Via’s algorithms dynamically match passengers with available seats instead of entire vehicles, creating a highly affordable, convenient, and premium bus service, while keeping trip durations similar to a private taxi.
The announcement marks the largest amount raised by an Israeli startup in 2016, despite the slowdown affecting the VC market. “Globes” spoke to Via cofounder and CTO Oren Shoval to find out more about the startup.
We are seeing a slowdown in startup investments, maybe even the start of a crisis. How do you explain your massive funding? Don’t you feel the VC funds turning off the tap?
Shoval: “You can’t argue with the data. The market is changing, but what helped us was our unique solution. We developed the ability to do something new entirely. And the potential of the transportation sector, which is ready for modern, smart technology, is immense. More than a few investors saw the potential and expressed a great deal of interest. There was a lot of intensive interest in recent months, and we think that comes down to our solution working very well in New York and Chicago.”
Q: Most entrepreneurs claim their solution is unique and innovative.
A:“I agree, but everything comes down to results. I can tell you about our experience, not other companies; we have received clear feedback - that what we were doing was aimed at a market that is too big to even evaluate. When you’re talking about urban transportation, you need to include infrastructure spending: say, the price of a light rail system or a subway. The amounts are immeasurable and it shows how big the market is and how big the challenge and we are one of the few companies in the world turning to this market and offering a revolutionary solution.”
Q: You mentioned the light rail. You encountered difficulty operating in Israel, where people use shared taxis.
A: “True. Before we rolled out, we thought about where we should launch and we reached the conclusion New York was the right destination, for more than a few reasons. I think we made a good choice. New York is densely populated and has a lot of demand for transportation services, which offers many advantages for a solution like ours. I also think it speaks volumes if you make it in New York.”
Q: A sort of seal of success.
A: “Exactly. We really feel it. Starting out in other cities wouldn’t have been the same. In the Western world, to succeed in New York, with the density of New York and with the unforgiving customers of New York - it’s something. If you provide subpar service, you’re done. And the competition is rough, so succeeding there truly shows the capability of our service. And now we’re expanding to other cities.”
Q: In reality, you’re riding on Uber’s coattails. If Uber had failed, it’s likely Via wouldn’t have managed to break out.
A: “That’s an interesting question. I think we’re riding the wave of success and potential of introducing technology into the transportation sector. Up until a few years ago, it had no technology. It started with providing real time data on bus arrivals and recommended routes, but for the first time we are taking the idea and influencing the system.
“What I mean is that we aren’t merely showing you what’s happening but we’re changing the system in real time: the taxis are changing their course in real time to adjust to your needs. And the success - not only of Uber but of a collection of companies worldwide which aim to bring you a taxi or car at the push of a buttion is being proven. We are talking about bringing you a bus or a shared taxi we see that as the next stage, and it has a bigger market than Uber. Our investors tell us: ‘This is what public transportation should look like,’ and we believe them.”
Q: The slowdown we mentioned has led to a devaluing of private companies like Uber. Are you not worried about raising funds now, given the pessimistic outlook?
A: “In the world of entrepreneurship, you need to learn to live with uncertainty across the board. We are trying to do something entirely new, which leads to a lot of questions and uncertainty. But alongside that we have a ton of potential. Our investors are professionals; I know they considered it carefully and must have reached the conclusion that this is the right investment at the right time. Of course there are risks, but we are burning the candle on both ends to succeed.”
Q: How much does a Via ride cost?
A: “Five dollars with a ticket pass, a price that’s close to a public transportation fare. It’s $7, if you go for an individual ride, but prices are beginning to change a bit between New York and Chicago. Chicago is a bit cheaper in general. Our service is based on the fact the customer knows the price beforehand, and the price is low and expected just like public transportation.”
At this point, Shoval turns to the Israeli regulation. “Another feature, which maybe should be adopted in Israel, is that in the US we received permission from the IRS to operate as a public transportation provider for tax purposes. It means any employee can use their pre-tax earnings for public transportation; the state exempts you from paying income tax on those expenses. And that’s not true for private taxis. And the real significance, if you pay a marginal tax rate of 50% can happen in New York then you’re actually paying $2.50 and not $5 per ride. It makes a difference, and the IRS permission shows the US authorities support Via.
A: “It’s hard to explain just how much support we’re getting from the authorities. Everyone wants to support ride sharing, get cars off the road, and make as much use as possible of each private car.”
Hundreds of thousands of users
Q: Tell us some numbers.A: “We provide rides to several thousand people every day. Overall, we have hundreds of thousands of users, with a significant portion using the service regularly almost daily. Our repeat service rate is good. We have more than 1,000 drivers registered to the platform, of which more than 500 are active any given day.”
Q: Are these people working full-time?
A: “They’re essentially freelance drivers. We don’t employ them, and they decide when to work. Each one has an iPad mini which runs our navigation software, and the drivers can log in and sign off as they wish.”
Q: And how do you profit from this?
A: “The bottom line: our efficiency. With such low prices, the only way to achieve a good business model is with high efficiency; we make money by utilizing every available seat in a vehicle.”
Q: How does that translate into the bottom line?
A: “I cannot detail the business model with each driver. But I can say that we can clearly see that it works on a large scale; when there are many riders, we reach a high efficiency level and the system becomes profitable. When you go into a new city or new neighborhood and you don’t have a significant market share, then it is hard to find people riding in the same direction and connecting them.
“But the moment the scale is large enough then the chance to find many people riding more or less in the same direction increases dramatically, and then it comes together. And we are seeing that happen; it is the catalyst for our fast growth and the confidence of our investors.”
©2016 the Globes (Tel Aviv, Israel) Distributed by Tribune Content Agency, LLC.
