the drivers on why they work for a particular player, whether they work full-time or part-time, what they like about the job, how they are being poached by competitor, which company helps them make more money, what it would take for them to switch, what they think about the customer ratings, about the taxi union strikes against Uber etc.

After talking to 100+ drivers and doing some secondary research, I have come to a conclusion that, at best, this category will be a two-horse race (Uber, Lyft) in US, leaving almost no significant room for other players or building pressure on them for consolidation. Here are a few reasons:

Network Effects: Being a marketplace-oriented business, ridesharing has strong network effects – Firstly, more drivers lead to more active users and vice versa. More active users imply more demand per hour and hence more drivers willing to be on the platform. More drivers on the platform means greater likelihood of free cars in user’s vicinity and hence lower wait time. I feel, pricing and wait time are two most critical decision-making parameters for users. Secondly, the new popular car-pooling derivatives – UberPool and LyftLine – that have been launched in San Francisco, rely even more heavily on network effects. Having shared liquidity along shared routes is critical for the pooling to work. My friends and I love these services as it reduces per passenger fare; I am sure, drivers love it too as they could make more money per ride. Thirdly, although, there could be room for existence of localized players who stay focused on certain cities, their existence is not sustainable for two reasons – 1. The two giants will enter those markets soon, if they haven’t already, in the next wave of growth 2. Customers who travel between cities tend to use the service that has omni-presence in all the cities (after all, we tend to use a limited number of mobile apps at a time), e.g., if I am an Uber-user in Boston (where Sidecar entered only recently), chances are high that I would not even think of using Sidecar when I am in SF.

War for Drivers: Drivers want to maximize dollar income per hour. I hear this number averages ~$25 /hour on a regular day. My interactions with full-time drivers reinforce that there is no barrier for them to use Uber, Lyft, Sidecar simultaneously. In fact, in most toughly contested cities (e.g., SF), we could see at least two smartphones next to the vehicle steering. They just care about higher ride time and minimal idle time. Switching cost is literally zero. All it takes is to click “offline” on Uber’s smartphone and hit “online” on Lyft’s (and vice versa) to make a switch. Moreover, there is a war over commission incentives. One driver shared, “If I complete 50 hours per week per month with Lyft, I don’t pay any commission to Lyft, basically, entire 20% is waived off”. In addition, there are sign-on bonuses of up to $1000 for switching. According to these drivers, both Uber and Lyft have access to each other’s driver databases. When asked how that becomes possible, they mention, there is strong employee attrition at these companies and poaching between the two is very common. This leads to drift of talent from one company to the other and data gets transferred as a result. Another driver also mentioned, both Uber and Lyft have fake users who would just book and cancel competitors’ cabs all day to confuse the network and make competitors’ cars unavailable.

Depth of Pockets: Drivers admit that it doesn’t impact them even if they end up getting only one passenger in a LyftLine ride. The customer ends up paying only 50% of the actual price; Lyft compensates the remaining 50% to the drivers. There are rides, for which only paid $3, when otherwise I would be paying at least $10 for a regular cab. Essentially, these companies are underwriting, at their investors’ expense, to continue building up network effects and get customers to ramp up usage and become stickier. Both Uber and Lyft are venture-backed and are burning cash on such rides. The business needs deep pockets to survive in a game that is more about “who can outlast the other”. In future, the need for cash will only intensify, as Uber and Lyft will fight to convert car-owners to switch to ridesharing, enter and grow in sparsely populated and tier-2 cities, and spread wings in more international markets. Hence, even though ridesharing marketplace business model is perceived to be asset-light, the competition will continue to overheat the price wars and escalate the asset intensity. It will be increasingly less fruitful and more frustrating for a VC to continue backing distant number “3 and beyond” in this market.

Size and Scale: By now, going by user behavior, one thing is evident that positioning alone is not a key differentiator. Pink moustache or not, fist bump or not, front seating or not, users don’t care much. Pricing and instant availability are critical. At the same time, drivers don’t like to drive for 5 minutes to get their next pick-up. “INSTANT” is important. That will come only with scale and size. Going by latest valuation data, Uber is valued ~20x its nearest competitor in the US market, Lyft. Even going by the amount of money raised, Uber stands at $1.5B, Lyft at ~$330M, and Sidecar a remote third at ~$35M.


  1. Please note that the article largely focuses on consumer mobility and ridesharing. Uber and Lyft have given indications to launch more transportation derivatives in future, such as flu-shot delivery, grocery and delivery, and Point AtoB logistics solutions. In these categories, the two horses will attract more competition from other diverse incumbents, such as Google, Amazon, Instacart.
  2. The aforementioned views and inferences are based on conversations with drivers of Uber and Lyft.

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Payment platforms for online and mobile businesses – current and future landscape

While most of the press around mobile payments has focused around B2C solutions such as Square and LevelUp, online payment platforms such as Zuora, Stripe and Braintree are also seeing robust growth, riding the tremendous growth in e-commerce and P2P mobile payments. Example client include Uber, LivingSocial and AirBnB (Braintree), box.net and zendesk (Zuora) and shopify and edmodo (Stripe).  Such platforms have a few key elements that all competitors in this space try to replicate:

  • A robust, reliable and scalable solution
  • Simple developer-friendly APIs
  • Excellent customer service
  • Quick (and in some cases “instant”) set up, including setting up a new merchant account for the client

A robust, reliable and scalable solution

Accepting payments for a new high-growth startup can be a very painful process if attempted on your own, but companies such as Braintree, Stripe and Zuora attempt to simplify the process as much as possible. The goal is to provide a solution that scales as your startup scales – from facilitating 100 transactions a week to a 1000 transactions a minute, all the while providing a reliable, secure and affordable service. Key to this space is supporting both desktop and mobile transactions, as a growing number of e-transactions occur on mobile devices. A number of startups also make international expansion a very early priority, as they attempt to be the first-mover in several markets. Payment providers try to stay one step ahead of the curve by expanding internationally and having a deep understanding of foreign legal and financial frameworks.

Simple developer-friendly APIs

Stripe is perhaps the best poster-child for having developer-friendly payment APIs. Stripe boasts having APIs “that get of your way” and also pioneered the “instant” setup features that were replicated by Braintree – which allow you to get started with a payment solution in under a day. The key here is to have API wrappers for various languages such as Ruby, PHP, Python and many more to make it incredibly easy to get started and integrate with your service.

Excellent customer service

Braintree seems to be leading here, and promises to always have a real person answer a customer service call. Customer service is key in this business, which is based on having reliable, trustworthy service with quick turnarounds if something goes wrong. Parts of the payments process remain tedious and high-touch. For example, setting up a new merchant can often involve multiple long-threads between the payment-solution provider and the client, where the payment-solution provider acts as the middleman (and underwriter) between the client and the bank. The client wants to have the account set up as soon as possible, while the bank wants to make sure that a proper risk assessment as done – companies like Braintree try to simplify the process by having excellent customer service and quick turnaround times.

Instant set-up

Now that Stripe and Braintree have instant setup (by eliminating the waiting period for a new merchant account or underwriting approval), startups can have a quick headstart in facilitating e-commerce transactions.  Through this process, companies such as Braintree also get more insight about the client’s business model and growth plans, and try to ensure that clients’ accounts are never frozen or shut down because of unanticipated activity.

Disruption and future landscape

While there are certainly scale benefits to serving many clients, I do not see any network effects associated with providing online payments. However, this could change as some of these providers attempt to get into the mobile P2P payments space, such as Braintree’s acquisition of Venmo.

On the other hand, the companies in this space are addressing an unmet need. For many high-growth startups, solutions such as PayPal, authorize.net are too expensive, slow, outdated and too hard to integrate with. I see solutions by Braintree and Stripe taking away a lot of business from PayPal. Switching costs are also high – it is usually hard to migrate customer payment information from one platform to another.

Although payment providers are seeing tremendous growth just because of the amount of growth in e-commerce and online/mobile transactions, all these solutions (except for Braintree’s Venmo business) are still reliant on the infrastructure provided by the credit-card networks. All the startups in this space seem to be playing the puppy-dog strategy – posing as small players who are friendly with the credit-card networks and are doing little to disintermediate them.

Competition is tough in the payment space, and more and more players (both large and small) are getting into this space everyday. Braintree, Stripe and Zuora seem to have carved out a niche, but need to remain innovative and competitive to stay relevant going forward. I’m looking forward to seeing many more innovate solutions come out of these companies to make payments for young, high-growth startups even easier.


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