Amid Uber controversy, taxi-hailing app Flywheel raises $12M, adds new management

At the end of Uber’s first full day of PR wreckage on Tuesday, one of my bosses announced she was downloading taxi-hailing app Flywheel and deleting Uber’s app — like many have tweeted they have done.

But while ride-sharing competitor Lyft has likely received a publicity bump from Uber’s massive fumble, it’s likely no one’s benefiting more from this right now than Flywheel. Today, the company is announcing a new round of funding, to the tune of $12 million, which it will undoubtedly use to maximize on this opportunity Uber has given it.

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The company also has a new chief executive, Rakesh Mathur, as well as a new chief technology officer and chief financial officer.

Unlike Uber, or even competitors Lyft and Sidecar, Flywheel is not an alternative to taxis. It merely outfits licensed taxis with the same technology. Cab drivers join Flywheel’s network, and in exchange for 10 percent of their proceeds, enjoy the benefits of access to Flywheel’s customer base.

And Flywheel can be a fairly easy sell to consumers — just as with ride-sharing apps, users can call, or hail, a car from their smartphone, track when and where it will arrive, and pay within the app without having to worry about carrying cash (as a San Franciscan, I can say that’s one of the biggest conveniences, as many cab drivers here refuse to take credit cards).

Where Flywheel wins

Unlike Uber chief Travis Kalanick’s goal of global domination, Mathur doesn’t see ride-sharing as the be all, end all.

“The ground transportation market is a giant market. It’s also one where the ride-sharing phenomenon has taken hold. … [But] the taxi industry operates in a significantly larger scale than Uber,” Mathur told VentureBeat in an interview.

And besides cab drivers’ usually better knowledge of their cities, he also pointed out one of the cab industry’s continuing wins over the ride-sharing companies: background checks.

“8.7 percent of the population has a felony on their records,” he said.

Last year, Uber came under fire more than once for having let drivers with criminal records slip through its screenings, and questions arose about whether the company should do Live Scan fingerprinting and background checks, as the taxi industry does.

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Moreover, ride-sharing companies often use temporary price hikes to, among other reasons, incentivize drivers to get on the road when there’s a high demand. But taxi companies don’t have that supply problem.

“The key thing is that you should be able to hail a cab, rush hour or not rush hour,” Mathur said.

So it’s voluntary price surge?

But is Flywheel’s model really all that different and better? Maybe not.

For one, Mathur described incentive methods the company is planning on implementing in the near future that include letting passengers set a tip percentage when they hail a cab, sort of like a bid to express their interest in getting picked up.

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Ride-sharing company Sidecar lets passengers and drivers negotiate the distance and price up front, meaning that Sidecar drivers effectively can choose to pick up passengers only for longer, more expensive rides if they want.

The model Mathur described is a sort of voluntary price surge. Accepting hiked prices with Uber or Lyft is the difference between getting picked up or not. Digitally waving a hiked price by advertising a high tip could be the difference between being picked up by a Flywheel driver or not.

It’s still possible to get a car without that incentive, but still.

And then there is the limit on Flywheel’s business that the cab industry’s medallion system imposes. Unlike Uber, Lyft, and Sidecar, which have virtually no limits on the number of drivers they can get on their networks, Flywheel is limited by the number of licensed cab drivers in each city.

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Flywheel currently has about 85 percent of San Francisco’s cabs onboard, so it still has room to grow, but what happens when it gets that other 15 percent? What happens when 100 percent of cab drivers in every single city in the U.S. is in the network?

Of course, Flywheel has to achieve customer loyalty first, on both sides.

“If a driver accepts a hail from us, that’s revenue to us. If a driver accepts a hail from someone on the street, they pay in cash” and that means no revenue for Flywheel, Mathur said. And at the moment, Flywheel is only in San Francisco, Seattle, and Los Angeles, though Mathur said it’s seeing a lot of interest “up and down the West Coast” and that New York City is a key future location (read: It’s coming very, very soon).

It’s not hard to image all kinds of new revenue streams the company could create, such as expanding on its driver training and education programs, playing around with the percentage cut it takes, introducing paid features, and so on.

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And maybe it is onto to something. Outside of the U.S., companies have found success in equipping taxis with similar tools instead of the ride-sharing model, such as Tappsi in Latin America and the hailing services nested inside messaging apps in Asia. These parts of the world do have different taxi industries and circumstances, however, something taxi-hailing app Hailo reminded us of when it announced it was pulling out of North America.

Flywheel raised its new funding from TCW/Craton, RockPort Capital, and Shasta Ventures. RockPort Capital’s Abe Yokell and Shasta Ventures’ Rob Coneybeer will be joining the board of directors as part of the deal.

Flywheel was founded in 2009 and is based in Redwood City, Calif. The company previously raised $22.9 million in funding.