Uber Continues International Growth

On-demand car service Uber launches in Toronto today, the ninth city for the Silicon Valley uber-startup that has over $40 million in funding. Today’s launch comes after several weeks of beta testing, and is the second international launch for Uber, which expanded to Paris in December 2011. Uber co-founder Travis Kalanick was on hand for the local launch, and said there’s a huge need for Uber in the city, which has the 20th most expensive taxis in the world (and ties with Montreal for the most expensive in North America). “That actually affected our pricing here,” Kalanick said. “Normally we’re 50-60 percent more than a taxi, but here we had to lower that because the taxis are just so expensive already.”

He outlined how there are 2.6 million people in Toronto (not counting the surrounding areas), and 64 subway stops. In comparison Paris has 2.2 million people in its downtown and over 300 subway stops. There are 5,000 taxis in the city (about 6,000 including ambassador taxis and limosuines), with over 15,000 taxis in Paris. The base fare for Uber in Toronto is $8 per kilometer (compared to a $4.25 base rate for Toronto taxis), and $2.50 per additional kilometer over 18km, and $.80 per minute at or under 18km. That base fare is similar to every other Uber city, except for Paris which doesn’t have a base fare. The per-mile rate is the same as Boston, but higher than Chicago and New York.

Uber allows users to request a car using the Android app, iPhone app, web version, or via SMS. Users get a text message confirming a driver has been dispatched with an estimated arrival time, and another message when the car arrives. Once the ride is completed, the rider’s credit card on file is charged, tip included.

The company has had its share of legal issues in the past (it received a cease and desist notice from San Francisco’s Metro Transit Authority in October 2010, the company responded by changing its name from UberCab to Uber). Kalanick said there are always regulatory and legal concerns when expanding internationally. “It’s really a city-by-city thing,” he said. “There’s no extreme peculiarities about Toronto.” He said they had to deal with currency exchange, banking relationships and merchant accounts for credit cards. The company has formed relationships with 60 drivers from several small limo fleets, and as is typical of other Uber city launches, they subsidize the drivers until demand takes off, then they offer drivers 80 percent of each ride. “When we first get going we want to make sure there’s a core availability,” Kalanick said about why they subsidize drivers when they first launch in a new city. “The first few cars we’re going to subsidize, because they’re not making enough just in fares, but after that it pretty much switches over.”

Uber has local competition in Toronto from Winston, another on-demand car service focused on professionals rather than the average iPhone owner. Winston developed while founders Aidan Nulman, Krista Caldwell and Yilun Zhang were in The Next 36 accelerator program in Toronto, and launched in beta in October 2011. The company has raised funding from The Next 36, and is closing six figures of seed investment from investors including Globalive CEO Anthony Lacavera and RHB Group’s John Kelleher, who also acts as an advisor. Similar to Uber, Winston has an iPhone app (which launched in November 2011), but they also launched a BlackBerry app yesterday, which fits in with their corporate target demographic. They also plan to debut an Android app soon. Nulman said it made sense for them to focus on professionals, and to offer corporate-focused features like an online expense management dashboard. “We found that we make a bigger impact in professionals’ lives, and that their employers are a great channel to reach them through,” Nulman said in an interview. “So we build for and market to professionals and their companies, exclusively.”

Winston’s HireWinston product offers similar functionality to Uber – users can use the mobile apps, web version or SMS version to order a car (from a certified sedan driver), track where it is on a map, and pay via the app. Users can also schedule a ride by adding car@hirewinston.com to a calendar appointment. Winston also offers pre-scheduling, which Uber hasn’t added to their app – Winston users can schedule a pickup anytime in advance, as opposed to Uber which only offers short-term pre-scheduling. The company is running pilot projects with four professional services firms in the city, and is in talks with six more.

In terms of pricing, Winston charges a $7 base fare, an additional $2.10 per kilometer when travelling above 18km, and an additional $.60 for every kilometer when travelling below 18km. Winston’s prices across the board are less expensive, and in busy urban centres at peak traffic times, its per kilometer pricing even for shorter trips will benefit passengers. To put that in context, a typical 15 kilometer taxi ride in Toronto costs $36 CAD, and a sedan costs $77. A Winston ride for the same distance costs $45, and an Uber ride would cost around the same but likely slightly more, depending on how long the ride takes (all rides have a $20 minimum, Uber only has a $15 minimum).

With millions in funding behind it, and a brand that now extends globally, Uber is well-positioned to gain mindshare and customers in the Toronto market. Uber’s Kalanick said he thinks overall competition is good for consumers, and it’s good for Toronto. “It means that there are going to be multiple services, alternatives to getting a ride to get around the city efficiently,” Kalanick said. “I also am all about winning, and it’s let the best service win. And I think we’re going to deliver that.” Kalanick reiterated that unlike Winston, Uber isn’t focused on the professional market. “You may be doing it for your business, and you might be doing it for personal, but we don’t really have a salesforce going out there and getting accounts.” He also said the service isn’t just targeted at the tech elite. “People who have iPhones are beyond tech-savvy folks at this point. Those are the folks that are obvious candidates to use a service like this, ” he said. “Do tech people jump on this wagon really quickly? Sure. But it really spreads beyond that very quickly.”

Uber currently has a team of three in Toronto, and will be looking to scale that team after they grow revenue. Winston will continue to focus on the professional market, and ultimately Nulman says “Uber being here has really helped [Winston]” because of the attention it’s brought to on-demand car services. Regardless of which company comes to dominate the on-demand car service Toronto market, the well-funded Silicon Valley powerhouse or the local up-and-comer, they both have a bigger competitor: local taxis. With taxi rates at a premium in Toronto, users might be hard to convince that they should pay more than they already do.

 


Erin Bury

Erin Bury

Erin has covered startups and technology for over three years in publications including Sprouter Weekly, The Globe and Mail, Business Insider, Mashable, and VentureBeat. She also writes a regular startup column for the Financial Post, and is a technology expert on CTV News Channel. Before BetaKit Erin worked as Director of Content & Communications at Sprouter from its launch in 2009 until its acquisition by Postmedia Network Inc. She was recently named one of Marketing Magazine's 30 Under 30 in 2012.

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