How Taxify has made business difficult for Uber
Opinion: There aren’t many stories that one hears about Billion Dollar Unicorn players out of East European countries like Estonia.
But ride-sharing service provider Taxify is one such rare gem. The company is already giving Uber tough competition in Europe.
Tallinn-based Taxify was founded in 2013 by brothers Markus and Martin Villig and their friend Oliver Leisalu.
The idea behind Taxify came to Martin in 2012 while on a trip to Ukraine.
He noticed how the locals in the country were using the internet to order taxis.
He realized that this useful service was missing in Estonia and Latvia.
Martin did his initial research on the taxi industry back home and identified that the market was highly fragmented.
There were nearly 25 taxi companies in the city and each of them operated their own version of a call center.
The three founders got together to build a mobile app that could integrate the taxi services and offer a ride-hailing service to consumers.
After launching a prototype, the company reached out to taxi companies and consumers and modified the app to meet user feedback.
Soon, they developed an app that allowed users to choose a ride sorted by price, distance, user rating, or car model.
Today, Taxify’s service is available in 26 countries, mostly in Europe and Africa.
It has helped connect more than 15 million customers to over 500 thousand taxi drivers.
It has also been expanding into other ride-sharing services. Earlier last year, it launched an e-scooter service in Paris.
Taxify vs Uber
Despite its might, Uber has had a tough ride in markets outside of the US.
Taxify is also making it difficult for Uber to expand in Europe and African markets.
Currently, Taxify is the leading ride service provider in 11 of the 26 markets that it operates in.
It has reached this success by ensuring that it works well both for consumers and the taxi operators.
Unlike Uber, which relies on independent drivers as its service provider, Taxify has entered into contracts with local taxi services.
The partnership with taxi services has helped it keep union- and labor-related issues in control. It pays them nearly 15% as commission for rides serviced by them.
Being local has also helped Taxify work better with the regulatory authorities.
For instance, when it began operations in Latvia, it worked together with the mayor’s office to understand the changing market and required regulatory restrictions.
Taxify does not disclose its detailed financials, but reports suggest that its revenues grew six times to €18 million (~$20.5 million) in 2017. It recorded a net loss of €11 million (~$12.5 million) in the year.
Till early 2014, Taxify was funded primarily through funds raised from family.
In 2014, it reached out to investors for additional funding to help expand in other countries. The initial seed round was a comparatively modest round of €1.4 million (~$1.6 million).
Surprisingly, since raising the seed funding, Taxify did not look for any other investment till last year.
So far, Taxify has raised $177 million in funding from investors including Korelya Capital, Taavet Hinrikus, Daimler, Didi Chuxing, Toomas Bergmann, Märt Kelder, Mikko Silventola, Martin Villig, Andrus Purde, and RubyLight.
Its last round of funding was held in May 2018 when it raised $175 million in a round led by Daimler that valued it at over a billion dollars.
Taxify plans to use these funds to continue to expand in other countries. It is looking to grow its African business by ten times over the next two years.
It is interesting to see how the smaller startups are giving some of these Goliath-like companies a tough run for their money.
Uber has had trouble expanding into markets outside of the US as these local players have established better relationships with taxi players and local authorities, even though the services provided by them are very similar.
As a user, how do you determine which of the ride-hailing services to use? What matters most – cost, convenience, alliance with local taxi operators, or nothing at all?