Ridesharing startups are nothing new. Since the first boom in Uber’s popularity, numerous companies have sought to follow in the rideshare giant’s footsteps. One, Lyft, was successful- acquiring similar numbers in today’s economic warzone. Along the way however, there are littered the corpses of numerous companies, some more successful than others. What then allowed Uber and Lyft to become so successful, where others failed? The most astute reader might claim that it was the principle of firsts. Uber and Lyft came first, and thus the market share was easily dominated by the two. The principle of firsts isn’t always correct- and in this case I propose that it was not the rapid closure of the market share by TNCs (Transportation Network Companies) like Uber and Lyft, but rather a mismanagement of a precarious balance. That balance manifests in corporate growth, and with growth comes a curse.
According to CB Insights via Business Insider, 29% of startups fail due to having ran out of the funds necessary to keep their business afloat. A staggering 42% fail due to the concept of ‘No Market Need.’ For the sake of this article, despite possibly reducing the scientific validity of the thesis, the market need of rideshare and TNCs will be ignored. The recent floundering of Uber and Lyft bring question to the stability of the rideshare market, and such- perhaps the next few years may prove to be the breeding ground of numerous successful TNCs.
Only 19% of the startups queried in CB Insights’ study failed due to out-competition. In the present environment it seems the most logical to investigate the elusive ‘running out of cash’ option. Uber and Lyft are anti-competitive, as far as they are permitted under the United States’ economic management laws. Though, only the startup Sidecar claims direct interference by the market giants as the reason that they failed. Though, as detailed in an article by Forbes, it was competition that led to their failure, but competition backed by “capital disadvantage”, according to Sidecar CEO, Sunil Paul. Sidecar is significant as it was one of the most successful and early competitors of Uber and Lyft. Sidecar possessed an initial startup fund of $10 million, raised via Union Square Ventures, Avalon Ventures, Google Ventures and Lightspeed Venture Partners. In total, their funding and profits amounted to roughly $35 million by their shut-down in 2015. Compared to Uber and Lyft’s $7+ billion in combined funding and earnings, this number is miniscule at best.
Sidecar was not initially in an economic disadvantage though. UberCab, the original company name of Uber, started in California after Travis Kalanick sold his startup, RedSwoosh to Akamai for $23 million. Some of this was utilized as primary funding for Uber, being co-founded with Ryan Graves- although additional funds were sourced. Surely Sidecar’s $10 million, while less than half of what Uber initially had from co-sources, should have been enough, right? Perhaps yes, had Sidecar not sought to engage in directly competitive markets. Sidecar was founded in San Francisco, immediately being engaged in lawsuits from the California Public Utilities Commission in 2012, a conglomerate of legal issues which led to the classification, Transportation Network Company in 2013. Sidecar also sought to begin operations in Seattle, Los Angeles, Philadelphia and Austin in 2013. By this time, Uber had already expanded throughout the United States, everywhere that Sidecar sought.
It’s obvious- large cities are the most marketable and profitable locations for ridesharing companies, right? Wrong. Sidecar’s mistake was immediately expanding into areas that were directly competitive. Of course, this rapid expansion was sought in order to build the profitability of the startup. It was a race, a race that they could not win. Economically, Uber and Lyft were far more capable of rapid expansion than Sidecar could ever hope to be. Startups are, from the start, going to be less capable of expansion than a large, pre-established company. This is especially true of modern startups, entering a market already saturated. How then, do they succeed? Other startup rideshare companies such as Split, began with $12.5 million, Bridj with $11 million, yet these too, end in failure. Failures which exhibit the same process- rapid expansion which forces them into direct competition with the long-standing economic juggernauts. Uber can easily lose a billion dollars to crush competition- a startup cannot.
RideSpider seeks to find out. By forging a company along the precarious balance, expansion must be sacrificed for stability and community. Loyalty to customers, steady and sustainable expansion is the only way to be competitive with larger, established TNCs. Currently, RideSpider has little in the way of immediate funding, and perhaps it is this frugal outlook for longevity, rather than a race to the top, that is necessary for a startup to succeed. As the old folktale goes, slow and steady wins the race.
By Dennis Kerley IV, Executive Assistant, RideSpider Inc.