In 2009, as students at 2-year-old Singularity University in Sunnyvale, Calif., budding entrepreneurs Jessica Scorpio (pictured) and Sam Zaid had 10 weeks to produce the kind of idea that could potentially impact a billion people in 10 years’ time.
It didn’t take long before they struck on a concept they’ve been developing ever since: a peer-to-peer car-sharing service that connects people who want to rent a car with people whose cars are underutilized.
Today, Scorpio and Zaid run GetAround, a 10-person startup that officially opened for business on Dec. 5 and has since connected 1,000 users with 50 cars — ranging from Porsches and 2011 Priuses to old Hondas — in the Bay Area. The seed-funded company will likely seek out a Series A round this year, Scorpio says.
To use the service, prescreened renters have to demonstrate an impeccable driving record and provide GetAround with their credit card information. After that, renters can search for rentals on the site based on where they live or where they’ll need a car at a particular time, along with how much they are willing to pay. (Car owners are able to charge whatever hourly, daily or weekly rate they want.) Meanwhile, the owners are given the peace of mind of knowing that should anything happen to their car, GetAround has them completely covered through a comprehensive insurance policy during the time that their cars are being rented.
“Getting [that policy, from a Fortune 500 company that GetAround declines to name] was our biggest challenge,” says Scorpio, who worked for the Prime Minister of Canada before attending Singularity University’s 10-week graduate studies program, which aims to foster exponentially advancing technologies. (For the uninitiated, Singularity was co-founded by Peter Diamandis, founder and chairman of the X Prize Foundation, and futurist Ray Kurzweil.)
Considering its potential — GetAround puts money in the pockets of car owners, an appealing proposition in recessionary times; it’s “green” in that car ownership could decrease through its service; and it potentially makes millions more cars available than any existing car-sharing service — it isn’t surprising that the company has already raised an undisclosed seed round from Redpoint Ventures, Powerset founder Barney Pell and a long list of other prominent Silicon Valley angels.
The company should also benefit from the successful passage last year of California’s AB 1871, a law that, beginning Jan. 1, allows Californians to share their cars without invalidating their personal car insurance.
Still, how well the economics work will likely determine what size Series A round the company is able to land.
On the face of things, the numbers don’t seem to add up to enough for car owners, at least for now. While they can charge whatever they want — Scorpio says most cars rent for between $4 and $14 an hour — GetAround takes a 30 percent cut of the transaction. That means owners renting their car for, say, $8 an hour, would be making roughly $45 every eight hours. It’s not bad, but it may not be enough to motivate them, especially if they have to string together bookings to get to those eight hours.
The company also charges car owners $200 for internally developed hardware that communicates with a renter’s iPhone to verify the person’s identity, give them access to a locked key box in the car, and track their whereabouts.
Scorpio says those hardware costs will fall as GetAround’s membership base grows and the company is able to outsource production of the boxes. She adds that owners are also able to circumvent the cost by providing their keys the old-fashioned way — by handing them over in person.
GetAround also has plenty of competitors, from the likes of Zipcar and City Carshare to newish programs by rental heavyweights like Hertz that invite customers to pay an annual fee to more cheaply rent cars by the hour.
Even BMW began a pilot program last October to rent its vehicles on an hourly basis over the Internet, based on the same research on which GetAround is centered: research that shows cars typically go parked and unused more than 90 percent of the time.
Scorpio suggests that she isn’t concerned, partly because GetAround potentially makes millions more cars available to renters than any one company can through a “fleet model” and partly because of GetAround’s screening process, which she calls “an operational pain that no one else is trying to replicate.”
Going forward, says Scorpio, GetAround may also derive much more of its revenue through insurance, including coverage that it’s hoping it can offer to car owners not only to supplement what they already have but to replace it altogether. “We’ll see,” she says. “We’re still very much learning about our core business.”
Perhaps potential investors will find the greatest inspiration in another San Francisco-based startup, Airbnb, an online marketplace for people to list and book unique spaces around the world, from boats to Scottish castles. Though the 2-year-old company doesn’t release its financials, its model of facilitating bookings has already attracted the attention of tens of thousands of users, as well as top-tier venture firms. Just two months ago, Sequoia Capital and Greylock Partners gave it $7.2 million in Series A funding.