Amid Ridesharing Wars, Hailo Sticks to Cabs (and Loves It)

5/10/13Follow @curtwoodward

In the rush to revolutionize taxicabs, the hot new property isn’t a fancy black sedan or a network of hustling cabbies. Instead, digital entrepreneurs are suddenly racing toward the 21st century version of hitchhiking.

So-called “ridesharing” services, which enlist everyday people to make some money by picking up other folks, have been spreading from the San Francisco area thanks to high-profile startups like Sidecar and Lyft.

Uber, a heavily financed startup that is taking on the “black car” and taxi industries, recently jumped into the ridesharing game too, unwilling to let other upstarts expand on its possible turf.

But some startups haven’t bothered to change lanes—and that could be an advantage.

One of the most notable examples is Hailo, a London-based company that makes smartphone apps to connect consumers and cabbies.

“Simplicity is a beautiful thing,” Hailo CEO Jay Bregman says. “We believe that there is more than enough room to build a spectacular business just focused there. So we are laser-focused on doing yellow cabs and doing them perfectly, and nothing else.”

Considering the way taxi services are regulated around the country, that should be plenty of work.

In many cities around the U.S., local governments have strict laws and rules limiting the number of players in the car-for-hire industry. The regulations are meant to help protect consumers from unsafe drivers and wildly varying fares. But predictably, the highly regulated industry has become relatively closed-off, and hasn’t leapt ahead with the latest advances in technology.

There are also plenty of bad actors. An amazingly detailed Boston Globe investigation, for example, recently revealed the seedier sides of the taxi industry, replete with tales of bribes, driver gouging, and straw-man license owners cashing in on lucrative taxi leases.

The highly regulated, insular nature of the taxi industry has led to plenty of clashes around the country as entrepreneurs have attempted to shake up the old-school taxi and black-car system. And by far, the most pugnacious has been San Francisco-based Uber.

Uber’s early approach was to start hooking up drivers and passengers with more expensive sedan rides without getting officially blessed as a regulated black-car booking service, leading to some skirmishes with local authorities.

In some cities, including Washington, DC, and Boston, government officials conceded to well-organized pressure from the app’s fans.

There’s a good reason why those people are so vocal—the Uber app, and others like it, can make a formerly frustrating task seamless. Whip out your smartphone, and up pops a little icon on the map where you’re standing. Push a button to call a car, and it arrives. When you leave, pay through the app with the credit card you have on file.

The established taxi industry, however, isn’t quite so sanguine. In Boston, for example, taxi interests have sued Uber in a case that has federal implications (Uber has asked that the civil lawsuit be dismissed).

Hailo, however, has mostly escaped that ire.

While Bregman says there have been some conflicts, he thinks his startup avoids spooking the entrenched taxi systems too badly because of its focus on getting more people into cabs when they’re empty, rather than trying to crowd out the cab companies or own the relationship with drivers.

For instance, Bregman says, taxi drivers spend 40 to 50 percent of their time “desperately seeking fares.” Hailo’s goal is to put riders in those empty cabs, but make it incremental business rather than cutting out a radio dispatch company or other entity that makes money by getting payments from cabbies.

Hailo can make that approach work when it has large numbers of cabbies signed up, Bregman says.

Hailo says it has about 1,400 drivers registered for its service in Boston, a significant number when compared to the 1,825 licensed taxis in the city. Hailo claims 32,000 drivers registered across all of its cities, and says it is on pace for $100 million in annual revenues. It’s raised about $50 million in venture capital from prominent investors including Virgin founder Richard Branson, Accel Partners, and Union Square Ventures.

“So basically, we’re building up a network that is really, really wide—we can sign up every driver in a particular city, and that’s our goal—but really shallow,” Bregman says. “They’re only doing up to, say, a third more incremental business during the time they otherwise would have spent empty.”

Hailo also doesn’t try to replace the in-car taxi meter as a means for calculating the fare. That’s something that has brought legal scrutiny to Uber, for example, because smartphones aren’t broadly approved as devices for figuring out how much is owed to a driver. In Hailo’s service, drivers log the meter fee into the app so passengers can pay.

Put that all together, and you can get a laissez-faire attitude from the old-school guys. Boston Cab Dispatch and EJT Management, major taxi interests that have sued Uber in local court, don’t consider Hailo a problem.

“Although Boston Cab and other local companies have developed their own apps, they can also make use of the Hailo app. In short, Hailo cooperates and works with current drivers and is not a direct competitor,” says Doug Bailey, a spokesman for the companies.

Hailo was started about two years ago in London, and added cities like Dublin and Toronto before finally reaching the U.S. with a Boston beachhead last fall.

The company was founded partly by actual London cabbies who wanted to create a useful smartphone app to help drivers get around and communicate. “We believe that the best way to optimize the experience for the guy in the back seat is by taking care of the guy in the front seat,” Bregman says.

So while Hailo might just look like another electronic taxi-booking service to consumers, it’s actually got another, much more detailed service that operates specifically for cab drivers—a location-based network for keeping in touch with other drivers, a goal- and sales-tracking system, and the ability to take credit cards as payment.

On top of that is a real-time stream of critical information, which Bregman says is “the real killer feature.”

“This is a crowdsourced, cabbie-generated feed of events that are relevant to drivers. Everything from traffic … to how many taxis are in the taxi stand at the Four Seasons hotel, to what’s the wait if I go to Logan airport now,” Bregman says.

That’s not to say there’s been zero conflict for Hailo. In New York, the promised land for any would-be taxi upstart, black-car services have sued to stop the city’s approved pilot program that would let Uber, Hailo, and others like them start operating their taxi-summoning services legally.

The problem, the lawsuit says, is that laws for hiring cars have always carved out rides arranged ahead of time for the black-car and limo guys, leaving spur-of-the-moment pickups for taxis only—another one of those byzantine old regulations that has stayed put for decades, suddenly running into 21st century technology and entrepreneurship.

All of this change is going to take some time to play out, and it’s a messy process for everyone involved. But it’s clearly inevitable that smartphone-based technologies will transform the way rides are hired.

Hailo just hopes that its focus on taxis, and its foundation with working cab drivers, puts it ahead of the pack. Bregman says it all goes back to those three London cabbies—Russell Hall, Gary Jackson, and Terry Runham—who co-founded the company with what Bregman cheekily calls “a crazy idea.”

“What if we just built the ultimate app for taxi drivers? Forget about everything else. And we know what the problems are because we do this everyday,” he says. “If we can solve those problems in an app and the drivers want to use it, we’ll get all the drivers. And if we get all the drivers, then the customers will come.”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • http://twitter.com/Selr8r Selr8r

    Someone should check the US govt definition of ridesharing and then go look at the Avego trials going on in the bay area. Now that IS ridesharing.