Gett, the ridesharing company backed by Volkswagen and valued at around $1.5 billion, is putting the brakes on a major part of its growth strategy. Today, the company announced that it is closing down its operations in New York, which operates under the Juno brand, effective today. The company has a substantial business serving enterprise customers globally — with some 15,000 companies overall, many with people in the US — so alongside this news, it’s also entered into a strategic partnership with Lyft to take on those accounts starting next year.
Notably, that 15,000 figure is down on the 20,000 number that Gett shared with me earlier this year when it raised $200 million and talked about going public, by Q1 of 2020.
That is not detailed in today’s press release, however, which focuses instead the reasons for the closure, specifically citing rationalization and blaming the “enactment of misguided regulations in New York City earlier this year.” (New York’s city council voted to cap licenses last year, which it voted then to extend for another 12 months this past August, along with other new rules.)
“This development reinforces Gett’s strategy to build a profitable company focused on the corporate transportation sector, a market worth $1 trillion each year,” said Gett CEO Dave Waiser, Gett CEO, in a statement.
We asked Waiser if he can provide more guidance on IPO plans and he noted to me earlier that the company still expects to be operationally profitable by December and that an IPO is still on the horizon, although without a specific date in mind.
“We are focusing on reaching operational profitability globally already next month in December,” he said. “Being a leader in the corporate ground transportation, profitable and global, makes our plans for IPO realistic.”
We’re also asking Gett for more specifics on the strategic aspect of this deal and whether Lyft is giving Gett shares in its company, or indeed vice versa. Gett notes that “Juno drivers will be paid in full by Juno for all rides completed by Juno’s service end-date. All Juno riders will be invited to join Lyft.”
The Lyft partnership, Gett said, will mean that when its corporate customers come to the United States, they can continue to use their Gett apps to order Lyft cars. As Gett had never managed to expand beyond New York City, this will give the company overall a larger footprint, while also drastically cutting the margins that it will be able to make per ride.
Gett made a significant move to consolidate its position in the US — specifically the key New York market where it operated — when it acquired Juno, a smaller rival in the New York market, for about $250 million in 2017.
The acquisition spearheaded a big effort to catch up to and potentially even surpass the two biggest ridehailing companies in the market, Uber and Lyft, at a time when many people were starting to question some of Uber’s and Lyft’s practices in the market. Juno (founded by the founders of the messaging app Viber) tried to take a different approach to the market by putting drivers and their compensation front and center, thereby hoping both to attract more of them to its platform, and also more riders happier with the ethics of the different approach.
At the same time, Gett took a different approach to its competitors by focusing only on specific markets, to cut down operating expenses and focus on profit. It made it as far as being a “solid number three,” in the words of Waiser earlier this year.
“A year ago, profitability was not a very popular topic,” Waiser said to me when Gett raised $200 million earlier this year. “In Uber and Lyft we see two great companies, but even as they grow revenues, their losses are growing. What is really unique for Gett is that our success, and our improvements in revenues, are in parallel with our Ebitda improving.”
However, as you can see from the IPOs and subsequent performances of both Uber and Lyft, the economics of ride-hailing have proven to be problematic, and ultimately the company has had to rely on outside investment like the others, while also finding that it couldn’t scale or move into the black as it had hoped it would. The retreat from direct operations in the US underscores that fact.