Israeli ridesharing startups face tough drive on streets of New York

Gett-Juno deal aims to give on-demand mobility rivals Uber and Lyft a run for their money

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

A GetTaxi vehicle in Tel Aviv. (Courtesy)
A GetTaxi vehicle in Tel Aviv. (Courtesy)

When Israeli startups Gett and Juno teamed up, their deal highlighted just how much action the ridesharing space has seen this year and how stiff the competition for the streets of New York is and will continue to be.

Gett and Juno, who said last week they would join forces to enable them to challenge larger rivals Uber and Lyft, did not disclose the terms of the deal but the news site TechCrunch reported that Gett had paid $200 million for Juno, which launched in New York last year.

“It’s pretty amazing to get a $200 million valuation for a two-year old company,” said Koby Simana, the CEO of IVC Research Center in Tel Aviv which tracks the industry. “The deal shows just how much attention the potential of the automotive industry is getting these days.”

Gett, formerly called GetTaxi, defines itself as an on-demand mobility company, and offers ride-hailing services in more than 80 cities around the world, including London, Moscow and New York. The taxi app Juno is only active in New York City and was founded in 2016 by CEO Talmon Marco, creator of the communication app Viber, which was sold to Japanese electronic commerce and internet company Rakuten for $900 million in 2014 — at the time the biggest-ever buyout of an Israeli tech company by an Asian firm.

Rakuten president Hiroshi Mikitani (L) shakes hands with Viber Media CEO Talmon Marco in Tokyo on February 14, 2014. (Photo credit: Yoshikazu Tsuno/AFP)
Rakuten president Hiroshi Mikitani (L) shakes hands with Viber Media CEO Talmon Marco in Tokyo on February 14, 2014. (Yoshikazu Tsuno/AFP)

Gett has raised some $640 million to date, according to Tel Aviv-based Ltd., a research firm that analyzes private companies using artificial intelligence and machine learning technologies. The funds raised by Gett include a $300 million investment last year from German automaker Volkswagen, with which Gett has partnered with the aim of becoming the first company to launch self-driving cars on demand, a market that MarketandMarkets forecast will be worth some $139 billion by 2020.

Together, Gett and Juno now plan to take on Uber, which offers service in hundreds of cities worldwide and is reportedly worth $60 billion, while Lyft is available in dozens of US cities.

Uber has been rocked by scandals and bad press in recent months, including accusations of sexism in the workplace, mistreatment of drivers, abusive behavior by CEO Travis Kalanick and belligerent business practices, including reportedly dispatching employees to order and cancel thousands of rides from Lyft drivers.

Uber’s competitors see this as an opening to exploit the company’s recent problems. The acquisition of Juno by Gett could put the companies in a better position to compete with Uber in New York City, although Uber still controls an overwhelming majority of the international market.

Juno has positioned itself from the beginning as a friendlier alternative to Uber, which was already notorious for its poor treatment of drivers. Its tagline is “Juno treats drivers better, drivers treat you better.” The company, with offices in Israel, New York and Europe, provides 24/7 support for drivers and customers, takes a lower commission from drivers than its competitors, according to the company’s website, and offers its drivers shares in the company.

GetTaxi app screenshot (Courtesy)
GetTaxi app screenshot (Courtesy)

But the job at hand for Juno and Gett won’t be without challenges, including the huge costs of acquiring drivers and customers and hostility from Juno’s drivers who now will be part of Gett.

“On one hand, Gett’s $200 million will make the company a second-place challenger in just a single US market,” said Kerry Wu, senior research analyst at the New York-based data firm CB Insights. “On the other, driver and customer acquisition costs can be staggering.”

Uber lost $2.8 billion in 2016, excluding China, while Lyft lost $600 million, Wu said. And, as Uber’s China retreat showed, when it sold its China operations to Didi Chuxing, “crossing borders is difficult,” said Wu.

Gearing up for the challenge

Meanwhile, Gett is gearing itself up for the challenge and is looking to raise some $700 million to fuel expansion, Bloomberg reported last week.

“With Juno, Gett will have to raise larger funds in order to compete with Uber and the recently funded Lyft,” said Zirra’s head of content, Assaf Gilad. But Gett’s new affiliation with the affluent Shabtai family, a low-profile shareholder in Juno that also made some $500 million from the sale of Viber, “will potentially be able to lead further investments in Gett,” Gilad said.

Viber logo (Courtesy)
Viber logo (Courtesy)

Meanwhile, taxi drivers who were drawn to Juno for its stock program, which awarded stocks to drivers who used the platform for 30 or more hours a week, told the website Recode that they were outraged after bring informed that Juno was doing away with the shares program as part of the Gett acquisition deal.

In addition, Juno paid drivers to migrate from Uber and gave them the highest share per drive from each ride (90 percent compared with 80% in Uber) alongside the shares in the company, Gilad said.

“For the deal to succeed, Juno and Gett will have to effectively manage their promises to the drivers,” Gilad said.

And whereas Gett’s business model is stable, Juno is still highly dependent on the subsidies to its drivers “and is probably far from being profitable,” Gilad said.

Luke Tress and AFP contributed to this report.

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