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August 30th, 2010
If you think ZipCar is cool, they have nothing on RelayRides. Some businesses just make sense, and when you hear about them you think ‘DUHHH’ obviously, ’Why doesn’t this already exist?’ or ’Why hasn’t anyone done this before?’ RelayRides is this concept.
RelayRides is hot, there’s no question about that, and for this they’ve been getting a lot of good press around Boston and the country from BostInnovation, Cambridge Day, Xconomy, and Mother Nature Network.
I enjoyed Scott Kirsner’s review of his experience using RelayRides for the first time, Driving Thy Neighbors
Car: My Experience with RelayRides. However, I absolutely, completely, 100% disagree with his conclusion about RelayRides and ZipCar. First, let me state that I’m not trying to start an argument, I just don’t want potential ‘RelayRiders’ to be scared away from the service due to his review. Mr. Kirsner stated he prefers ZipCar for two reasons: convenience and confidence. Here’s the thing: RelayRides is in beta release. Thus, they are still working out the kinks, only have a small number of cars on the road, etc. However, with their business model, there is no question they will be much more convenient then ZipCar, because the cars can be everywhere and anywhere. In terms of confidence, as more RelayRide users start renting their cars, competition will increase between renters. Thus, renters will be heavily incentivized (being able to make up to 7k per year!) to make sure that their cars are in tip top shape.
After skimming through all the press, I learned a little bit about the company, and the concept, but I wasn’t satisfied and I wanted to learn a little bit more myself. So, I made my way over to east Cambridge and had a great conversation with Shelby Clark, the founder, outside, on the porch next to their office with my video camera.
I know that Shelby and team must be annoyed with constant ZipCar references, but after our conversation I couldn’t resist to apply a little Babson College business acumen to comparing the two companies. Here are my thoughts:
Top 5 Reasons RelayRides is better than ZipCar.
1) RelayRides will make money, Zip Car d
oes not. Here’s the thing, ZipCar doesn’t make money. I’ll be surprised if they ever do, and if so, it’ll be a very small margin. It’s pretty easy to find this data because ZipCar has filed with the SEC for an IPO. If you look at the filing, ZipCar’s two major costs drivers are directly tied to their revenue. This means that as their revenue grows so too do these costs, creating huge challenges to ever becoming profitable. The first red flag is user acquisition cost ( shown as SGA) and the second is d
irect operating expenses (to fund the fleet of cars). It make sense that as ZipCar grows, they need more cars and their operating costs will increase. They can’t get around. When looking at their user acquisition costs, it increases as a percentage of revenue as revenue increases. This means they’ve already acquired the cheap customers and each new customer will be even more expensive. Bad news.
RelayRides business model fundamentally solves this in two ways. 1) They don’t own the cars. High operating costs problem solved. 2
) Because people are renting their own cars, they will naturally market RelayRides to other via craigslist, facebook, etc. Second problem solved. I wish I had 10 million to give them.
2) You can make money! Let me repeat it again, you can make money off of renting your car. Shelby stated this can be around 2k to 7k per year based on their assumptions. I think everyone will understand why this is awesome.
3) Enhance your community. Naturally if you’re renting cars from each other, neighbors will began to know each other, this is also a good thing.
4) Sharing is caring. I’d much ra
ther give money to my neighbor then a huge company.
5) They can scale much faster. Because RelayRides does not actually own the cars and only the piece of technology that allows for the sharing of vehicles they can scale much faster then ZipCar. This is critical for the environmental benefit of RelayRides and our planet.
6) A Bonus! They’re really cool guys. Boris, who heads up marketing is a neighbor of mine who lives in Inman Square, and Shelby was very nice, and laid back. Startups never pass up chances to get some local press, but I felt their coolness was genuine as well.
Here’s the real question, if two of the exact cars were side by side, one was a ZipCar and the other from RelayRides, which would you pick? I’d go with RelayRides.
Long story short, if you live in Cambridge, check ‘em out.
My Interview with Shelby Clark, Founder and CEO of RelayRides
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