Hailo investors made a difficult decision today. After two years, they concluded the company was unable to compete with Uber and Lyft in the US.
Wisely they strategically withdrew from the North American market. They are now focusing their remaining venture capital and management energy on Europe.
Today the investors also terminated the co-founder and co-chief executive. He was in charge of the North American effort.
Should Lyft investors soon conclude that the management strategy including the current Uberfication of Lyft has resulted in a drop to 12% market share?
As I’ve discussed in other posts, Lyft has an option to strategically refocus on a smaller list of Lyft-like cities and pursue a strategy that delivers the experience desired by Lyft-like riders and Lyft-like drivers.
That’s just one possible solution.
I’m sure that there are many, many strategists a whole lot smarter than me with potential solutions. I’m sure some currently work at Alibaba.
Like Hailo, there comes a point when getting smaller actually gives you a shot at getting profits.
Taxi App Company Hailo to Pull Out of North America
By Murad Ahmed, European Technology Correspondent
October 14, 2014
Hailo, the London-based taxi app company, is retreating from North America, becoming a casualty of the price war being fought by competitors such as Uber and Lyft.
Jay Bregman, co-founder and co-chief executive, will also depart from the company leaving Tom Barr, a former Starbucks executive, in sole charge.
The three year-old group, which partners with incumbent taxi services, said it was forced to abandon the US and Canada because it was impossible to be profitable. It will focus instead on expanding into new cities across Europe and Asia, where regulators appear to be more willing to protect the traditional industry.
When Hailo launched in New York in March last year, global expansion was seen as a sign that it was on track to becoming one of Europe’s leading technology start-ups. Hailo has received close to $77m in investment from venture capital groups including Atomico, Union Square Ventures and Accel Partners, making it one of the best-funded fledgling tech groups on the continent.
Hailo will cease operations in Washington, Chicago, Boston, Toronto and Montreal. About 20 staff based in the US and Canada – comprising about a tenth of its global workforce – are likely to lose their jobs.
Mr Barr said that competition has led Hailo to rethink its strategy.
“When we moved into North America, we had two entrenched first-mover competitors,” he said. “They are in a price war. It’s not that we aren’t growing there, but the profitability of the market and the type of environment [that other taxi-app companies] are setting up – both on the driver and passenger side – ceased to make sense to us.”
Hailo operates in about 30 cities and remains among the most used taxi app services in London, Madrid, Barcelona and Dublin. It has more than 1.4m registered passengers worldwide and had more than $100m in revenues in 2013.
In the US, the company has been in a battle for market share with Uber and Lyft. Uber has been criticised for its aggressive price cuts and authorities in some countries, such as in Germany, have attempted to impose restrictions on ride-sharing apps in order to protect incumbent services.
Uber argues that lower fares lead to more frequent rides and an overall rise in driver income, although some drivers have complained about working conditions.
Hailo says it takes a different approach to the Californian company by attempting to partner with local taxi groups such as London’s black cabs, which continue to operate using a meter while the group takes a 10 per cent commission from the overall fare.
Mr Barr said authorities outside North America offer its business model more protection. “In Europe and Asia, regulators see more importance in how the taxi industry supports the citizenry,” said Mr Barr. “We do see better support for taxis in those markets. It’s a friendlier environment to grow in.”
The company added that Mr Bregman, the former co-chief executive who lives in New York, had “by his own admission . . . taken the business to the level he can”. He will leave Hailo to work on new “entrepreneurial endeavours”.