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FlightCar (YC W13) Raises $5.5M Round to Expand and Hire (techcrunch.com)
93 points by shrig94 on Apr 15, 2013 | hide | past | web | favorite | 58 comments

These guys are Airbnb-like in another way too: as with Airbnb, I initially thought this was a bad idea. What changed my mind was when I emailed all the YC alumni to recruit users for the closed beta, and large numbers of them immediately and enthusiastically signed up.

There is clearly something to the "sharing economy" that everyone is talking about. There will be glitches along the way, but I'm pretty sure this idea is here to stay. Considering the value of the assets involved, it could be the big economic story of this decade.

There is a clear value add for people coming into a city who don't want to rent a normal rental car. But I'm not sure the same value add is there for people renting out their car, unlike Airbnb. If the maximum you can obtain for renting out your car is < $100, is that really what your emotional peace of mind (your car being ticketed, trashed, and scratched, loss in blue book value) is worth?

The emotional peace of mind is the exact thing that FlightCar and Airbnb are creating by encouraging this aspect of sharing. Yeah shit can go wrong with your car--that's with anything sharing-based though. As the saying goes, "Shit happens". But at the end of the day, sharing is a good thing and people are opening up to the aspect of it more and more. Essentially, the idea that you are sharing with others is the peace of mind. Hasn't warmed up with everyone, but it has with some and will continue.

As someone else pointed out, I'm sure FlightCar will change their pricing as it gains more traction. For now, the pricing is just a reasonable and simple model.

If there's one thing I disagree with from PG's comment, it's his prediction that this could be the economic story of the decade...no, it has the potential to be the economic story of the century. Not FlightCar by itself, but all these companies disrupting different industries through the simple idea of sharing--it's revolutionary and still young.

You're right, but I always try to underestimate things.

It would be pretty big if ownership turned out to be largely a hack people resorted to before they had the infrastructure to manage sharing properly.

It's not so much that ownership is a hack, or that sharing will replace ownership, but that as technology improves the transaction costs for trading property rights decreases, allowing "ownership" to be treated in a more fine-grained way than previously possible.

You can see a fairly pure instance of this situation in spectrum management (which is a common area used to study property rights because it's easy to deal with theoretically). In 1960, Ronald Coase said we should break off big chunks of spectrum and sell it off for exclusive use, just like we do with land. Transactions in those rights will help achieve efficient allocations of resources, but there is a limit at which transaction costs dominate and optimal allocations aren't reached. If you think of something very coarse-grained like frequencies for broadcast radio, you're likely to get efficient allocations via trading of property rights. If you think of something very fine-grained like allocation of frequencies to a cell phone as it travels through a busy intersection, the idea of doing micro-transactions to yield an optimal allocation becomes intractable in the face of transaction costs. But as you make the transactions cheaper, through technology, it becomes more practical to do micro-transactions.

This basic phenomenon is generalizable to pretty much any situation where you have property rights that are coarse-grained out of accounting convenience. If you can make it cheap and easy to break off little chunks of the property right and trade in them, you'll achieve a more optimal allocation of rights. That's pretty much exactly what AirBnB and FlightCar are: not sharing, but ways of breaking off a piece of a coarse property right and trading in those little pieces in a fine-grained way.

Trends in property law and home ownership in urban areas seem to indicate that as rules and safeguards are developed for sharing more effectively, the rate of sharing increases dramatically.

Condominiums, for instance, seem like a crazy type of building if your system of land ownership is feudal, but they're a practical necessity if property value skyrockets and more population housing is needed in a dense area.

One of the main shifts in social structure occurred around the 1890s to 1920s, and was largely predicated on the difficulty associated with sharing issues in urban life, and the lack of rules to mediate that type of space sharing. Debates at the time about how to accommodate these issues were rather fierce, but mostly forgotten now. Our current laws regarding nuisance and abuse of rights are both hacks of the property system to make urban life work. Karl Polanyi's Great Transformation is a fantastic book which recounts the shift, if anyone is interested.

I'm interested in seeing what types of norms and rules would need to exist in order to fulfill the infrastructure requirement that you mention. Additionally, I wonder if certain areas of the world are already normatively primed for sharing, and whether or not they could become springboards for a more global shift.

Nailed it... "ownership turned out to be largely a hack people resorted to before they had the infrastructure to manage sharing properly"

Ownership is just an idea to align consumption with stewardship. The idea that owning stuff is "right" or "good" is just a cultural phenomenon, and not one shared by all cultures (e.g. Native Americans).

I think you could do a lot worse in trying to find a start-up idea than to ask yourself "where is there excess capacity that can be shared."

Parking, housing, office space, cooking, people-to-do-tasks, storage space, server space - this is the sharing era.

I think the concept is brilliant, but how does it scale out? So, they implement this at major airport and then what? The whole model is predicated on the fact that you know your car is being unused because you are physically incapable of accessing it.

So let's think of scenarios - you park your car for the day for work so you rent it out. What happens when there is a emergency, or you need to pop out for a quick errand? What happens when the person returning it shows up late? The reason you buy a car is for the convenience to be able to transport yourself from A to B, at any point that you need to. I just see so few scenarios, except for traveling out of your home location, that could warrant this model scaling out to other scenarios. The number of airports is very static too.

Personally, I would much rather see good public transport take off in over congested cities like SFO, NYC, etc. I see a business model like this as fixing the wrong problem.

Assuming they reduce all of the liabilities (which is 100x harder to do with mechanical items as opposed to an apartment/house) then I definitely see this taking off. On the flip side, I suspect margins will forever be razor thin in order to be competitive and the growth will halt when no new scenarios beyond airport parking can be found.

The article points out that the airport rental car business is a $10 Billion market...I don't think they need to worry about leaving this scenario (market/vertical) anytime soon nor do I think they need to worry about scaling.

Disrupting a $10B market will keep them busy for quite some time before really having to worry about other scenarios (or other verticals).

We're not looking to leave the airport vertical actually. About half of all rental volume takes place at airports.

Don't forget the cost of parking at the airport. If you're gone for 10 days, that's almost $200.

Yes, the free parking is the big appeal for users, not the money they could make if their car is rented out.

While free parking is appealing for many users, it’s definitely not for many others because unlike Airbnb, the value of their possession (in this case, their car) is variable while the compensation (free parking and $10/day rented out) is fixed in the sense that it is pre-determined.

With Airbnb, the compensation is variable and is set based on the owner's perceived value (which factors in the 'emotional piece of mind’ too among other things). It’s essentially a market based approach, and to get a wider acceptance from the supply-side, that’s what FlightCar needs to incorporate while preserving simplicity.

As an optimist, I believe the creases will get ironed out eventually. It’s not going to be easy (never is) and it might take some time, but it will happen. Here’s a structure that comes to my mind:

Tier 1 – Free parking and $10 for every day the car is rented out (like they have now)

Tier 2 – Pay $X per day to park and Receive $Y for every day the car is rented out, where X is the market rate which in SFO’s case is $18 and Y is the daily rental-price you name.

While I think this is a good approach, since the service's main drawbacks involve cosmetic damage, it makes sense to launch using a payment model which favors lower-end cars. Once the damage issues are adequately addressed in practice Tier 2, or an equivalent, might become more attractive.

why wouldn't you just take a cab vs paying that much for parking

Because if you park on the street outside of the apartment where you live (which is many people, btw - very few people have a dedicated parking spot), then chances are you will get ticketed if you are gone while there's street cleaning happening. To prevent that from happening, you would have to arrange with your friends to move it while you are gone, or you would have to pay someone to do it. In the first case this is an inconvenience, in the second case it's an expense, and the downsides of letting someone else behind the wheel of your car are the same as renting it out.

while a valid use case, I wonder if its the norm and how big this market is.

I wonder how familiar you are with urban living in the United States. At least within my circle of family and friends, this is very common.

I've lived in the two largest cities in the US. I'm very familiar with urban living. In NYC everyone takes cabs and don't own cars. In LA everyone drives and can hire very cheap cars to lax or shared shuttles. Its hardly a problem in either of the biggest urban centers in the US.

"In NYC everyone takes cabs and don't own cars." - Jesus man, have you ever been outside of Manhattan? If everyone in NYC doesn't own a car, why are there so many fucking cars there all the time?

I grew up in Queens, in huge apartment buildings. Everyone there has cars with street parking that they have to move every time street sweeping comes around.

I did exaggerate , but the fact that parking is so hard.. kills the other side of the equation for the company in why would anyone rent the car.

Then why do rental companies exist?

With all due to respect, I think I am done with this thread. Perhaps it is unintentional from your side, but I feel like I am arguing with someone who willfully exaggerates things to get a rise out of me.

In Houston, at least, many apartment complexes have parking lots or parking garages. You may not necessarily have a specific assigned spot, but you can park in the garage.

Speaking for the Bay area, public transportation here is shockingly bad, even for something as routine as getting to the airport. For someone living in the valley to get to SFO (about 40 miles), a taxi can cost anywhere from $50-$80, and the public transportation alternative takes anything between 2-2.5 hours, 1 bus, 3 trains, some distance walking with your luggage, and about 15 bucks. Oh, I forgot to mention that trains are once an hour, and there are a total of 3 distinct operators for the bus and train systems who are totally uncoordinated with each other.

Not surprisingly, most people who value their time prefer making a 35-minute drive at their convenience, and paying about $12-$18 per day of parking.

A search on flightcar shows results allowing 90 miles/day. At $28/day ($10+$18 in parking savings), thats $.31/mile. At $18/day ($10+$8 parking) thats $.20/mile. This is probably the worst case. Most people wont drive 90 miles everyday.

The federal reimbursment rate is $.55/mile. You have to pull gas reimbursment out of that because like normal rental cars (I assume) flightcar renters pay for their own gas.

A conservative estimate based on 20 miles/gallon and $4/gallon is $.20/mile in gas cost. Each mile the renter drives using your vehicle thus costs you $.35 in wear and tear and depreciation.

An alternative data point would be car lease mileage overage fees. They are commonly $.15-$.25/mile and are supposed to represent the extra depreciation of the vehicle.

So its in the right neighborhood of value to the car owner but probably doesnt represent much profit and may not be worth the hassle.

For brand new cars, FlightCar honestly comes out to about even as you mentioned. Though, our ordinary car is an '08 Prius, which has depreciated enough in value (as cars depreciate quickly!) to make our service a definite positive. Also, our utility will probably never really be 100% (Hertz for example is doing a lot to increase their's and is at 65% or so I believe). So your car most likely won't be rented for everyday you're gone.

We do try and make the experience way better than traditional airport parking. We drop you off and pick you up in a town car and we give you free Starbuck's coffee before you fly and after you land! You also don't come home to an outrageous bill!

Thanks for the reply. As you mention, a day or two without being rented would definitely swing it more in the car owners favor. Perhaps the best idea is just to bring a car so ugly no one would rent it!

I tried to bring my 95' Camry with broken door handles, windows that don't go down, oil leak, and no paint on the hood to rent with FlightCar ... but it didn't qualify. Not surprisingly, they have quality standards :-p

Playing Devils Advocate - could it be that Airbnb is making all similar ideas seem like good ideas?

As far as I can see, the potential is not so much about the airport rental stuff, because that market is "quite" small, but a very strong use case to launch out of and to get momentum to become the AirBnb for cars and to surpass getaround, relaycars, DriveNow etc.

We're actually just focused on airports. That's half of the market!

Hm very interesting, but how so? The average person probably doesn't use their car because it's at the airport for 200h/year, but doesn't use their car for 8000h/year in total, where it could be used by someone else.

It's probably easier if you can have a car for 10 days straight instead of just an afternoon, but that's where you want to be or not?

I know you have thought about and/or already have a strategy to deal with the opposition from rental companies. Care to share some details? I'm curious as to how long it will take for them to start using their legal muscle, and industry connections.

I'm still hesitant to buy in to the idea because I'm just a fundamentally skeptical person when it comes to letting other people use very personal things like cars as opposed to apartments. Cars have a "feel" to them that many people notice is different after they get used extensively by others. But maybe that's just me.

BUT - I have to admit - there's a kernel here that think makes this different from RelayRides, etc. And that's that unlike the other companies where they "suggest" that the user return the car washed, FlightCar is actually doing the post-rental clean-up themselves, and that makes a difference. I don't like the idea of coming back to a used, possible dirty car sitting in my garage (i.e. w/ RelayRides), but if I'm coming back to a parking lot where I know the car has been professionally washed and inspected, my peace of mind is greater.

I'm still not interested in using the service, but again that's just me (I'm an anal car nerd), and that certainly doesn't mean others won't use it extensively.

Good luck guys! Love seeing awesome car-related businesses take off.

I had the same feeling when I saw GetAround launch (car-sharing). But then I thought about it some more, and realised I'm way more attached to my apartment then my car, and AirBnb seems to work just fine..

Thanks! Hopefully, we can change your mind one day. :)

One tip for your website. Calendars From To. When i select a date in From filed, set the To field at least to the same date.

$10 in gas cards per day seems like low compensation for putting my vehicle at risk. I realize they have insurance but anyone who's had a car get damaged and repaired knows it's never the same as before the damage, especially if it's suspension/steering related.

I wish them the best, though, if any industry is stagnant and in need of being overhauled it's the terrible car rental industry.

The main appeal for users is actually the free parking. Long term parking at SFO is $18/day.

This is the second time you commented free parking is the main appeal.

I have to say your single sentences can get my mind racing at a hundred mph. Example, Why institute the sharing (AirBnB model) if it is less about sharing and more about not paying for parking? Does this mean there is room for a purely valet model, where one drives to the airport and a valet drives it back their home instead of parking at the airport? Is it going to be a common practice for people to be the AirBnB of "this and that", making the marketing more important than the service, especially when sharing is not the main appeal?

I take what I can from your comments, like your perspective on the sharing model above, but it makes me think getting a YC interview would be bitter-sweet because really I would want to interview you.

Sharing pays for the free parking.

pg nailed it. In the model you described above, you're still shelling out dollars from your bank account rather than leveraging an under utilized asset of your's.

As to the model, honestly it was just one quick thought in a stream of conscience purposely meant to be a contrast to the sharing model, or leveraging an under utilized asset - nice phrasing.

A company out to get me free parking is a company after my own heart. In no way was I challenging the AirBnB/sharing/your model, I agree with you and pg the model I describe would not work specifically b/c "shelling out dollars", yet there is value if a valet model cost $18 once and a trip was longer than 48 hours, which sounds like your not meeting a demand so much as your making one.

Keep working on great things.

I think this only works if the benefits outweigh the potential costs. Crashing a car, getting a rental, and purchasing a new car are all unwanted headaches that are more likely in this model vs some screwing up a room in the airbnb model.

On the damage front, I'd be a lot more worried about cosmetic damage than steering/suspension. Hard parts (steering, suspension) are perfectly replaceable and, IME, the result is generally perfect, assuming you used quality parts and installed them correctly. Even crash damage that affects the pickup points CAN be correctly repaired (but often isn't, because someone cheaps out).

In contrast, I've never seen a respray that was perfect, even high-dollar work on high-dollar cars.

I'm a big fan of Zipcar, but getting to/from the airport from/to your Zipcar has always been a big frustration. I've tried FlightCar and have been surprised how easy and seamless the experience is, given how young the company is. I hope they expand quickly.

The challenging thing to me with FlightCar is it seems like one of those things where you need critical mass for it to work. You have to have a close matching of people leaving and wanting to rent to people returning and wanting to rent. AirBnB was a little easier because some people already had rentals, and others had empty rooms.

IE someone has to be arriving in Pittsburgh roughly around the time I'm leaving, and they have to also be leaving before I get home. I think that's the biggest challenge (beyond getting people to know about it and trust it). I'm sure it will take off at SFO at least.

How are the existing car sharing services doing? I haven't actually used one myself yet.

The idea is great, I'm sure the'll get the pricing sorted out after the launch. From my point of view $10/Day + free parking ($18) seems low. Maybe if you're leaving a smart car or something, but what if you have a nicer car like a Lexus or Mercedes?

If you own a luxury car, you probably don't care about the cost of parking. For extended trips, you're likely being picked up/dropped off by a black sedan anyway.

Am I the only one that was bummed out to learn that FlightCar isn't making hover cars?

This, from all the other YC W13 companies, was the one that made my head tilt as I thought "huh... that's a ridiculously cool idea." It has a really fun element to it as far as business ideas go.

Congrats to the founders!

There is something to this idea but I am still skeptical. In ATL I park my car for 5$ a day using my wife's corporate discount. I am assuming that most of the regular fliers out of ATL use some sort of discount. So, this might not be the target market for FlightCar on the supply side. But, these are the very people whose cars might be available more often for renting.

On demand side, this idea rocks. I remember renting a compact car for a day for around 150$ (including taxes, fees etc etc).

It's awesome to see companies that came out of the startup scene in Cincinnati doing so well.

"Cars must have been made by 1999" So my 2010 Honda Civic is too new? They only want pre-2000 cars?

FlightCar (along with Uber, Lyft, etc) has been issued a C&D by SFO airport: http://www.sfexaminer.com/local/transportation/2013/04/sfo-t...

Surprised that the article didn't mention this.

The C&D is old. It applied to an old model of ours where we operated on airport property which was rather grey. Our current operation with a black car, on the other hand, follows all rules and regulations by the airport and in fact pays the airport on every trip.

Awesome. In that case I amend my statement. I'm surprised the Examiner didn't mention this in their article!

Probably our fault for not getting the press involved with the C&D. :)

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