Sidecar

What did it do?

Sidecar was a ride-sharing service that connected drivers who owned private cars with passengers through a mobile app. Founded in San Francisco in 2011, the company expanded in 2013 to cities including Boston, New York, Washington and Chicago. In 2015 it also began offering same-day delivery for local businesses using its existing driver network.

Why did it shut down?

Although Sidecar was a ride-sharing pioneer, it was competing in the same cities as far larger rivals such as Uber and Lyft; in 2014 The Wall Street Journal reported that, facing big competitors, the company had enlisted Richard Branson as an investor. Early on it also battled regulators in California and Philadelphia. In 2015 it moved away from passenger transport towards delivery, and by August most of its business was delivery. That shift was not enough either, and on 29 December 2015 the company announced it would shut down.

The story

On 19 January 2016 General Motors announced it had bought the assets and intellectual property of Sidecar, which had shut down a few weeks earlier, and hired co-founder Jahan Khanna and 20 employees. Bloomberg reported it as the carmaker salvaging the company for parts. GM's move followed its $500 million investment in Lyft. One of the pioneers of ride sharing had ended up in the hands of a company that had invested in one of its big rivals.

Sidecar was founded in San Francisco in September 2011 by Sunil Paul, Jahan Khanna and Adrian Fortino. The app connected drivers making journeys in their own cars with passengers. In 2012 it raised a $10 million Series A from Google Ventures and Lightspeed Venture Partners; Union Square Ventures and Avalon Ventures were also among its investors. The company launched in Seattle, Los Angeles, Philadelphia and Austin, and in 2013 added Boston, New York, Washington, Charlotte, Chicago, San Diego, Long Beach and Oakland. At the 2013 South by Southwest festival it made all rides free; TechCrunch described this as a transport war breaking out between Uber and Sidecar in Austin.

Sidecar was right in the middle of the period when the sector's rules were being written. In autumn 2012 the California Public Utilities Commission sent Sidecar, Lyft and Uber cease-and-desist notices and fined each of them $20,000. An interim agreement reached in 2013 was made permanent, and California became the first state to recognise these services, under the name transportation network companies. In Philadelphia, meanwhile, the service was deemed unauthorised following a sting organised by the parking authority.

As the rules became clearer, competition grew fiercer. In 2014 The Wall Street Journal reported that, facing big rivals, Sidecar had enlisted Richard Branson as an investor. In February 2015 the company began using its driver network to deliver goods, food and flowers for local businesses, and partnered with Yelp Eat24. By August 2015 most of its business was delivery. On 29 December 2015 Sidecar announced it would shut down, and it ceased operations on 31 December.

Sidecar's story shows that spotting a market early, and helping to write its rules, is not enough to win the race for scale.

Lessons for founders

• Being first is not enough in a market with strong network effects; if you cannot grow driver and passenger density faster than a rival, you lose again in every city.
• Early dialogue with regulators helps you shape the rules of the sector; in Turkey, too, plan municipal and UKOME (transport coordination board) processes from the outset in the transport space.
• Factor in that a pivot made while retreating from your core market requires different unit economics.

Sources

1. Sidecar (company) (Wikipedia)
2. General Motors Salvages Ride-Hailing Company Sidecar for Parts (Bloomberg, 2016-01-19)
3. Facing Big Ride-Sharing Competitors, Sidecar Enlists Richard Branson (The Wall Street Journal, 2014-09-15)
4. https://www.wikidata.org/wiki/Q7508244
5. Wikipedia (English)

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