- HyreCar: how it works
- HyreCar key partners
- HyreCar key business model ingredients
- Fueling growth via insurance coverage arbitraging
- The one-man sales team approach
- The marketplace over a marketplace business model
- Leveraging the gap between ride-sharing and car-sharing
- A seamless sign-up process to acquire drivers quickly
- HyreCar Revenue model
- How did HyreCar figure its initial target market?
- Key takeaway and lessons from HyreCar business model
HyreCar: how it works
The basic premise of HyreCar is a peer-to-peer marketplace where owners of cars can easily rent them. Drivers can easily find a vehicle fully insured to start driving for Uber and Lyft and make some additional income.
The compelling part is that HyreCar tackles two segments of the mobility industry:
- and ride-sharing
HyreCar key partners
- cars’ owners
- and drivers
That’s why it is like HyreCar has seized the opportunity and has created a marketplace on top of the need generated by existing marketplaces.
For instance, as we’ll see, when understanding its serviceable market HyreCar looked at local Google searches for terms like “rent a car for Uber” which pointed a clear need and intent of people to start earning additional income by renting a car and submitting it to either Uber/Lyft.
Car owners that want to amortize their cost of ownership can rent their car quite easily via HyreCar. Indeed, one of the main issues of car ownership is the fact that for most of the time it sits in one place (like the work parking lot, or home parking) without ever being used.
This implies an excess capacity of vehicles that make car sharing appealing for a few reasons:
- passive Income: HyreCar allows a steady source of passive income resulting from a re-booking process
- Insurance: the liability and insurance provided by HyreCar makes it riskless for the car owner to rent it
- Drivers’ review process: HyreCar has a rigid and extensive background check process, besides matching t Drivers that also have passed the Uber and Lyft background checks. This makes owners more at ease with renting their car
Thus, a few reasons why those drivers are attracted by HyreCar value proposition is:
- Extra income: drivers can easily earn some extra money via ride-sharing marketplaces like Uber/Lyft
- Pay-As-You-Go: drivers can rent a car weekly or for as long as they need it with no obligations or long-term contracts
- Convenience: drivers can quickly get a car they need, at times also delivered to them within 48 hours
- Transparency and Trust: owners are also screened and must pass a review process before being accepted to the platform
Indeed, one of the risks of failure for Uber and Lyft is the inability to keep drivers going back to the platform.
At the same time, it offers a good option for people that want to temporary make a part-time income from driving for either Uber and Lyft by reducing their “entrepreneurial risk.”
In fact, who drives for Uber and Lyft is not an employee, but rather an independent contractor that has maximum flexibility on when to operate.
HyreCar key business model ingredients
Let’s look now at the few pieces that make up the HyreCar business model and how they come together.
Fueling growth via insurance coverage arbitraging
The process follows these steps
- Driver and Owner are provided an insurance ID card with driver’s name and the vehicle identification number twenty-four hours in advance of the commencement of the rental through the drop-off confirmation by the owner of the vehicle
- An owner takes pictures of his or her vehicle before pressing the “Confirm Pick-up” button on the HyreCar mobile app
- After the rental is completed, the Owner presses the “Confirm Drop-off” button on the HyreCar mobile app and the rental ends
American Business Insurance Services (“ABI”) handles all of back-end insurance generation and processing. The insurance is broken down in four driving periods:
- Period 0 is when the Driver has picked a vehicle up from the Owner and is driving with the Uber or Lyft app turned-off
- Period 1 is when the Driver has the Uber or Lyft app turned-on but has not yet accepted a fare
- Period 2 is when the Driver has accepted a fare and is on the way to pick-up a passenger
- Period 3 is when a passenger is in the vehicle
The HyreCar policy covers Period 0 or when the driver is not operating according to Uber and Lyft app. Indeed, from period 1 to 3 the insurance coverage falls on Uber/Lyft.
This insurance system is pretty ingenious for a couple of reasons.
First, usually, Uber’s drivers are covered at the moment in which they are active on the platform. This typically covers driving when picking up and dropping passengers off.
Thus, in certain period drivers might be uncovered. That happens because a regular insurance policy is not enough. Indeed, as drivers that operate via Uber/Lyft are considered “contractors,” they also need a commercial insurance policy.
In that scenario, HyreCar might take over what Uber doesn’t cover while at the same time stop covering drivers when Uber/Lyft instead covers them.
Second, HyreCar can save in insurance by only covering the period of inactivity on Uber/Lyft and leaving them the expense of ensuring riders when active on those platforms!
This commercial automobile policy might be a competitive advantage as so far HyreCar might be the only provider of this car-matching service.
In a sense, it is almost like HyreCar offers a unique insurance policy by making it nearly an operator in the insurance sector.
The one-man sales team approach
The sales team is another critical element for HyreCar success. Indeed, HyreCar noticed that customers (both drivers and owners) that were driven through the platform on a one-to-one basis were more inclined to keep using the platform and its services for more extended periods.
This made HyreCar implement a one-man sales team approach.
The sales team is divided into:
- driver team (15 sales contractor, making about 30 calls a day to new leads)
- and owner team (6 sales contractor in west coast, central and east US)
I like to call this business model type as a marketplace over a marketplace. Indeed, as new marketplaces like Uber and Lyft take over the world, they also open up new opportunities and create a whole new set of industries.
One example we already discussed in the search world is DuckDuckGo and how it is building an entire business based on the need of people to get out from Google data collecting search engine.
In this particular case, DuckDuckGo is leveraging on an intrinsic weakness of the Google business model (it can’t live without users’ data), by offering a private navigation which only matches keywords based on location (if the user chooses to share it) yet it throws away the data on the fly rather than keep collecting it for years to come.
HyreCar has built so far a business based on a need created by marketplaces like Uber and Lyft. Its peer-to-peer car-sharing marketplace allows car owners to rent their idle cars to ride-sharing service drivers.
The advantage of HyreCar marketplace is that part-time Drivers can quickly enter and exit the market by matching their need for an idle car with the owner need to rent it.
Leveraging the gap between ride-sharing and car-sharing
HyreCar leverages on the gap created by both car-sharing services (Car2go, ZipCar, and Turo) and ride-sharing marketplaces (Uber/Lyft).
On the one hand, HyreCar taps into the unexpressed market of idle cars, that is most of the time in a parking lot, which allows owners to amortize their cost of ownership.
While it taps into the drivers, need to make an additional income.
A seamless sign-up process to acquire drivers quickly
One key element to any two-sided marketplace success is a smooth sign-up process. In this respect, HyreCar has partnered up with Lyft to allow a sign-up of drivers through Lyft sign-up portal.
This integration makes Lyft constant demand for drivers satisfied while it allows drivers to find their vehicle within a day or so (this agreement has yet to be formalized). HyreCar is also entering in similar partnerships with other players.
HyreCar Revenue model
As a two-sided marketplace, HyreCar makes money via a fee charged to both sides. On the one hand, drivers pay a weekly rental rate, plus the direct insurance costs and a 10% fee to HyreCar. Owners get a weekly rental from which a 15% fee is subtracted.
To recap the revenues of HyreCar are broken down in:
- 10% fee from drivers on the weekly rental price
- direct insurance paid by drivers
- a 15% fee from owners weekly rental income
A practical example is given by an average weekly rental of $200 and a total gross billings of $290 it makes $170 to the car’s owner and $120 to HyreCar. Below a breakdown:
To summarize, a driver picks up a car and pays a weekly rental of $200, plus direct insurance of $70 and a 10% fee on the weekly rental of $20. This makes the total gross billing in $290.
Of those $290, $170 is given to the car’s owner (the weekly rental rate of $200 minus the 15% fee to HyreCar). That’s how HyreCar makes $120 in revenues from a single transaction.
For instance, in 2018 the total gross billings amounted at almost four and a half million, while the revenues for HyreCar amounted at over $1.7 million.
How did HyreCar figure its initial target market?
As pointed out in HyreCar financial prospectus they analyzed a set of keywords to determine an initial population that could be reached by the service.
When launching a marketplace or in general a service it is important to at least try to identify a TAM, SAM, and SOM.
In 2016 HyreCar identified that market in customer demographics with the Google search results by creating a Driver/Owner affinity population of over 25 million potential customers, with the bulk of the 25 million concentrated in 16 core geographic locations.
For instance, they realized that 400,000 people in Los Angeles googled keywords like, “rent a car for Uber,” “Uber,” and “Uber Leasing.”
HyreCar growth is highly dependent from its ability to tap into other marketplace lack of drivers, and its ability to keep the dominance on a market that so far seems to have a single player.
A few lessons from its business model are:
- when new players enter a market, they also expand the market itself by generating needs that before didn’t exist. For instance, in this case, HyreCar saw three primary needs. First, the need by ride-sharing marketplaces for drivers. Second, the need for car owners to amortize their cost of ownership. Third, a lack of commercial insurance coverage from companies like Uber/Lyft which might make the ride for drivers riskier
- another lesson from HyreCar business model is its one-man sales team approach. Where they try to create a one to one relationship with both drivers and owners. When they implemented this strategy, they almost doubled their revenue a month over a month back in 2016. That is why they rolled it out companywide
- leverage on simple market researches to understand your target audience. It is easy to get bogged down in sophisticated analyses of TAM. But HyreCar simply confirmed its feeling by looking at local Google searches such as “rent a car for Uber” to realize there was an existing demand for those services
- another aspect is tied to two-sided marketplaces in general. If you can design a seamless customer experience it becomes easier to collect revenues from both sides of the transactions with minimum effort over time
- a last and important lesson from HyreCar business model is its partnerships with other marketplaces to create a seamless sign-up process and integrations, where it becomes easy for drivers to find a car while they are signed in to other marketplaces like Lyft. This kind of approach helps to hack the growth of the most important side of the marketplace, in this case, the drivers’ side
What other lessons did you learn?
Resources for your business:
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