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Car-Sharing Startup RelayRides Raises $25 Million In Funding Led By Canaan Partners

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Over the past year, peer-to-peer car rental startup RelayRides has been growing its average rental times and revenues by focusing specifically on daily and multi-day rentals. On the strength of its results, the company has raised an additional $25 million in Series B funding led by Canaan Partners.

The new funding brings the total amount raised to $44 million, with previous investors that include August Capital, Google Ventures, and Shasta Ventures. Along with the Series B round, Canaan Partners General Partner Deepak Kamra will join the company’s board of directors.

The funding comes as RelayRides has been changing up its business to focus on longer-term rentals, rather than hourly or daily rate. Over the first few years of its existence, RelayRides tried to compete with Zipcar and Getaround, both of which were focused on providing on-demand access to rentals. That includes a partnership with GM and OnStar to enable users to unlock and access vehicles without having to grab the keys from the owner.

It even acquired a company called Wheelz that had built Zipcar-like hardware to install in cars and enable instant access to cars. But according to RelayRides CEO Andre Haddad, not only is the size of the hourly segment pretty small, but the growth opportunity is limited. Throw in the cost of hardware, and the short-term rental segment also had limited profitability.

There were other problems with on-demand, short-term rentals. There were more customer service issues with automatic unlocking of cars and the number of claims associated with that model were also higher than when owner and renter met each other in person to hand off keys. As a result, the company eventually decided that short-term rentals were probably more trouble than they were worth, and last October it did away with hourly rentals altogether.

Since then, not surprisingly, the average length of rentals has increased dramatically. According to Haddad, the average rental is up to about five days, with a number of users taking advantage of weekly and even monthly rentals. And, since people now are required to meet face-to-face when borrowing a car, they’re much less likely to trash it or leave it in worse shape than when they rented it.

In addition to its focus on longer-term rentals, RelayRides has also been expanding its service to a number of airports around the country since launching at San Francisco International last summer. Its users are now making cars available at more than 300 airports around the country, and its peer-to-peer model means that renters typically get much better rates than when they rent from one of the traditional car agencies.

With the new funding, the company plans to undertake a number of initiatives, most notably raise brand awareness of its platform and peer-to-peer car sharing in general. It also plans to continue investing in its product, which will include the long-awaited launch of a mobile app for Android. And, finally, it’ll work on expansion, which could mean becoming more widely available outside the U.S.