FlightCar isn't struggling with supply and demand. So does that mean it's not growing fast enough?

By Carmel DeAmicis , written on March 25, 2014

From The News Desk

FlightCar is the sort of entrepreneurial story Silicon Valley loves to trumpet. Two whipsmart teenagers -- age 17 to be exact -- get inspired by Airbnb, turn down their acceptances to MIT and Harvard, and move West to start a company.

They decide to go after airport rentals with a sharing economy model, giving travelers free airport parking and cash for renting their cars out to incoming travelers. It's an untested model -- this was before UberX or Lyft even existed -- but the teens dream big.

They scrimp, scramble, and save, sharing couches in shitty apartments in Palo Alto, knocking down doors until they finally break into the scene through Y Combinator.

Fast forward one year, and FlightCar is still chugging away. It has moved into three markets – San Francisco, Los Angeles, and Boston – hired 45 employees, and tripled its number of members in the last seven months from 5,500 to 15,000.

While this is by no means the hockey stick-type growth of a hit consumer software company, the team is undeterred. Flightcar is facing far bigger hurdles than your standard mobile app startup, namely setting up physical locations in every new market, fielding a lawsuit from the City of San Francisco, and convincing consumers to hand over their cars, rather than simply their passenger seats, in the name of the sharing economy.

Taking on the $11 billion airport rental industry isn't as simple as pushing some out code.

Soon after its one year anniversary, Pando sat down with the now-19-year-old co-founder and CEO Rujul Zaparde to talk about the trials and tribulations of the last twelve months, how advice from Airbnb's Brian Chesky shaped FlightCar, and the biggest challenges the company has to face in the future.

[The following is a Q&A between PandoDaily and Zaparde, edited for clarity.]

When you look back at what you were doing a year ago, how does it compare to today? What you were worried about, how did you spend your days, what kept you up at night?

Thirteen months ago we didn't have any employees, it was just me and my two cofounders.

I spent many Saturday nights washing cars myself. That's a good thing -- you understand what works, what doesn't. You think if you give someone a rag and some water they can wash a car, but that's not the case.

Now we obviously have a lot more structure in place. It's way more organized. We've also made a bunch of great hires to the core team. It's much more big picture: Where are we going next? Do we need to focus on listings or rentals? If listings what acquisition channels are we going to use?

Speaking of listings, the biggest pain point ridesharing companies like Uber and Lyft face isn't demand -- it's supply. How are the supply issues for FlightCar today?

Now over 98 percent of rentals are people renting other people's cars. In the event that we're oversold...we'll bring a car from [a rental company].

That must be expensive.

We definitely lose money on those rentals for sure.

Does that worry you? The supply problem.

1-2 percent of the time we're oversold. We're oversold maybe two cars per week. Our supply and demand are almost even.

So then are you worried that you're not growing fast enough? Demand should be outstripping supply.

We're growing roughly 25 to 30 percent month-over-month. One thing that will speed up that growth process is definitely network effects. We won't really see network effects until we're in eight to ten more cities. People who live in SF go to LA, have a good experience renting through FlightCar, and then list their own cars next time they fly out of SF. That's why it's good to expand to other locations. If you look at Airbnb one of the reason it grew so quickly is because it's instantly available in 34,000 cities. If we were in 34,000 cities that would be phenomenal.

But Airbnb can grow much quicker than FlightCar because it doesn't need to establish a physical presence to open up a new city. 

There is a lot of capital expense in launching in a city and having the service available in a city. If you don't have that capital expense you could launch a lot more rapidly.

That said there are a lot of airports in the US and the world where something like this would make a lot of sense. It's one of those things that works well at scale, it just takes awhile to get to scale.

That's going to take a lot of money to get off the ground. How much have you raised?

If we want to go after the Uber model, launching a new city a month, it will take a little more capital. We've raised $6 million. We'll probably be raising more later this year.

Brian Chesky is an investor. What is some of the advice he's given you?

Airbnb faced a lot of the same challenges [as us]. They're both marketplaces and they both rely heavily on [community] trust. That's the number one thing Brian has helped us with. For us building communities and trust is very important. It's the only way FlightCar will work.

What are some specific tips he's given you?

If we have a situation where, the battery [of a car] is failing because it's four to five years old, that's not something we cover because it's a wear and tear issue. But one of Brian's points was that if you do cover it, that person will have an even better experience than if nothing was wrong at all.

You do everything you can to turn it into an experience where the person says, 'I'm happy the problem happened because of the way it was handled.' That's a very good point that he had. That's one thing we try to follow. Obviously nothing is possible all the time, but that's our motto and what our support folks are trying to do right by.

If you had a wish granted about what could be going differently what would it be?

That we would have an infinite amount of supply. We will only grow as fast as our supply grows.

It's satisfying to see that we're still here. The real thing is -- when you ask what would you have been doing a year ago, that's where the difference is night and day. It was very different back when you only had 50 customers, meeting every customer individually. If you called 1-866-FLIGHT-CAR a year ago, I would pick up and say, 'Hi thank you for calling FlightCar this is Rajul.' We'd alternate night duty, answering calls. We'd sleep with the cell phone next to us. We've [answered] calls in the middle of the shower.

And now you have 15,000 customers.

It's a whole different operation now.