On a typical New York morning, millions of people leave their homes and make their way to work. Some commute by car, while others opt for the taxi, subway, bus or even a bicycle.
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In recent years, these options have been augmented by ride-hailing apps like Uber, Lyft and the Gett taxi service. There’s also the car-pooling option provided by Via, which was founded by Israelis who basically enhanced the sherut shared-taxi concept with 21st-century technology.
If America is the land of endless possibilities, New York is the city of endless options for getting around town. Many of the new options, as in the rest of the world, are based on shared transportation that efficiently allocates the road’s resources.
As a result, a city’s transportation palette can be upgraded without any government or municipal intervention, relying solely on supply and demand. Ironically, while in Israel these models can’t be implemented due to regulatory restrictions, Israeli startups are the revolution’s avant-garde.
The intense competition has benefited Americans; the price for getting around town sometimes isn’t much higher than for public transportation. For example, a ride arranged by Via costs $5 plus tax, compared with $2.75 on the subway.
In a city like New York with its huge number of riders and many options, the competition is often over price. Recently, Uber also began offering $5 shared rides during rush hour. Daniel Ramot, Via’s cofounder and chief executive, says that before he and his colleagues set up the company, they spent half of 2012 examining the model’s feasibility.
“We analyzed the information received from GPS devices that all yellow cabs must install by law, including collection points, drop-offs, payments and times of day. The statistics are very interesting; you can know who's traveling from where to where, and how demand changes when the price changes,” he says.
“Through this information and demographic surveys we had a lot of data on how people get around, and we used it to build models for, for example, how many people you can carry in a car at a given hour.”
After analyzing the data from taxis in New York, San Francisco, Washington and Chicago, the company came to a firm conclusion. “We saw from the numbers that demand for cabs is almost infinite; the more cabs you inject into the market, the greater the rider demand,” Ramot says.
Uber’s entry into the market proved to Via’s founders that even when a large number of drivers are added, demand exceeds supply. Via’s challenge was to create routes that wouldn’t lengthen riders’ journeys too much.
“The idea was to take Israel’s sherut shared-taxi idea and dress it in technology that would let it deviate from the set routes and timetables and pick up riders along dynamic routes based on demand,” Ramot says. “That’s how we turned into taxi dispatchers.”
Via’s drivers are essentially in constant motion throughout the city, plying routes that are determined by the passengers who get in and out of the vehicles.
“This turns the system into public transportation,” Ramot says. “It’s not a taxi that takes you where you need to go, but a system that allocates the vehicles’ seats in a more efficient way.”
After New York, Chicago
Oren Shoval, who founded Via with Ramot, attended TheMarker’s conference on the sharing economy the week. He told the story of his company, which recently raised $100 million.
With Via’s app, you enter your current location and destination. For example, to visit the company's offices in lower Manhattan’s SoHo neighborhood, I was told to wait at the corner of Seventh Avenue and 41st Street, only a short walk from where I had ordered the service.
The app tells you exactly on which side of the street to wait and how long it will take the driver to get there, as with other ride-ordering apps.
Via is part of the startup scene that has emerged in New York in recent years. Employees come to work in jeans, a marked contrast to the attire in the nearby financial district. Via employs 85 people in New York, Chicago and at its Tel Aviv development center.
The company launched its service in September 2013 in New York, a logical place to start, not least because Ramot lives there. At first the company operated only in part of Manhattan, and only recently it began offering the service on weekends.
In December Via expanded to Chicago, and it now serves some 30,000 people a day. It plans to use the $100 million to penetrate other markets.
Shared transportation is a hot field in what has become known as the sharing economy, but it has had to overcome regulatory barriers. Ramot says there’s a significant difference between transportation and many other industries.
“In the cases of Uber and Lyft, there was something even deeper. There was very heavy regulation in the industry that significantly restricted the supply of rides. In most cities around the world there’s a huge shortage of taxis because of artificial elements that determine the fare and the number of taxis,” he says.
“In what other industry is it impossible to find the product at peak hours, as happens with taxis? The innovation of Uber and Lyft was the fact that they broke through the regulations.
“They said they were technology companies, not taxi companies, and pumped supply into the market .... This was a revolution in supply; a service with incredible demand that previously could not be met. It was a regulatory innovation.”
Despite the great interest stoked by shared-transportation companies, the product is not yet widely used. According to statistics published last week by the Pew research institute, only 15% of adult Americans use mobile apps to share and order rides. But the study showed that awareness about these apps is greater, and investors apparently see a healthy upside for growth.
According to Pew, ride-hailing and ride-sharing apps are most used by college graduates who live in cities and whose median age is 33. And 28% of users are 18 to 29, while only 8% are 50 to 64.
Frequency of use remains sporadic; only 17% of users use the apps daily or weekly. Meanwhile, 26% use them around once a month and 56% less frequently.
Juno jumps in
Unlike other U.S. and world cities, where anyone can drive for a service like Uber, in New York only professional drivers with special licenses and insurance can. Ramot says professional drivers have benefited from the new sources of employment these apps have provided.
“In New York and other cities there are tens of thousands of people driving for Uber and Lyft,” he says. “Some people complain about Uber, particularly its attitude toward its drivers, but in the end they wouldn’t be doing it if they weren’t making money.”
At Via, the drivers are the company’s suppliers, and the company pays them a minimum hourly payment while committing to supply them with income based on the company’s decent profit margins from what it charges passengers.
Ramot says the company is making a profit on much of its service in New York, depending on how well Via has penetrated an area and the degree local people are aware of the service. Operating costs are high when the company enters a new area because it must make sure the supply of drivers can meet demand. Marketing is mainly through word of mouth.
One company that plans to do better by its drivers is Juno, which was founded in New York by Talmon Marco and Ronen Ben-David. Juno has not yet officially launched its service, but media outlets like Forbes and Fortune have already reported on its plans to treat its drivers better and thus attract many of Uber’s dissatisfied drivers.
Juno plans to take only a 10% commission from drivers, compared with Uber’s 20% to 25%, and give drivers half the company’s equity. It will not insist that its drivers work for it exclusively.
To assure a high level of service, Juno will only accept drivers who have achieved a quality rating of at least 4.7 out of five at another transportation service. It recruited 7,500 drivers for its beta program that began in February to serve a limited number of customers. According to Marco, Juno has been providing hundreds of rides a day through its app during this trial period.
“Because we’re going to treat [drivers] properly, they’re going to treat their customers properly,” Marco told the Disrupt NY conference last month, adding that the service’s official launch would happen “soon.”
Once the service is fully online in New York, Juno’s executives will start examining other markets. Marco wouldn’t confirm that the company had recently completed a $30 million funding round.
Ultimately, Juno isn’t just an Uber competitor, “it’s a social mission and a business at the same time,” Marco told the conference.
Still, it’s not clear when Israel will be able to benefit from the shared-transportation revolution being spearheaded by Israelis elsewhere around the world.