Israeli Ride-sharing Startups Encounter a Rough Ride in New York

Gett and Juno joined forces to compete against their bigger rivals, but the effort failed

Haim Handwerker
Israel Fisher
Send in e-mailSend in e-mail
Traffic on 42nd street in New York City, January 11, 2018.
Traffic on 42nd street in New York City, January 11, 2018.Credit: Mary Altaffer,AP
Haim Handwerker
Israel Fisher

Up until two years ago, the ride hailing app firm Juno was considered an exception in the overcrowded, cutthroat competition of the New York taxicab industry. With prices 10% lower than those of the competition, high ratings and rumors of stock options for drivers, little Juno – which was founded by Israeli-American entrepreneur Talmon Marco – became the coolest “club” in the big city. So cool, to the point that rumors began spreading of riders needing to receive high enough ratings from drivers to get a ride in its cabs.

But then the Juno dream shattered: Two months ago, Gett – which had acquired Juno for $200 million in 2017 – announced it had stopped its ride operations in New York. Gett had operated in New York since 2012, without a great deal of success. Its purchase of Juno was another attempt to save its business in the Big Apple, an attempt that failed too.

Some 100,000 taxis operate in New York City, an industry worth billions of dollars a year. It includes the yellow cabs of Manhattan, the green cabs in the boroughs outside of Manhattan, Uber, Lyft, Via and others. In practice, after the subway, taxicabs are the most popular form of transportation in the city.

Israeli entrepreneurs were naturally drawn to New York’s large taxi market and its financial potential. The first of the Israeli gang was Gett, which operated in a number of cities around the world, including in Israel. The next was Via, which set up a minibus service that picks up a number of riders – and whose route changes depending on the passengers’ destinations in the app. The third and youngest of the companies, Juno, wanted to play on the field with the big boys.

Little reaction

The disappearance of Gett and Juno from the New York market in November caused very little reaction there. Gett’s operations there have been marginal for quite a while, and Juno’s service has been eroding too. The announcement of their closing, and the recommendation to riders to use the services of Lyft, were met with a yawn.

The Gett-Juno affair is also the story of an Israeli team that wanted to conquer the big city – and failed miserably. About 400 Israeli startups operate in New York, according to Guy Franklin, the general manager of SOSA NYC, an innovation center.

This is an impressive number, but what is less talked about is the number of Israeli firms in New York that were closed down. According to Franklin, about 70 Israeli companies were closed over the past seven years, some were startups just getting underway – and the question never drew much attention. But the case of Gett-Juno is different, because the company provided services directly to the public, so it was much better known.

The reasons for the failure of the two companies are many and varied, some related to the companies’ own actions, and others concern the taxi market. It seems that the most important influence on the New York City taxi industry was Uber, whose cars can be seen everywhere. Uber is considered aggressive and not overly loved, even if everyone uses it.

Customers don’t like the way Uber raises prices dramatically on rainy days, when demand for cabs is high. The company’s drivers complain that it takes too large a cut of their fares. The company also reduced the demand for yellow cabs, and as a result many yellow cab drivers went bankrupt – and a few even committed suicide.

Lyft, the second largest cab company in the New York market, rode the wave of being a more ethical company than Uber, which paid its drivers better and had better prices for customers. Uber haters found refuge in Lyft, which offered a similar model to Uber – but as time has passed, it turned out that Uber and Lyft are not really very different from each other at all. The two ride apps both face lawsuits against them over their labor relations with the drivers, and both oppose laws that would force them to recognize drivers as regular employees, and not independent contractors, and pay them employee benefits.

Gett, which was founded by Dave Waiser and Roi More in 2010 as GetTaxi, entered the New York market in 2013. That same year it entered the list of the 20 hottest startups in Israel, complied by the Business Insider website. In 2014, after raising $150 million, Waiser took pride in the firm’s being more successful than other applications: “While most of the companies in our industry are losing money, GetTaxi is profitable in 22 of the 24 cities where it operates.”

Gett did not hesitate to attack Uber in order to increase its market share in New York, and in 2015 it ran an ad campaign attacking Uber directly – offering riders a $10 gift to use on rides. “The competition, who we shall not name, is uber ripping you off,” was one of the ads. “Uber was the best thing since sliced bread. Now it’s time for a no-carb diet,” said another.

Gett’s spokesman, Nathan Roth, told New York’s Observer website at the time: “We welcome any competition from Uber. New Yorkers deserve to choose whether or not to pay-surge. Competition is long overdue and good for the city,” referring to Uber’s business model of raising prices as demand rises – while Gett’s fixed prices never change.

But in spite of all its efforts, Gett – whose value was estimated at $1.5 billion, and was backed by Volkswagen – always found itself left behind. Part of the reason was a not good enough customer experience, which included long waits for cabs, and relatively high prices.

‘Ride sharing with social responsibility’

Then little Juno entered the picture. The company was founded in 2015 by Marco, who two years earlier had sold the instant messaging app Viber to Japanese electronic commerce company Rakuten for $800 million. Marco said he wanted to found a company that treated drivers better: “At the heart of Juno is a belief that it’s time for a ride sharing service that treated drivers right,” Marco told Forbes magazine in 2016. “It’s time for an ethical, socially responsible ride sharing service. And that’s what we are doing.”

Marco’s business model seemed simple at the time: Because of the preferential treatment the company would give its drivers, who would be recognized as regular employees or as self-employed, based on their own choice, more drivers would work for Juno – and this would make the company’s service better than that of Uber or Lyft.

“A lot of Uber drivers’ complaints fall on deaf ears, and Juno is literally addressing all of these pain points that Uber hasn’t done anything about for years,” Marco told the Quartz website in February 2016.

At first, in their early days in New York, Juno’s new taxi service was friendly and convenient. As time passed, the rumor began to spread that its drivers were the ones who earned almost perfect 5-star ratings at Uber and Lyft, before they switched to Juno. The company recruited only polite and well-mannered drivers who knew how to please their customers. Prices were better, too: The feeling at the time was that Juno’s prices were about 10% lower than those of its competitors.

Juno has something else nice too, which the enlightened liberals of New York liked: While Uber took a 30% to 35% cut from its drivers, Juno only took 15% from them. Both drivers and customers liked Juno’s “socialist” approach. Drivers said they were told they would be given stock options, and in any case, they continued to work for all three companies.

Juno, the newest competitor, became a major player – even more than the more veteran Gett – but still remained well behind Uber and Lyft. At a certain stage, Gett decided to provide a bonus: Every ride in the city for only $10. But the feeling in the air was that this was a going out of business sale and not necessarily an innovative approach to how to treat the customer.

In 2017, Gett’s management decided to buy Juno, and paid $200 million. Juno’s management was happy to sell because they had run out of money, said a taxi industry source. Many of Gett’s staff in New York were laid off, and Juno became the company’s business unit in New York.

Under new management, the feeling at Juno was that something had changed. It seems Gett’s management style trickled down. It is hard to know if the change happened immediately after the sale or whether it occurred before it, but Juno’s prices became similar to those of its competitors.

Later, drivers complained that as opposed to the rumors, they never received options, and even organized to file a class action suit against Juno because of it. Juno no longer felt like an underdog and no reason remained to prefer it, particularly because the cabs form Lyft and Uber arrived faster.

The media published reports about Gett trying to sell Juno, without success. Just over two months ago, Gett announced it was shutting down Juno. Gett announced it would cooperate with Lyft and focus on the business market, and not on the general public.

Uber, Lyft and Gett are all losing money, and are only managing to survive because of the massive support they receive from venture capital money. According to reports over the past year, the Juno escapade cost Gett $1 million a month since the purchase. After the closure, Gett fired some 135 employees, including 60 in Israel. In March 2019, Waiser said the company was interested in holding an IPO before the end of 2019 – which of course didn’t happen.

Uber’s woes

Uber held its IPO in May 2019, and today it is not much better off than Gett. Uber reported disappointing financial results in November, which included a net loss of $1.16 billion for the third quarter and a slowdown in the growth of orders for rides. The point of light in the company’s financial reports was a 33% increase in revenues, to $3.5 billion. Uber forecasts it will become profitable only in 2021, and for now it continues to burn investors’ cash with its desperate efforts to focus its operations on rides and delivery services, and to lower its profile in businesses such as the development of autonomous vehicles, which requires enormous investments.

Lyft had its IPO in March 2019, but it too has not been a great buy for investors. In October, the company reported a $463.5 million loss for the third quarter of last year, which may have been lower than the loss analysts forecast, but it too reflects burning cash at the rate of $2 billion a year.

Gett’s management declined to comment on for this article, but American media outlets reported in Waiser’s name that regulatory changes in New York made it difficult for the company to reach profitability. These regulatory changes include limits on the number of drivers and cars that ride hailing services such as Uber and Lyft can deploy, as well as limitations on the amount of time drivers can cruise the city without riders, and have made life more difficult for the industry.

While Gett tried to force its way into the already crowded New York taxi market, Via came up with a new approach. Via Transportation, which was founded in 2012 by Daniel Ramot and Oren Shoval, created a sort of hybrid between a taxi and what is known in Israel as a “sherut” taxi, a private van service that follows pre-set routes, such as bus or intercity lines. In Via’s case, riders order a cab using the app, and it adapts the route to their individual destinations. One cab can take an average of five riders, depending on the size of the vehicle, and the price of the ride is about a third of Uber or Lyft, on average.

At the beginning, the average price of a ride was $5, and as time went on the prices began to rise, and today they range from $5 to $10. Ramot says the company is still not profitable, but that is the result of the company’s efforts to expand. Via now operates in 22 countries and 70 cities. In some places it operates its own cabs, and in others it sells the technology to the cities, which then can run the service themselves.

In New York, Via operates 6,000 to 7,000 vehicles and drivers earn between $20 to $50 an hour, says Ramot – but drivers say they only earn about $20 an hour. There are those who say Via has relatively low demand for its services and problems and a number of regulatory issues.

Comments