founder

Founder Profile: Uber For The Long Haul

Summary

The future of transportation has been upended by the rise of Uber and Lyft. Car ownership, and everyday commuting no longer looks anything like it did 5 years ago for millions of Americans.

But when it comes to making trips between cities like New York and Boston, our options have still remained relatively unchanged. We can either go through the painful process of taking a shuttle flight with long security lines and drives to the airport or take way overpriced trains that are overfilled.

That is where Priva comes into play, with an Uber like solution for business and leisure travelers alike to travel with ease between major cities. We sat down with Ryan Gee, COO to get all the details on what Priva is all about!

Chris Lustrino

Ryan, can you tell us about your career experience in transportation and how you came to found Priva?

Ryan Gee

I’ve spent my entire career in transportation and the automotive industry. Growing up in Detroit, it’s a pretty natural fit to enter automotive. I started my career in product development, working in an engineering function at an engineering services company. I then attended Harvard Business School and my career transitioned to more corporate functions.

I worked for GM Finance, in their product development group, and learned the cost structure of automotive production. Then I worked at Roland Berger, a leading management consultancy, in their automotive group based in Chicago. At the firm, my focus was exclusively on the future of transportation and the impact on the industry from autonomous driving, shared mobility, and vehicle electrification. Finally, I spent two years helping build the EV startup Rivian.

At Rivian, I worked directly for the CEO & Chief Strategy Officer and held a wide variety of responsibilities including investor relations, fundrasing, corporate strategy, business development, and human resources.

The founding of Priva is a culmination of my professional experiences, coupled with my own regional transportation travel pain points. On the professional side, I’ve become convinced that autonomous driving and ride sharing will not only impact the way we move around our cities, they will also alter the way we move around our regions. This is because they will dramatically lower the cost of transportation.

Simultaneously on the personal side, I was spending a lot of time traveling flying between Detroit & Chicago. It’s a trip that takes roughly the same amount of time to fly as to drive once you factor in cabs and security lines. It was the combination of expertise with my personal travel experiences that made the concept of Priva resonate with me when my co-founder Dagan first proposed the idea.

After Dagan proposed the idea, I could not stop thinking about a modern ground-based regional transportation solution. From there the two of us started iterating on business models that would allow us to launch a service with today’s technology. We prototyped our ideas with SUVs and kept iterating until we arrived at Priva. We then pitched at Techstars Mobility and went full time into the business once we were accepted to the accelerator program.

Chris Lustrino

How do you define Priva as a business and how does it differentiate from Uber and Lyft?

Ryan Gee

Priva is the modern expectation for regional transportation. It is private, connected and door-to-door. We differentiate from Uber and Lyft by our consistency of experience and onboard amenities. We use a consistent fleet of mobile offices equipped with WiFi, TVs, comfortable seats, and a barrier to the driver for privacy. We also focus exclusively on regional trips, so our drivers are prepared to drive passengers 4-5 hours for a trip.  

This is different from Uber/Lyft’s crowdsourced model where passengers do not know the vehicle they will receive and if the driver will be willing to provide a long distance trip. Plus, few (if any) vehicle’s on these platforms provide in-vehicle privacy to the passengers with a barrier to the driver.

Chris Lustrino

Speaking of differentiation, how is this better than flying on a plane or taking a train from a cost and experience POV?

Ryan Gee

Priva focuses on providing a better experience than current commercial regional transportation options through door-to-door service. There is no need to head to an airport or train station and lose time shuffling in/out of cabs, and through security or boarding lines. This focus on door-to-door provides our customers more time to be productive or to rest while in transit.

From a cost perspective, Priva is a more affordable option than flying. A group of four travelers can save 50% on their travel expenses by traveling with Priva while gaining the benefits of door-to-door service. We are not competitive with train travel yet, but I believe this is a market we can address in the future as we reduce costs through scale and adoption of technology.

Chris Lustrino

Since launching who has been your core customer and how does this shape your go-to-market strategy?

Ryan Gee

Our customers come from a variety of professions. They are consultants, lawyers, business executives, and startup CEOs. The one unifying theme amongst them is they are busy and they value their time. This insight altered the way we promote and message our service. When we first launched, we assumed the cost savings versus flying would be the primary motivation for purchasing. However, through feedback, we quickly learned our service was more about providing our customers time to be productive. Based on this insight, we are currently working to shift our sales motion from exclusively B2C to include B2B offerings since it is companies that see the most value from the increases in productivity.

Chris Lustrino

What does the current price point look like for a ride?

Ryan Gee

We charge for rides by the mile. Our current price point is $2/mile so a typical ride is between $400-$600 for a private vehicle with all four seats.

Chris Lustrino

What do your gross margins look like today and what would they look like at scale?

Ryan Gee

Last month we achieved a 10% gross margin. We are forecasting these margins to improve dramatically as we gain scale and fill vehicles going both ways on these regional routes (similar to the way airlines operate). Right now we are achieving fill rates of ~15% on our return trips, and each filled return provides additional revenue without a negligible increase in cost. Commercial airlines achieve roughly 85% fill rates on their transportation networks, so if we achieve the same performance the gross margin would expand to over 40%.

Chris Lustrino

How do you manage ensuring full capacity for routes, and how many individuals do you need in each vehicle to make the service not lose money?

Ryan Gee

We operate on a chartered trip model. We always have customers for a route before the trip is scheduled and staffed. Our pricing also assumes the customer is chartering the full vehicle (e.g. all 4 seats) and that the vehicle will be returning without passengers. This shifts the fill rate and deadhead risks to the customer. Since each trip generates cash, it simply becomes a question of monthly volume to cover the overhead of vehicle payments and monthly insurance. We need to run sixteen trips per vehicle each month to cover these costs, and finding the demand for regional trips has not been a problem to date.

Chris Lustrino

Will you look to create schedules for each route or is the idea to be tech-enabled and create the routes based on demand at any one time?

Ryan Gee

The idea is to make the service tech-enabled and move toward dynamic pricing. I think this is the best way to create value for our customers because it delivers on our brand promise of flexibility in routes and departure times. At the same time, it allows us as a company to appropriately price our service and capture more of the market by lowering our price on trips where there is a high probability of having a return customer. For example, we can charge less on a major city pair on a Monday morning than we can for a weekend trip to a more remote town.

Chris Lustrino

Can you talk about the capital intensivity of this business and how you are managing to keep cost low?

Ryan Gee

The business is certainly capital intensive, but I think it’s important to recognize that transportation is a capital-intensive space. Airplanes, buses, and trains are all expensive pieces of equipment. Furthermore, even Uber/Lyft use capital equipment in the form of the driver’s car.

In terms of pricing, the trick to keeping costs low in a capital-intensive business is to avoid oversupply. The worst scenario is to have too much equipment and not enough demand to utilize that equipment. At Priva, this would look like having too many vehicles without customer demand to keep them on the road. This requires the vehicles in operation to generate enough revenue to pay for themselves and the underutilized vehicles. Often this means raising prices because the volume is lacking.

While I do worry about this oversupply scenario, we are managing it in a few different ways. First, we allow demand to lead supply. We only expand our fleet once we cannot keep up with the number of ride requests and start selling out. Second, we are exploring B2B sales contracts that I mentioned earlier. This would give us a stable source of contracted revenue that we could then build our fleet size to meet. Third, we can reposition our underutilized assets to new markets. If we end up oversupplied right now, there are a lot of new routes and cities we can grow into to use the equipment.

Chris Lustrino

In trying to understand the market opportunity, how large is the market based on your niche focus of these 300 mile or less routes?

Ryan Gee

A recent report I read from the U.S. Bureau of Transportation Statistics stated that Americans make more than 405 million long-distance business trips per year. Furthermore, nearly 75% of these trips are under 250 miles – so this is a very sizable market. We also conducted our own market analysis at Priva where we focused exclusively on US commuter flights, which is a subset of the business travel market. Our analysis uncovered that the top 60 routes alone are $10 B market annually.

Chris Lustrino

Other commuter services such as Priva that tried to aggregate rides have gone under here in the US like Bridj. How does your business model prevent this?

Ryan Gee

A number of commuter services using commercial vans have popped up around the US, including Bridj in Boston. Our model is quite different from these providers. It all starts with the problem we are addressing — we focus on an entirely on travel between cities, instead of commuting around them.   

This problem lends itself to very different customer demographics and willingness to pay. Priva customers use our service instead of purchasing airfare, plus they typically expense it to their companies. Additionally, there is a real lack of viable alternatives in regional transportation in most of the US. Most customers only have two options: fly or drive themselves. The combination of favorable customer demographics and a lack of competition provide Priva with a lot of pricing power and really differentiate our model from commuter shuttle services.

Chris Lustrino

What kind of exit for investors would you envision in the next five to ten years?

Ryan Gee

I fully expect the exit to be an acquisition, rather than an IPO. I’ve seen a strong appetite for mobility services companies, especially from the automotive OEMs that are looking to reinvent themselves as transportation services companies. Daimler’s recent reorganization into three major business units and transportation investments, including into Blacklane, are indicative of this trend, as is Ford’s acquisition of Chariot in 2016.

With a space ripe for acquisition and an acute need being met by the Priva team, we think this is an intriguing investment opportunity to consider. With an experienced management team as it relates to the transportation sector, we think Ryan and his team can provide a real value added service to the business commuting sector.

Stay tuned to see if this team gets additional coverage. And be sure to invest HERE, if interested.

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About: Chris Lustrino

A Boston College Eagle for life, on a mission to democratize startup investing for all people at KingsCrowd, with a passion for Fintech, investing, social impact, doing well and doing good, and an avid runner, cyclist and writer.

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