Is the Rideshare Market Too Saturated for Startups to Succeed?

  • Natalie Mattila
  • April 19, 2017
  • 1

In the overcrowded ridesharing market, the question of whether the industry will remain open to new players has vexed startups and investors since Uber launched seven years ago.

But that unanswered question has not stopped rideshare startups from trying (and many failing) to conquer the market.

These days there are carpool apps for any taste: from traditional yellow cabs, to women-only, coworker, and luxury car pickups. So how do companies stand out among the competition?

Companies taking on Uber include Lyft throughout the U.S., Ola in India, Grab in Southeast Asia, and newer startups like New York City-centric Juno. However, it is in the United States, in particular, where startups are prolific, joining — and sometimes leaving — the overly congested, on-demand ride-service market.

London-based Hailo, for example, halted its ride-hailing service in North America in October 2014. Hailo Chief Executive Tom Barr said the company would focus on more profitable markets in Asia and Europe. “Astronomical marketing spend required to compete is making profitability for any one player almost impossible,” Barr said in a statement.

Similarly, other startups like Sidecar and Split ceased operations. San Francisco-based Sidecar, founded in 2012, shut down its rideshare service in December 2015, and Washington, D.C.-based Split discontinued its service in October 2016.

Seattle, Wash.-based Red Ride, founded in 2013, also appears to have shut its doors just six months after launching. The company initially launched under the impression it would be “the Kayak.com for the road,” according to Crunchbase. Red Ride’s business model was to aggregate data from various ridesharing providers, and let the user see which cars can arrive the fastest. The startup would then push the user to the app he or she chooses. Red Ride’s website is no longer active, and the app could not be found.

So what does this mean for rideshare startups entering the space? Operating in niche markets, and offering services not available through Uber or Lyft, is key to attracting not only riders, but investors as well.

Shifting to Specialized Models

It is hard for rideshare companies — including those that have failed — to stand out among competitors, because many do not bring anything else to the table, Anya Babbitt, founder and CEO of SPLT, told Mobility Buzz. “They fall into the same trap, settling on a business-to-consumer model,” Babbitt said, rather than focusing on a less competitive market, such as a business-to-business model.

Founded in 2014, Detroit-based SPLT started out just like your typical rideshare, but shortly after found its own niche, pivoting to a B2B model. The startup’s platform creates a commuting community for coworkers, instead of pairing riders up with strangers. Companies are charged an annual fee to provide the platform to employees.

“When you are coming up to an investor, you have to show them what it is you are bringing to the table,” Babbitt said. “Tell them why it works. You also need to be able to go where competition is not. For us, that’s in Mexico or Europe. We have found that it’s easy to just fight to the death if you don’t expand into other markets, but we also learn a lot from our competition and their battles.”

And that’s exactly what startups are doing — fighting to the death (quite literally). Or at least fighting the rideshare battle until forced to pivot models to a more verticalized — and less competitive — market.

Both Sidecar and Split, for example, have since shifted business models to more profitable ventures. Sidecar now operates under a delivery service for businesses and Split plans to refocus on creating products and services that will help solve “some of their most acute transportation problems,” the company said in a blog post.

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One thought on “Is the Rideshare Market Too Saturated for Startups to Succeed?

  1. Really great article, and highlighting some fantastic points in the rideshare industry.

    “However, there could be room left in the marketplace for specialized companies, Feigon said. “If someone is eager to do it, they should give it a try. There’s a tremendous need for good transit and for more options for flexible transportation services.”

    UZURV, a Reservation Service app, allows you to select the Uber or Lyft driver of your choice in advance. This enhances safety, personal service and the overall rideshare experience for both rider and driver. More choice means riders can customize their experience filtering drivers by vehicle, amenities and special services; view driver profiles; as well as send their requests to Favorite Drivers they know and trust. In doing so, UZURV’s advance reservation system improves the quality, safety and accessibility of on-demand transportation.

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