News June 7 2018

Gett raises $80m led by VW at a $1.4bn valuation

While Uber is growing its business with a net loss on its balance sheet, a smaller rival has confirmed a round of funding, and projects that it will be profitable by Q1 of next year. Gett, the transportation-on-demand startup that competes with the likes of Uber but also traditional taxi cabs, has raised $80 million led by existing investor VW with participation from other previous investors.

Post-funding, Gett is now valued at around $1.4 billion, CEO and founder Dave Waiser told TechCrunch in an interview. This is the first time the company has officially disclosed its value.

It may give Gett a claim to being a “unicorn,” but it is still a pale number when you compare Gett to Uber, which is doing a secondary round right now at a $62 billion valuation. but Gett is playing with another strong card in its hand: Waiser said the funding will be enough to get Gett — which operates in 120 cities globally — to profitability in all of its markets by Q1 of next year, and possibly earlier.

The news comes on the heels of a report that Gett is looking to raise $350 million — a figure that Waiser dismissed, but did not deny outright when I asked about Gett’s plans beyond profitability and this current investment:

“For now, we’re laser focused on this important [profitability] milestone, and the funds we’ve raised to execute on that strategy,” he said, “but when you consider competitive markets like New York and London, we will start thinking about what our next milestone should be, after we make money.” The company has now raised just under $700 million with other investors including Access Industries, Baring Vostok and MCI (Russia’s Sberbank and Kreos have previously provided debt).

In the 120 cities where Gett is now active, Waiser said that New York, London and Moscow are its biggest markets, with half of the company’s volume coming from New York and London alone, on a revenue basis.

Gett, he said, is currently at a $1 billion/year rate, meaning collectively those two cities account for $500,000. He declined to say what kind of margin the company is operating on now, or what it might be when the company is profitable.

New York is Gett’s fastest growing market. It operates in the city as Juno after acquiring its competitor for $200 million a year ago, and it currently has more than 45,000 drivers on its books, or more than half of the 80,000 licensed cab drivers in the city.

Uber has been aggressive in its efforts to expand rapidly across the globe, and to position itself as a provider of all things transportation to all people — with categories like food delivery, bikes, autonomous vehicles and flying cars all in Uber’s purview. To do this, it, along with a select few others like Didi in China and Lyft in the US, have raised billions of dollars in outside funding, effectively sucking up a large part of venture money and interest in the transportation-on-demand sector.

But rather than falling by the wayside for being unable to keep up, Gett has turned the situation into an opportunity of sorts, by taking a very different, vastly more modest route. Its principle has largely been, for the last several years, to focus most of its efforts on nailing one area before considering how and where to grow.

“We are focusing just on our core service,” Waiser said. “We’d rather do that better than others than to go too broad. Uber might be able to afford [going broad], but we want everyone in New York [for example] to know that we are there if you want a much better, higher quality option.”

In the case of Gett, the company has been primarily serving consumers with rides, with a heavy emphasis on business users (other test areas of Gett’s like shuttle services and courier deliveries are still too small to note, Waiser said). The company today has 13,000 large enterprises on its books, and they account for the majority of the company’s revenues and profit. “Most of our billion dollars in revenues are coming from corporate clients,” he said.

The idea is not just to court businesses, but to provide a level of service that will help Gett grow by word of mouth, both among drivers and passengers. The company, he said, will only consider drivers with a 4.8 rating or higher in New York before a driver can work with Gett, using the driver’s previous ratings on other platforms as a marker. On the other side of the transaction, Gett’s been trying to give drivers better commissions than other services in their specific markets, and generally raising the standard for how they treat them, said Waiser. He said its growth in NYC has been done on virtually no marketing budget.

“Some people describe marketing as a tax, but once you become favourable for drivers you don’t have that tax,” he said. “Drivers choose us, without us having to spend a lot on marketing.”

Over in London, Waiser said that that the current state of competition — Uber is currently appealing a rejection by local regulators for a license to operate in the city — hasn’t had a huge impact. “We’ve seen some uplift in London because of it, but you always need to try to improve your service, rather than looking at competition. We believe Uber will stay in London, so we’re not building our business on competitors’ problems.”