The hardest period for car-sharing startup Drivezy came whilst it neglected a huge spherical of investment final year
To get better, founders decided to preserve cash and gave up salaries for a 12 months from March 2018
After bouncing lower back, Drivezy is close to finalising a first-rate funding spherical in early April 2020
After 4 years of starting up, vehicle sharing startup Drivezy went through its hardest segment, frequently known as ‘valley of loss of life’, in reference to the section when startups discover it extremely tough to cover the bad coins go with the flow, generally occurring within the seed degree. The vehicle-sharing startup did practically the entirety, along with founders sacrificing their salaries, a couple of pivots, looking for mergers and acquisitions offers and rethinking the enterprise version, to decrease coins burn quite appreciably.
In March 2019, SoftBank and ecommerce giant Amazon have been reportedly in talks to steer a $a hundred Mn (INR 690 Cr) equity financing spherical within the startup for Series C fundraiser. However, the Bengaluru-based startup was unable to shut the spherical. The a couple of investors that Drivezy changed into in talks with had stated that the world in India is still at a nascent stage with out a clean winner in the mean time.
“The SoftBank deal in March 2019 turned into a Quasi term sheet. Since they made no investments in India in 2019, we break up our 100 Mn spherical into 2 rounds,” said Ashwarya Pratap Singh, cofounder, Drivezy.
This brought about the startup to have early talks with numerous players. According to CFT resources, the startup become approached through Bounce, Zoomcar for unique mergers and acquisition proposals. “However, we reached that degree in which we realised what we were doing became enormous. Later we proven that. We didn’t pass ahead with the M&A proposals,” Singh stated.
Renewed Focus And Ideation
After that incident, Drivezy mainly focussed on strong unit economics and fundamentals and by some means locating approaches to lessen burn and emerge as operationally extra green. As a end result, the founders started out exploring options that would assist them boost market share which at the time become around 35%.
Then got here the second one section, which became the concept to franchise existing places. That became the precise issue to do to cut down the cost of growth and reduce all operational fees to zero. In this model, the micro-entrepreneurs took manage of the local gadgets and operational challenges like downtime. “By December 2019 we have been capable of include the price by using greater than 30% and general revenue multiplied 2.8x,” Singh said.
The founders additionally decided that it turned into honest to not take a earnings and preserve cash. So from March 2018 to March 2019, they determined now not to attract their salaries and come down at the cost-reducing side. That helped our burn decrease pretty substantially.
Drivezy become founded in April 2015 by means of Ashwarya Pratap Singh and his pals Hemant Kumar Sah, Vasant Verma, Amit Sahu, Abhishek Mahajan as a automobile-sharing provider after realising the capacity of vehicle sharing in India. Today, the startup has a fleet of over 17K vehicles, bikes and scooters, masking extra than 250 places in eleven towns. In 2019, Drivezy started car-sharing services in San Francisco, turning into the primary and best Indian automobile sharing platform to start operations inside the USA. According to CFT resources, the startup might be closing a main round in early April 2020.
Funding Setbacks, M&A Rejections And Pivots: Drivezy’s Redemption Song
Today, Drivezy has 23 franchise places in 5 cities and that proper now constitutes 32% of total month-to-month revenue coming in from that precise area. It pursuits to convert all present places into franchise-operated devices by using the give up of the 12 months. The startup has also partnered with OYO to enjoy a sizeable gain with the intention to assist the enterprise consolidate market percentage to 50% in the coming months.
Failed Experiments And Learnings
Drivezy’s journey is going again to 2014 whilst Ashwarya and his buddies realised that Indians, youngsters, especially, have been now not searching for possession styles. They are willing to pay for on-call for merchandise along with brief time period and long time leases. Average center-elegance households who ought to manage to pay for automobiles additionally had two-wheelers. “That was a stunning finding. We realised that households that had a Maruti 800 or Zen would not use it for shorter distances, within 10 Km. When the distance was greater than that or concerned extra than people, a car was preferred. Car is that manner still a collection pastime,” he stated.
Additionally, once a purchaser makes use of -wheelers greater than five times, the aspiration for automobile kicks in. And in cities with erratic climate conditions and pollution cars are frequently rented out. This caused the concept of JustRide (Drivezy changed into earlier called JustRide). The founders shared a common love for entrepreneurship and labored difficult for a 12 months to refine the idea earlier than setting out operations in 2015.
There became additionally some other pivotal incident that caused the theory of JustRide. Ashwarya’s brand-new Ford Figo met with an unlucky twist of fate and that is while he saw the opportunity for car rentals in India. “I slightly used my vehicle for greater than an hour an afternoon and I spent an amazing part of my salary to maintain the automobile. The coincidence made me comprehend that a whole lot of humans my age is probably going thru the identical conundrum,” he stated.
Drivezy (previously JustRide) changed into initially underneath the aggregator model where people should rent cars and motorcycles from human beings around them. “When we released JustRide in 2015, the concept of carsharing in India was not anything more than a laughable idea,” he said. According to the startup, delivering ownership of something as privy as your vehicle to a stranger even for a few hours, let alone days at a stretch was preposterous lower back then.
In November 2015, however, the startup raised investment of $2 Mn. Before that, it had raised an undisclosed quantity of angel investment from enterprise veterans like Alok Mittal, Zishaan Hayath, Niraj Singh, Nikunj Jain, amongst others in August 2015.
The startup then targeted on building a self-drive automobile condominium carrier and have been successful to an quantity. The platform became bought out almost every weekend but including new automobiles was tough. As the budget were restricted, purchasing automobiles become out of the query. So, the startup had leased round 250 vehicles but that too proved high priced.
In March 2016, the startup raised $400K in Pre-Series A round of funding from a set of angel traders. Additionally, Google decided on Justride for its Launchpad accelerator and the company changed into again decided on via Y Combinator for summer time 2016.
Funding Setbacks, M&A Rejections And Pivots: Drivezy’s Redemption Song
The equal yr, the startup toyed with the idea of constructing a market in which person owners ought to listing their idle motors. The platform changed into rolled out in Bangalore, Mumbai and Pune. “A lot of owners we met were unwilling to agree with strangers with their vehicles. Addressing the intellectual block took us a very good six months however we trudged alongside. Now of route, with the sharing economy being at the forefront, thanks to the efforts of businesses like Airbnb, Uber and Ola, people are much extra relaxed in sharing their motors with strangers,” Singh told us.
That’s when the business enterprise shifted to a vehicle-sharing market from an aggregator-based version. The marketplace version become like Airbnb of motors, developing on each the demand and deliver aspect. In 2017, Justride rebranded to Drivezy and started proposing -wheelers further to vehicles.
In November 2018, Drivezy raised $20 Mn in Series B, led with the aid of present investor Das Capital, and spread operations to extra than forty places in 7 cities in India. Drivezy secured $100 Mn in an asset financing deal the usage of which the organisation planned to induct over 50K vehicles. The funds were for use over 3 years, thru Harbourfront Capital, a Special Purpose Vehicle. Additionally, the financing mechanism become dealt with by Tokyo-based Anypay Inc., an early investor in Drivezy.
Ride To The Right Fit
Drivezy these days follows an asset-mild enterprise model that blends multiple supply channels to supply property. Drivezy’s center commercial enterprise includes producing call for for the cars listed on its platform. For this, the agency costs a 15-25% platform take charge. The business enterprise works with person P2P owners, asset preserving corporations, NBFC’s and car dealerships to enlist automobiles.
The peer-to-peer deliver channel debts for extra than 70% of the cars and around 29% of the 2-wheelers (bikes and scooters) listed at the platform. Individual owners and commercial gamers like automobile dealerships enlist idle stock on a sales-sharing foundation. Through the asset financing channel, the business enterprise partners with institutional investors who buy and listing property on the company’s platform via special-reason vehicles (SPV’s).
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For an funding of $100K, the franchisee manages the unit for a tenure of 3 years. During this era, Drivezy leases assets really worth $590K to the unit. The franchise generates revenue via renting the belongings to customers and handles all operations and related manpower. The franchisee additionally will pay a revenue share to Drivezy for each a success reserving. At the give up of the 3-year tenure, the franchisee is entitled to the salvage fee of the belongings, post suitable depreciation.
According to a World Bank 2018 record, on common $5.Five is spent every day through a mean Indian and 33 % of that spend is on mobility wishes which covers 6 trips each day, which includes last-mile transport. “This is whilst we realised that with rentals, we should carry down standard spending on every day travel by 30%. We thought of a extra problem to remedy. We elevated to two-wheelers from 2017,” Singh stated.
Understanding the unit economics, accepting the fault and revisiting the business version, helped the business enterprise get through the difficult time and nowadays the organization has an edge over its competition who conventionally depend on a unmarried channel to listing motors on their respective platforms.