Peer to peer car sharing is hot for investors, recently drawing interest from the funds of Eric Schmidt, Ashton Kutcher and Marissa Mayer, as well as Google, GM and Zipcar. But the sector is still emerging and has a lot of growing pains to go through.
What do Yahoo CEO Marissa Mayer, celebrity Ashton Kutcher and former Google CEO Eric Schmidt all have in common? Their funds have all put money into a round for a startup called Getaround, which enables users to share their personal cars with other users.
The emerging sector is called a variety of things like peer to peer car sharing, car sharing 2.o, or neighborhood car sharing, and there’s a half dozen companies who have emerged to try to develop businesses based on this idea. Despite that the market is so new, and the hurdles are somewhat high, many of the companies in this sector have very high profile investors.
Relay Rides, another of these companies, raised money from the venture arms of Google and auto giant GM, as well as August Capital. Wheelz, another competitor, has raised money from traditional car sharing company Zipcar. Clearly forward-focused investors are intrigued with the idea, but is there a solid business model here? If so, it still needs to be worked out.
The industry hasn’t been without its growing pains. Relay Rides has pivoted a bit, and no longer installs its own in-car connected systems in the vehicles in its network. The company’s original model was to have its staff install the connected devices in the vehicles, which took money and time. Now Relay Rides is relying on its partnership with GM, and Onstar, to supply the vehicle connectivity and control system. And yes, the GM deal was a big win for the firm.
RelayRides also experimented with whether or not it should offer gas cards, and how to cover the cost of gas for very short trips. It’s not necessarily obvious how to set up a system like this, as the only precursor is traditional car sharing like Zipcar, where the company owns the cars and is responsible for their upkeep and gas bills. Both Relay Rides and Getaround have invested in substantial marketing, at least in San Francisco, one of their test markets.
Getaround sells connected kits for cars, which is a less capital intensive way of having the connected device system installed in the cars. But when I’ve talked to some potential investors, and yes competitors, they wonder how secure these systems are.
Safety and security are huge issues for this emerging industry. A company called HiGear, which created a business like this based on luxury cars, was the target of thieves and had to shut down. A startup called Spride Share, developed by investor Sunil Paul, never launched because of the concerns over insurance and the business model. Questions also remain about liability and insurance, which Relay Rides faced in a recent tragic event.
Peer to peer car sharing is an inspiring idea, and one that uses cars more efficiently, which is why some of these top notch investors have supported these startups. But the business models for these companies still needs to be worked out.
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