With the acquisition of Zipcar by car rental giant Avis Budget Group for over $400 million, the car-sharing business has gone mainstream. So mainstream in fact, that many pundits are proclaiming doomsday for the preeminent car-sharing business.
The rapid pace of consolidation in the domestic and global car rental market has led the remaining car rental behemoths to push into the hourly car rental domain popular with car-less, carbon-conscious urbanites not interested in the high costs of car ownership: Avis now has Zipcar, Enterprise has WeCar, and Hertz is rolling out Hertz On Demand.
A new startup sees a silver lining in this increasingly uncompetitive landscape.
Called Silvercar, the company aims to provide luxury car rentals that mirror the differentiation of luxury-tinged, service-oriented brands in other travel sectors, such as hotels and airlines.
Dubbed the "Rise of the Rent-a-Porsche" by some pundits, the consumer appetite for upmarket car rentals has already been proven by Zipcar - the selection of hip vehicles was one of the main sales points.
But with Enterprise and Hertz both expanding their luxury car offerings, this segment of the rental market is only heating up.
Co-founders Todd Belveal and Bill Diffenderffer found that many business travelers wanted to be driving cars similar to what they had in their home garages - rather than a midmarket Camry, they wanted upmarket Audis, for example.
CEO Luke Schneider - the former CTO at Zipcar, which shows just how much potential there is in this idea - describes the genesis of the concept:
Silvercar was born out of one too many frustrating travel experiences at the car rental counter – the long waits and failure to receive a vehicle that fulfils your needs are irritations most travellers have experienced.
The decision to find solutions to the typical car rental problems through technology was hiding in plain sight. We recognize Silvercar is entering a large incumbent market with several well-established competitors, but wholeheartedly believe now is the time to make an impact on the rental industry by introducing a refreshing and modern experience.
Currently only available at the Dallas/Fort Worth airport, each car in the 200-car fleet is accessible via QR code. A customer simply walks up, opens the Silvercar app and scans a QR code on their phone. No need for an additional card in the wallet - it all works with existing technology.
The cars are then wired to connect directly to customers' phones, maintaining a seamless technological experience that appeals to a specific subset of the savvy, connected, luxury-oriented traveler.
The cars also possess Silvercar's proprietary technology, so the mileage, gas (down to the 100th of a liter) and tolls are automatically calculated upon returning the car to the lot. The customer then receives a receipt within minutes for their rental - a hassle-free return without wait that will surely engender loyalty in business travelers pushing for every minute they can.
Eventually cars will also be able to learn customers' preferences and auto-set themselves when a particular customer scans that vehicle's QR code. Thus the company bills itself as a "car rental that syncs with you" and "paperless, wireless, peerless. And habit-forming."
The Austin-based team is comprised of 40 employees, and has received $11.2 million in venture capital investments led by Austin Ventures and early-stage investors Michael Arrington’s CrunchFund, Ron Conway’s SV Angel Fund, Dave Morin, Chris Dixon and others. With that roster of investors, the company's tech-focused direction is crystal clear.
Expansion plans are aggressive, and include an additional 3-5 airports in 2013. Pricing is competitive at a daily $50 (weekend) and $75 (week), and focuses primarily on matching the quoted rates for full-size nonluxury cars at "regular" rental companies. These rates are likely to increase over time, unless the expanded competition at the luxury end of the market forces prices down.
Read on for the Tnooz Q&A with CEO Luke Schneider.
Describe what your start-up does, what problem it solves (differently to what is already out there) and for whom?
Silvercar is a completely reimagined car rental experience. Silvercar offers a fully mobile-integrated customer experience with iOS and Android apps that manages the entire car rental process from reservation to receipt.
Silvercar was designed to eradicate the typical pain points of car rental: lines, counters, up-selling, questionable cars, confusing gas refill requirements, billings.
We devised seamless technology-based solutions to these problems that specifically accommodate the needs of the modern business traveller.
Why should people or companies use your startup?
Travellers are tired of the usual car rental experience. People who want simple, easy, consistent travel experiences should get behind the wheel of one of Silvercar’s 2013 Audi A4s. Driving a better car, equipped with Sirius/XM radio, a mobile Wi-Fi hot spot, GPS and Audi’s award-winning multi-media interface is a differentiating factor among travellers.
Couple that consistently better experience with the Silvercar app integration and you experience a frictionless car rental experience, every time. There are no surprises with Silvercar because you always know what kind of car you will receive and Silvercar is up front about rates, billing and what to expect.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
Silvercar works with numerous travel management companies and plans to introduce Silvercar as a new rental solution to the gatekeepers of business travel: travel agents, trip planners, and convention organizers.
Silvercar will also utilize pricing incentives for booking travel with Silvercar (e.g.: recommend Silvercar to a friend and get a discount for your next booking).
How did your initial idea evolve? Were there changes/any pivots along the way? What other options have you considered for the business if the original vision fails?
Silvercar started as a simplified car rental model. One make-model combination, but it didn’t have the technology component that it does today - and it did not have a premium car. Those pieces were added later. There were several pivots along the way including vehicle selection, locations, financing and others.
Where do you see yourselves in 3 years time? What specific challenges do you hope to have overcome?
We expect that in 3 years, we’ll have more than 5000 cars in at least four different markets in the United States.
Challenges will include overcoming a legacy business model that the airports are beholden to, large, well-heeled incumbents and the table stakes of leveraging some very expensive vehicle assets.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
We’ve seen the proliferation of consolidated rental facilities at airports, the growing marriage between mobile and travel, the dawn of “connected cars,”
and the widespread adoption of personal transportation alternatives from Getaround to Uber to ZipCar.
The airport-based car rental industry, however, has remained stagnant. The airport-based car rental category is ripe for innovation. Silvercar provides
what we think is that much needed modernization to the industry. With the Silvercar App, a simplified fleet model and a seamless customer journey, we’re confident Silvercar will find a niche among savvy travellers.
And since our fleet has only one make/model – and a great car at that – in the Audi A4, Silvercar customers can expect a consistent product and experience, each
time they rent with us.
Tnooz take:
This idea is very timely, and addresses some of the key issues with car sharing/rental that Zipcar struggled with - namely, the cost of fleet maintenance. By having one model of car, Silvercar is taking a page from the airline handbook and consolidating expenses and knowledge fleet-wide.
The choice of one color is also smart, as it diminishes choice and ensures a consistent experience that more accurately reflects the customer's luxury positioning. It also reflects the trend toward simple, straightforward brands without fluff.
The technological component is also extremely impressive, and is most definitely an area that traditional airport car rental companies were not excelling in. The business traveler most likely to use this service will welcome the time saved due to technology, and will love the seamless, consistent self-service experience.
Obviously the costs of scaling a fleet to 5,000 cars is significant, and a huge hurdle still to be jumped. So far, however, the signs point to success: the user experience, vehicle customization, mobile interface, technology and car selection are all on point, and we'll be watching to see how the company does as far as their customer acquisition goes.
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