A Deal with the Devil?

Having taken some time to consider the extraordinary news last week that Uber had acquired our biggest global competitor Autocab I thought I’d put down my own views and opinions. 

These are my own, for the iCabbi company line please see our CEO Gavan Walsh’s post. 

To begin, I’d be the first to congratulate any hard working company owners and executives that have the opportunity to take some money off the table to enjoy with their families, even better if they can get some cash into the business to help develop and grow their business. 

However having been there ourselves, we of all people know the importance of strategic alignment of the new parent and the acquired business and their customers. We spoke to a number of Venture Capital (VC) and Private Equity (PE) companies when looking for investment. We understood that we’d be entering a marriage, one that had massive implications for us, our team, our business and our customers. Like a marriage we had to find the right partner or we’d be miserable and it would have a horrific impact on our business and customers. 

VC and PE firms typically want to make a return of a multiple of their investment within 5 years or so. That’s a great deal of pressure, and it also means that the business and its customers know that they’re likely to have a new owner in the mid-term. This wasn’t the right path for us to take. 

Like us, Autocab were out seeking investment and to sell their business for quite a while. Anecdotally I hear that it didn’t work out a number of times. Based on our engagements with VCs and PEs I can only assume that this was due to their falling customer numbers, sinking revenues and that the unsustainable losses they were racking up coupled with no clear path for correction in the future. This is not a criticism of them but an opinion and one that is based on their own publicly available filed accounts. It is very difficult for any business that is in a freefall spiral such as that to pull out.

I have a lot of respect for the fight that the Autocab team have shown in the last 5 years, they’ve never given up in the most difficult of circumstances which is truly a credit to them. For them to sell out to their stated number one enemy must have been borne from need as much as anything else, that is they were perhaps thrown a financial lifeline, but it’s extremely disappointing for us and everyone in the industry who values the place that independent taxi companies have in our communities. 

We were very fortunate to be introduced to Groupe Renault (and their bank RCI Banque) and having met with them and discussed where we were then, the future of mobility, their ambitions and ours it became very clear that our working together could potentially pay dividends for them and their shareholders and for us and our customers. By and large Renault are not a key brand for taxi drivers to use in many of our markets. We didn’t know how we’d do it, but we could see that there was going to be an opportunity to match their coming Electric Vehicles, with our dispatching technology and our customer base. This model requires all three players to be present - Renault, iCabbi and the taxi companies. Each has their area of expertise, but are inextricably linked. 

Like any business that is majority acquired we did of course have our concerns that we may not know the company we were marrying well enough, that they could be difficult to work with, there may be cultural issues and challenges, that they could overly impose their will on us. These are all concerns that Autocab are now dealing with, thankfully all of our concerns have proven to be unfounded and to date everything has worked out very well. Like any marriage there’s ups and downs, but like any successful marriage having mutual respect and being aligned by the same goals and objectives gets you through. We want to service the taxi industry with the very best technology, they want to establish how they can sell more cars into our customer base. 

We’re two years in now, we had a massive growth program in place funded by Renault that has seen us make acquisitions and grow exponentially. This growth phase was naturally a time where we were also loss making. That was part of the plan and as we were fully funded and met our plan targets it wasn’t an issue. We’re now exiting that phase and are a self-sufficient business which is a great place to be following the growth we’ve experienced.  

At the beginning of 2020 we completed our first Electric Vehicle (EV) Pilot in City Taxis Sheffield. This was done with the support of Renault, Sheffield City Council, City Taxis, iCabbi and others. It was a true collaboration and one that has given extremely valuable data (no surprise, EVs are better, cost less to run, pollute less, are quieter etc). We had hoped to push this on further in 2020 but with regret Covid has put a hold to that. Having said that this may ultimately be to our advantage as Renault has better and possibly more appropriate EVs for use as taxis coming online in 2021 and 2022. 

We’ve been able to stay true to our values. We’re honest (to a fault), transparent, and carry ourselves with integrity. Are we perfect? No we’re not. We know we can do better in many areas, including delivering new product to our customers within committed timelines. That’s not to point the finger at any one area within our business, we can all do better and we’re always trying to be better. However our customer retention rate of c. 99% speaks for itself, and if you were to speak to our customers you will find many advocates who really appreciate our approach and the incredible hard work and dedication that all of our team members put in all the time.

The way our team stepped up to the mark during the Covid crisis and supported our customer base has been wonderful to see and was truly humbling, we’re very lucky to have them and grateful for their efforts and dedication. Our giving our entire customer base a no strings attached two month payment break is a good example of how we work with our customers, we want to help but not to take advantage of it by extending contract lengths or requiring them to change terms and conditions. 

Ultimately since Groupe Renault became involved we’re doing what we said we would, we’re being supported by a superb parent company that had a turnover of €55 billion last year (that makes my eyes water every time I see it). While we’re but a very, very small cog in a massive machine we still get a huge amount of respect and time from them, that says a lot to me about who they are, their values and what they represent. So, Vive la France (except for in the 6 Nations)!

This brings me into the recent news around Uber’s acquisition of our biggest global competitor Autocab (they say they’re bigger than us, we have a different view) that sent shockwaves through the industry. 

We integrate to many aggregators who send trips down to taxis. These are businesses that source passengers that require a taxi for some reason, for example one aggregator looks after passengers who are stranded in airports when a late plane gets cancelled. They ensure all passengers get a taxi to a hotel or their home simply by entering them into a system which sends their trip requirements directly into taxi companies dispatch systems. There are many others like this who have large volumes of taxi trips to fulfil from their business model. All the aggregators care about is getting trips fulfilled successfully in a timely manner and require information and reporting on same, they need no access to the system or to the data or anything like that. It’s down to each taxi or private hire company as to which aggregator they want to take trips from, some take from them all, some have reasons not to work with some, some take trips from no aggregators at all. To date we’ve allowed many different kinds of aggregators to integrate to iCabbi based on taxi company demand. That is if our customer wants it they can have it and it’s not our place to judge. 

I’ve written a number of times on LinkedIn over the years that I didn’t really understand the Uber model and that something like Booking.com for taxis would potentially make much more sense. That companies like Lyft and Uber could get immediate (and almost free) access to any market they want by negotiating partnerships with dispatch technology companies and their taxi company customers. Alternatively they could make it even easier by integrating to an intermediary who has already done all of that such as Karhoo, Splyt or Here. The heavy lifting has already been done by these companies, and trips could flow down to taxi companies with little development work, quickly and with very little cost. 

So this ultimately is why I don’t understand the core message that has been shared around Uber’s acquisition of Autocab. The message is that Uber want to partner with the taxi industry and to send trips into them. If that’s the case then why do they need to own the technology company that is the very centre of every taxi company using it? The technology that is the heart of the taxi company and the database that records every single detail of every trip. This is a very big red flag to me. 

I watched the presentation made by the Autocab CEO to his customer base outlining the key elements of the deal and why it’s going to be good for their customers and the taxi industry overall. 

Below are the key points he made and my comments around them, as before they are my opinion and my views, not necessarily that of iCabbi, and are open for individual interpretation and debate. 

1. Uber are engaging with taxi companies all over the world that want to buy taxi dispatch technology

That’s brilliant, but why do you need to buy a dispatch technology company for that? A strategic partnership would have the same end result and would have cost nothing, or a licensing deal could have been done where Uber could white label the Autocab technology and both parties make money from it. 

2. The same board will remain in place

Sorry but I can’t believe this for a minute. Are Autocab really suggesting that a company would buy 100% of their business and not have someone sitting on the board representing the owner? Perhaps the same board plus X individuals representing Uber is closer to the truth.

3. Autocab will be an independent company

They are an independent company, but one owned by Uber. I would bet my bottom dollar that no key strategic decision can be made without Uber signing off. Also that Uber have the right to Veto any key decision. They’re the owners, of course they do! So Autocab will be independent in the day to day running of the business, and fair dues to them, but they’re working for someone else now, end of story. 

4. The Taxi companies data is safe, it’s protected by contract and GDPR, Uber can’t access it

Really? GDPR protects personal data and that’s pretty much what is also covered in the supplier/customer contracts. I’m no data lawyer, but my understanding is that as owners Uber have every right to access anonymised data if and when they choose. That is they can build up knowledge on usage trends and patterns. The big data side of things, they really don’t care about Joe Blogs himself. All board decisions are made by the owner (regardless of who sits on it), so if Uber decide they want to look they can and will. Maybe not today, maybe not tomorrow...

5. Global growth for Autocab

How does that help UK customers in any way? If I was a taxi company I’d view this as being irrelevant to me and perhaps a negative if Autocab become distracted and stretched thin. 

6. New revenue opportunities from new trips from Uber and deliveries eg bikes, scooters, vans

Ok, that’s going to be attractive to some taxi companies and their drivers. But again, why do Uber need to acquire a taxi dispatch technology company to do that? Attempting to partner with all dispatch technology providers and allowing their taxi company customers to individually make up their mind would potentially have offered a greater spread and opportunity. 

7. Increased investment and development in Autocab products

How is that any different to today? In fairness to Autocab they’ve been pretty good at getting new products out there over the years. They’ve managed to move from a hardware to a SaaS model which is no mean feat. Will throwing more cash into this help in any meaningful way?

8. Taxi Companies don't need to take Uber trips

This is the absolute biggest area of concern for me. This places Autocab's taxi company customers in a horrific situation. If you as a taxi company don’t take the Uber trips then your competitor using Autocab may and can grow faster than you. So you're damned if you do and you’re damned if you don’t. This is the one that absolutely stinks for me. 

If Uber had no interest in eventually cutting out the taxi company then they wouldn’t have needed to buy a taxi dispatch technology company. They could have just become another aggregator like all the ones named by the Autocab CEO on his presentation. 

The solution? Taxi company competitors in each town and city need to come together and unite against the single enemy - Uber UK (Autocab). If every taxi company in a town moves to another dispatch solution then Uber can’t get in, doesn’t matter what system it is, just move. 

9. Your customers stay your customers, trips from Uber will go in via iGo

What happens when all your customers start using the Uber app by default?

10. Taxi companies taking Uber trips will grow (through taxi, delivery etc) 

I have absolutely no doubt that taxi companies beginning to accept trips from Uber will begin to grow. The question in my mind is what does 18-24 months time look like? What does 5 years time look like? 

As mentioned before, if they were pure aggregators I wouldn’t even be writing this article. Uber as an aggregator would just be another supply channel and taxi companies could follow the same model as hotels with the likes of Booking.com, Hotels.com, Expedia. These hotels have a well run channel management strategy to have bookings from aggregators work hand in hand with their own local demand generation strategy.

The hotel or taxi company's prime focus is on their customer base. Developing their branding, their marketing, customer loyalty, driving new local business etc. They then accept trips from aggregators as per the terms of their strategy, that is at specific times of day, week, year etc. So they supplement local marketing efforts and boost the loyal customer base with aggregators supplying demand from people coming in from out of town who may not have found your business. 

Nobody yet knows what Uber are going to charge taxi companies for taking trips. It’s a funny one because the lower the charge the more paranoid I’ll be that they’re aiming to screw taxi companies. Get them in with a low price, get them hooked on trip volume, start sending them their own customers and charging for them, then game over local taxi company. You will have one single customer, called Uber, they’ll call the shots and then when they don’t need you any more goodbye!

To conclude:

Uber buying Autocab means that the taxi industry's biggest competitor now has a possible roadmap to establishing demand in any given area and eventually cutting out the taxi company. 

If you are an Autocab customer and can’t see it, don’t want to see it or want to ‘wait for the dust to settle’ then fair enough I respect that. If I was an Autocab customer I’d be moving taxi dispatch system as quickly as I could, it doesn’t have to be iCabbi, there’s other options out there, just move while you have value in your business and you’re in control. 

As for suggestions that we may be talking to companies similar to Uber about selling out? Absolute bullshit and it’s a shame our competitor has tried to detract from their own sell out by trying to pull us down to their level. 

Times are tough as it is, we’ll knuckle down and work with the taxi industry to keep providing them with solutions that will not only keep them relevant, but will help them thrive.