Transportation-on-demand startups betting on growth by homing in on specific market segments continue to play strong with both investors and customers looking for alternatives to traditional taxis and Uber.
Today, Blacklane, a Berlin-based business that offers limousines and other high-end cars for airport and other medium-length journeys, is announcing that it has raised a significant round of funding, between $40 million and $45 million according to sources, to move into concierge services and expand its services globally. Currently, Blacklane’s footprint covers 250 cities and 500 airports in 50 countries, and it plans to expand this year to over 300 cities, with major growth across the Middle East and Africa, by way of an infusion of capital from its newest strategic investor.
This round, a Series D, was led by ALFAHIM, a conglomerate out of UAE that has holdings in automotive and travel; with previous investors Daimler and btov Partners also participating. Automotive giant Daimler put about $20 million into Blacklane in 2016 and has been a prolific investor and buyer of other transportation startups, part of a bigger strategy to differentiate into services alongside its car-making business.
This Series D is the biggest round raised by Blacklane to date. The startup has raised over $80 million since being founded in 2011, a relatively modest amount when you consider the wider landscape of on-demand transport and the collective billions that has been poured into it by VCs and other investors. It’s not disclosing its valuation.
While outsized companies like Uber and Didi have been raising a lot of capital to expand their global footprints and to become all transport things to all people, Blacklane is a key example of how a different approach can be used for a lucrative end.
It’s not the only one: just earlier today, London-based Addison Lee — which is backed by Carlyle — announced that it would be investing $90 million in its own high-end car service as it looks to expand more globally.
For Blacklane, the company has banked on the idea that, by building out the most efficient backend system for managing rides, it can help keep capacity full for its fleet of vehicles, and that higher volume will mean more turnover, and so the relative cost of the rides can be brought down.
Jens Wohltorf, CEO and co-founder of Blacklane, said in an interview that the typical ride on its service — another differentiator between it and the likes of Uber — is 35 kilometres and takes between 45 and 60 minutes. In the past, the limo and car services that have targeted this kind of medium distance would average only about 20 percent fill rates in the duration of a driver’s work shift. Blacklane, he said, brings this up to between 60 percent and 80 percent.
“This brings the price point down,” he said. “If you compare to a typical limo service, we come in at one-third of the price because of the capacity utilization.”
He says that the rise of Uber specifically has been a blessing and a curse to smaller and more targeted transport companies like his.
On one side, Uber has helped put companies like his on the map. “The e-hailing industry has put ground transportation on more radars than it used to be,” he said, both in terms of investors but more specifically users and drivers. “Businesses [a key customer for Blacklane] are starting to think that this is an important revenue component that needs to be managed and so they are putting solutions in.”
On the other side, it’s outsized ambitions have thrown doubts on whether smaller startups can stay afloat.
“Three or four years ago it was very difficult to talk to investors,” he said. “With funding and valuations poured into some companies, there was a question of whether any other transportation companies could exist beyond the few obvious players.”
And that is before you consider the artificially low pricing that the companies lay on especially in competitive markets. “Those in the taxi wars are raising more to compete,” Wohltorf said. “The rides are so heavily cross subsidised that customers are paying 40 percent of the real cost.”
And there is another kind of cost of doing business. Uber has raised the hackles of regulators over their predatory practices and those aforementioned artificially low subsidies.
“They are running on heavy financing but they are competing with heavily regulated taxi industry. Ask those drivers how long it took to get their licenses and what maintenance they need to run their cars,” he said. “It is too unbalanced.” (These are issues that Uber, too, is now trying to reckon with under its new CEO, who wants to both focus on more healthy efficiencies and raise the perception of his company.)
Wohltorf added, though, that times have changed when it comes to perception.
“Studies now show that scale doesn’t actually make a difference in terms of unit economics,” he said, noting that Blacklane “has a very healthy margin and unit economics.” He would not specify what it is but noted that the company could be profitable except that it’s putting all its profit now into growth.
That growth is taking a few different forms. Wohltorf said that the company is currently trying to look at whether it can offer more lower-end services but with a similar attention to quality.
“This is a difficult game since quality usually comes with a price,” he said. “We are trying to investigate if there s room for a premium economy class.” And like every other transport company, Blacklane is also starting to think about autonomous vehicles, and is also now piloting electric vehicles as one move to efficiency.
It’s also diversifying by moving into concierge, fuelled by its acquisition of a concierge service called Solve at the end of last year. “Our ambition is to take the stress out of travelling, and to do that beyond the first and last mile of travel,” he said. Indeed as more consumers become accustomed to using more on more on-demand services, this is leading to a natural transition for Blacklane to pick up more services business, and in more regions. “The market is growing with us. The Middle East is one of our biggest markets.”
“Combining our nationwide expertise and diversity with Blacklane’s reinvention of the professional driver industry for the benefit of travelers, drivers and partners, will bring unequivocal innovative luxury services to the Middle East and Africa,” said Ahmed AJ Al Fahim, Chairman of ALFAHIM, in a statement. “Blacklane’s ambition and brand strength make it the ideal company to add to our global portfolio.”
To hear more about the company, check out my interview with Frank Steuer, Blacklane’s other co-founder, below.
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