Following on from Socar, Korea’s answer to Zipcar, which raised $18 million earlier this month, another car rental startup in Asia is in the money today. India-based Zoomcar has added $8 million to its coffers with a funding round led by Sequoia Capital.
The 18-month-old Bangalore-based company isn’t your average Indian startup. It is founded by two US expats — David Back and Greg Moran — and counts Lawrence Summers — an ex-U.S. Treasury Secretary and the former President of Harvard University — among its investors.
Sequoia aside, other investors involved in this new round include ex-Infosys CFO Mohandas Pai, Manipal Group’s Abhay Jain, and existing stakeholders Empire Angels, FundersClub and Basset Investment Group, as well as funds advised by Triangle Growth Partners. Prior to today, the startup had raised $3 million in funding.
Zoomcar is billed as a “self-drive” car rental company. That might sound odd to Western ears, but it goes against the grain in India (and other parts of Asia), where Back says that over 95 percent of the industry deals are chauffeur-driven rentals. The startup currently has a fleet of 250 vehicles (including electric cars) that cover Bangalore and Pune and can be booked via its website or smartphone apps.
Back told TechCrunch in an interview that the funding will enable the company to expand to as many as 2,000 cars across four or five cities within the next year. He added that the money raised will be invested in developing technology and expanding its 40 person staff “across the board.”
This week has been a momentous one for collaborative consumption startups in India after Ola, a taxi-booking company that rivals Uber, raised a $210 million round led by SoftBank, with input from Sequoia, too. With Uber also investing considerable resources to expand its reach in India, it’s clear that the top players see a huge market for taxi-app booking services in India. Despite that, Back said Zoomcar will stay focused on the rental market, although it may branch out in the future.
“Over time we’ll develop the technology and processes to let customers pick up a car in one city, and drop it off in another,” he explained. “We’re also looking at integrating ride-sharing and car-pooling — either with our own platform or via a partnership.”
Back believes that a peer-to-peer model, which would allow car owners to rent their vehicles out in an Airbnb-like way, could be a big hit in India, where car ownership is low. With an average of 41 vehicles per 1,000 people, India ranks 128th worldwide.
For now, Zoomcar is busy battling its own supply-and-demand battle. Back noted that the startup has been forced to turn away customers for 89 weekends in a row. He said the new investment will help cater to demand, and that the company’s finances are “very comfortable” right now, but additional capital will be required as and when Zoomcar targets the pan-India market.
Zoomcar is a rare case of an Indian startup run by non-Indian founders. Back says that the challenge of emerging markets is what motivated he and Moran to try their hand overseas, and he urges other entrepreneurs in the US to consider doing the same.
“There’s a legitimate opportunity to become a major company in India,” Back said. “That’s something we wouldn’t have had in the US had we stayed. Not only that, but we believe that we have an opportunity to make an impact and democratize transportation here.
“The risk and reward levels are much higher in developing markets. Yes, there are inefficiencies that makes things difficult, but they also makes the opportunities much larger too.”
With a population of over 1 billion, it’s not great surprise that Zoomcar is focused on India only for now, though Back admits that, once established, the team could use its experience to expand into other emerging markets in the future.