There's been a war brewing in Los Angeles, between a trio of ride services-- Lyft, Uber, Sidecar-- and the city's taxi drivers--over a new generation of Internet-enabled and smartphone-friendly, connected rideshare services, versus what has been an old, opaque, and phone-driven taxi establishment. There's been plenty of debate over how to handle the new services, and arguments for and against both ridesharing services and the taxis.
One of the new developments in that battle, has been the entry of a Silicon Valley startup, Flywheel, into the war. Flywheel offers up software and hardware which enables those same, Internet- and smartphone-friendly features--not for ridesharing services--but for the traditional taxicab services. We spoke with Flywheel's CEO, Steve Humphreys, who has been in Los Angles this week.
For those who haven't heard of Flywheel, can you start by explaining what you do, and how it relates to these ridesharing services?
Steve Humphreys: We're an app for hired vehicle access. We're focused on taxis. We're different, in that we work with licensed taxi fleets, sign up those fleets, and put a device in every car for that fleet. It's not jus a driver with his smartphone--this hardware actually sits in the car, and when a driver gets in the cab, he punches in his pin number, which is his identifier. On our app, that allows you to see all of the cars in the city, and hail one with your smartphone. Our app dispatches the closest taxi, and you get the name of the driver, see when they're coming to get you, and also handles payment capability as well. The number one difference with what we do is, number one, this is a licensed taxi, and you paid a metered fare, plus you can set your own tip. We don't try to keep control of that. We also offer up driver ratings, plus driver ratings of passengers--because this is a whole community, made up of both drivers and passengers. Because we're working with fleets, we can deploy very quickly. Ten days ago, if you looked at the Flywheel app for Los Angeles, there were no taxis. Today, there are now over 150 taxis on the streets of Los Angeles, all qualified drivers, all well trained. I took half a dozen Flywheel cabs today in Los Angeles, and they were all fantastic.
How long has Flywheel been around, and can you talk about the background of the company before its launch here?
Steve Humphreys: We've been active in the market for a long time, since early 2010. We started by taking this direct to drivers, letting them download apps on their phones. This was before the iPhone was multitasking. We realized quickly, that in order to get the network effect, to provide quality experience, that it would be very difficult to do without leveraging the existing infrastructure of taxis. So, we began approaching those companies and built the platform. It's something a whole fleet can operate on, and we've been building the methodology, training drivers, giving feedback, and getting the customer experience to where it ought to be. We relaunched and rebranded in December of last year, and even though we've been around awhile, we really launched on our current trajectory about eight months ago. Over half the taxis in San Francisco were on our service when we launched, and over the 1500 taxis there, we now have around 1,000. We're also in a number of other, smaller cities. Los Angeles is really the second major market we're launching into.
What's your position in this market, versus Uber, Lyft, etc., and why work with the taxi companies?
Steve Humphreys: The first thing, it's economic. There are a bunch of fleets that are already out there. They're already managing cars, paying for insurance, dealing with licensing, etc. What we bring is all of the technology for geolocation, the customer experience, vehicle access, and so on. We are in a position to add value where things are truly disrupting, and we can leverage what's already out there. The new companies are going out there, and becoming their own taxi fleets. It's not efficient to manage cars and drivers, and that's what taxi fleets already do. That's why they've raised so much money to reinvent this area. We just raised a $15M round, as you know, but we didn't need to raise that much.
The second area we're addressing is the safety and regulations out there's a reason there are regulations out there. Taxi drivers need to get criminal background checks, insurance coverage, and there's a whole body of law out there about the area. If people are in a registered taxi, and something happens to them, they're covered. Things do happen, unfortunately. However, if you call up the insurance company of a Lyft driver, they'll tell you that the policy says that if you use your car for a commercial purpose, you're not covered. Even though Lyft says they have $1 million liability coverage, I think anyone will tell you that a million doesn't go very far if you're in an auto accident, and injured for life. It feels like, with the ridesharing services, you're experimenting with your life. The drivers are also personally liable, and they're also taking a risk with their entire life and livelihood. I think that's wrong. The new business models are putting people at a lot of risk, without acknowledging that risk.
It's like greenhouse gases. We know we're burning greenhouse gases, but destroying the planet, and we keep on doing it anyway. The third thing, is the taxi drivers themselves. That's an area I personally get very passionate about. The vast majority of taxi drivers are really good, hardworking people. 95 percent of our driver ratings are 4 and 5 stars. Those are voluntary ratings, and normally people only report the bad stuff. Two thirds of the taxicab drivers are getting five stars on Flywheel. They're good people, they're hard working, they're giving good service, but they end up having to pay more in registration, medallions, and insurance--and yet somehow those other drivers are consider the cool, good guys. That's just wrong. The taxi drivers and fleets are well run, and they're good people, and they just need good technology and feedback. They are going to be the last man standing when the dust settles over these new services, and that capital injected into the area starts to wear out and starts to defy gravity. Startups are going to have a niche, but the vast majority of rides will be through taxis, with well performing taxi fleets.
Why did you decide to expand here in LA, in particular?
Steve Humphreys: It's a fantastic taxi market, for us in particular. There are only about 2,300 cabs spread across Los Angeles, which is a very dispersed area. The utilization of taxis here is very low. That's a big part of the value proposition, which is increased utilization, with the existing cabbies around the streets. If you do the quick math, there are around 2,000 taxi cabs, and they average around 20 rides per day, so that's around 40,000 rides a day. That's about a million rides a month that you have capacity for in Los Angeles. But, right now, they're doing only somewhat around half that number. I think we can provide a couple more thousand rides in Los Angeles, without putting any more cars on the road, or adding more CO2 to the atmosphere. Right now, more than 90 percent of taxi drivers are dispatched via telephone dispatch, the old fashioned way. Because things in Los Angeles are so dispersed, I think people here will prefer to go through a smartphone, to be able to pay in an app, and also know when a car is coming. Even if a hail is three to five minutes away, you can't see them. If you can see them in an app, that will give you lots of comfort. We've gotten great reception from the fleets here, and also from regulators and the city. The bards, merchants, and hotels are also very welcoming of us coming to the city. It's all about capacity, taxi infrastructure, helping to solve the inefficiency here due to the sprawl.
How would you like to see all of this rideshare versus taxi thing pan out?
Steve Humphreys: I'd like to see a level playing field. I think anyone who is providing a hired ride in Los Angeles should have the same registration, licensing, regulations, and same fare structure, and then let the consumer decide. Consumers definitely need access to more rides. There's an opportunity to get more cars off the streets. There should be a level playing field, and all of these companies should be treated the same. Taxi companies right now have to have a certain number of their cars handicapped enabled. We recently had a rally in San Francisco, and there were many representatives of the elderly and handicapped. If you want a Lyft ride there, you're screwed, because they don't have any ramp vans. It might sound like it's cool right now, but wait until you're handicapped, or older, and you need a service provider and can't find one. That's what city regulations provide. You'll wish you weren't so glib about the market. There needs to be a level playing field, and Lyft and the others need to have handicapped cars. Also, when someone calls, you have to pick them up. There should be no cherry picking. It's not fair to not have cars on the street when an elderly person has to go the doctor at 10am, but have lots of cars at lunch during the busy times. Cabs have to have a supply of drivers at all times, and the others should be required to do the same thing. One of the reasons cities have been involved in this, is because there were too many cars picking up people. It's odd to me that Los Angeles is very sensitive to things like congestion and pollution, but all these services are putting lots of cars on the street, uninspected, without the right insurance, without smog emissions inspections, to make sure they're not messing up the urban scene. On the other hand, taxi services have now shifted over to hybrids, both because they're more economical and because they're better for the environment. There needs to be a level playing field.