Upshift is raising capital via a Crowd SAFE with no discount, and its valuation is capped at $15 million. Its valuation has nearly doubled from $8 million in December 2019 in reflection of the company’s progress. In 2018, Upshift generated $64,847 in revenue. That figure tripled between then and 2021, now standing at $196,677. Upshift has a revenue-to-valuation multiple of 76x, which is definitely high — and problematic. But the company’s valuation is lower than other companies raising online in the same industry. 

Upshift’s current valuation is based more on its tech-driven future growth potential than its recent and current revenue. The startup has built software to automate its operations and to cheaply and almost seamlessly expand into additional cities. That should significantly smooth out its scaling process. Revenue matters. But investors should keep in mind that valuation reflects a number of other variables that are also important.

Upshift is operating in the United States car sharing market, which has been stimulated by the work-from-home trend and the higher prices of cars. Car sharing reduces carbon footprints. It diminishes the demand for new cars and the release of greenhouse gasses from car production. It’s also an economic solution for occasional drivers. Cars depreciate so fast that owning them is more a matter of convenience than financial investment. But it’s easy to argue that a car is simply not worth the convenience it confers. Consequently, urban drivers are easily attracted by car sharing solutions. 

The US car sharing market is worth $2.6 billion in 2022 and is expected to grow at a sizable annual rate of 8.1%. Upshift is targeting a small niche of customers within the car sharing market. Typical customers do not have kids at home and are living in high-density areas where walking and public transportation are easy options. The expectation is that they need a car for groceries or traveling outside the city center for work or leisure. For these customers, car ownership, ride-sharing, and occasional car rentals are expensive and inconvenient options. Unfortunately, these criteria drastically reduce the number of potential customers. Finding customers with just the right profile may be a challenge for Upshift. In San Francisco, Upshift had to reduce its geo-coverage to optimize the cost and use of its 24-car fleet. 

Upshift’s service isn’t a solution for everyone. But the company has been refining its business model over the years, and according to the founder, its customers stay with the service for 13.5 months on average. Therefore, Upshift has potential in a market where the intersection of convenience and affordability has proven elusive.

Married couple Ezra Goldman and Hayako Isawa co-founded Upshift 10 years ago. The company first started as a car co-ownership business. The founders changed their business model in 2018 because of car vandalism and stagnating revenues. It took them about a year to build a new system and appropriate technology. Their previous raise, which started in December 2019, helped them launch this new business model. The founders’ shift shows their perseverance and quest for growth. Such dedication is an asset for the future of Upshift.

CEO, Director, and President Ezra Goldman has devoted his career to the transportation industry. He has a few experiences in the startup space. Goldman launched two startups as college projects, Bikeshare and eScotershare. He also managed a human resources technology startup called PiiPL in Copenhagen for two years. In designing Upshift’s final business model, Goldman investigated multiple car sharing solutions. He drove for Lyft for four months and took part in the operations of shared fleet startup Reachnow for five months. These experiences demonstrate Goldman’s ability to experiment, adapt, and stay connected to his vision. 

Head of Operations Hayako Isawa is mainly responsible for the company’s operations and administrative tasks. She earned a master’s in international public administration from Ritsumeikan Asia Pacific University and a master’s in health system strengthening and financing from the Royal Tropical Institute, University of Copenhagen, and Queen Margaret University. Isawa previously served more than a year as branch office director for a startup that helps trafficked children and spent another year as a consultant working with The World Bank on its energy program. She doesn’t have as much industry experience as her co-founder. Isawa is currently working part-time for Upshift.

Seven full-time employees work with Goldman. Two concierges transport cars around San Francisco, and two engineers build the company’s technology from India. One full-time business developer and one part-time marketer work on growing the company’s customer base. The startup plans to implement remote driving technology in its cars to further reduce the costs of concierges. 

Goldman showed real dedication to his project by pivoting the company and risking the loss of earlier customers. Upshift’s team is small, and the company needs to invest in its manpower to scale.

Upshift is currently operating in northeastern San Francisco. It wants to extend operations to Washington DC after this raise. Future expansion plans will focus on other high-income and high-density areas. It’s currently looking to New York, Boston, and Philadelphia as promising candidates. Upshift offers three monthly plans: four days for $279, eight days for $479, and 12 days for $679. Customers do not need to pay for parking, insurance, or maintenance. Their car is delivered at their doorstep in as little as 30 minutes after booking and will be picked up at the same place. Upshift’s service is tailored to occasional drivers and competes with car ownership and car rental services.

Owning a car is convenient, but it is pricey and time-consuming. For new car purchases, drivers pay an average of $700 a month. And the costs don’t end with ownership. Car owners in high-density areas must also pay high parking fees. Monthly parking costs $340 in San Francisco and $250 in Washington DC. Insurance costs an average of $147.58 per month for full coverage in the United States. And drivers spend an average of $119.38 a month on car maintenance. Considering all fees added up together — plus the inevitable depreciation of a car’s value — Upshift offers a more affordable and convenient solution to occasional drivers.

Car rentals are also less convenient than Upshift’s solution for repetitive renters. They require customers to walk, take public transportation, or spend on ride-sharing to reach the rental place. The rental process can take up to an hour before customers are able to leave with a car. And it can be expensive. A rental car averages $167 per day in California and $136 in Washington DC. It is a suitable solution for occasional renters, but regular customers will likely prefer Upshift to save time and money.

Ultimately, Upshift’s most serious competitor is Zipcar, which lets customers quickly book cars through an app. Zipcar is present in the same areas that Upshift is targeting: high-density areas inhabited by high-income earners. Its cars are widely available in the targeted areas, so customers can easily walk to one. Zipcar’s offerings start at $11 per hour and $83 per day, with gas and insurance included. The company only requires an additional $8 monthly subscription fee, while Upshift asks for a one-time $499 activation fee. Zipcar is a competitive option for customers who rent for four days a month or take short trips. But Upshift still has a few advantages. Upshift customers don’t have to go anywhere to reach a car because the company delivers it to their front door. It is priced competitively or is cheaper than Zipcar, depending on frequency of use. And Upshift gets more use out of each car, making the business more financially healthy in the long term.

Upshift’s fractional car leasing business model is unique and well differentiated from its competitors. It can better target regular car renters living in high-density areas with its affordable and convenient solution. Furthermore, Upshift’s software system and design helps the company scale easily. The combination of its pricing and software make the company defensible.

Upshift’s growth hasn’t taken off yet. The company’s revenue grew by 37.1% between 2020 and 2021, going from $143,464 to $196,667. Upshift’s results during the first half of 2022 show that it is on track to double its revenue. But this is nothing more than expected for a company at Upshift’s early stage. 

Upshift’s customers stay with the company for an average of 13.5 months. Each customer has a lifetime value of $5,967 for an acquisition cost of $805. This means Upshift must spend heavily on advertising and constantly onboard new clients to maintain its business. With 24 cars and 74 customers in San Francisco, the company has close to one car for every three customers. Its customer base is currently too small to determine whether the company has found strong product-market fit.

The slow customer response may come from a lack of awareness about Upshift’s solution. The company used to have a car co-ownership business model. It pivoted in 2018 and 2019 and truly started to operate as a fractional car leasing business after its raise in 2020. The solution is innovative — but as a new concept, it requires customer education. It will take additional resources for Upshift to advertise its solution.

Hopefully, scaling to other cities will not require much capital. Upshift’s founder believes the company can launch in Washington DC with five cars and two concierges. The startup built proprietary software, including apps, to manage its services. This is an asset that will allow it to expand at a low cost.

Upshift can continue to refine product-market fit through its San Francisco’s operations. It built tools to make the company scalable. This is good news, as expansion will likely be key to Upshift achieving better financial results.

Upshift is a moderately risky investment. The company’s total liabilities were worth $879,140 at the end of 2021. Part of that debt is a convertible note worth $341,669, which will convert into equity. But Upshift holds long-term debt of $325,860. Upshift’s revenue is only 40.4% higher than its cost of goods sold, which somewhat limits the company’s ability to repay its debt. But with growing revenue, debt does not pose a big risk at this time.

Upshift only had 74 customers as of July 2022. The high price of the company’s service allows it to still generate a comfortable revenue. But this customer base is small. A decline in business or a new competitor could quickly become a threat for Upshift.

Upshift has made significant progress since its last Republic round closed in January 2021. Since then, its valuation rose from $8 million to $15 million. The company increased its revenue from $64,847 in 2018 to $196,667 in 2021. In the first six months of 2022, Upshift earned close to $182,987 in revenue, which may mean 2x growth in 2022 compared to the previous year. Founder Ezra Goldman also reports team growth from seven to eleven members (although not all are full-time), a 100% increase in Upshift’s membership base, and an increase of fleet cars from 13 to 24. Although Upshift doesn’t seem completely prepared to successfully scale yet, it is definitely growing. 

Upshift’s most significant progress happened on the technological side. The company built an app for its concierges and facilitates their work with a new dispatch system. Upshift integrated technology to allow customers to lock and unlock cars without keys and improved its system for customers to report damages to the cars. It also implemented a system to automatically collect data after car trips to improve its service. These technical implementations are an asset because they allow Upshift to easily replicate its model in various cities.

Upshift’s business model is new. Most potential customers are still unaware of the solution, and the product-market fit is still being proven. The company’s target market is too small to feel certain Upshift can reach profitability. 

Currently, Upshift is only on track to generate less than $400,000 in 2022. Its revenue has been growing slowly over the past few years, which doesn’t inspire confidence for significant future growth. The company consists of a small team of seven full-time employees serving only 74 customers. Despite a lifetime value of $5,937 per customer, investors should note that Upshift is currently powered by a fragile combination of market forces and emerging customer interest. For investors, backing Upshift is a jump into the unknown. The company could bring great returns if it becomes a leader on the new fractional car sharing market — or it could face a lack of demand.

Upshift’s founder, Ezra Goldman, spent most of his career working with alternative transportation solutions. He is passionate about his work and pivoted Upshift’s first business model from car co-ownership to fractional car leasing. His hands-on experience has helped shape Upshift’s subscription model, providing a pathway for revenue growth. Upshift also charges customers a one-time registration fee and charges for options to add a new driver or rent cars for extra days. These are strategic sources of revenue for the company. Upshift can attract clients with cheaper monthly payments and entice them to spend more through optional features.

The company targets a clear need for affordable and convenient alternatives to owning a car. And the conditions are optimal for Upshift to launch. An increasing number of city dwellers now work from home, and soaring car prices are making potential car buyers hesitate. 

Additionally, Upshift’s technology allows the company to smoothly scale its operations and personalize its service. After this raise, Upshift wants to start implementing remote driving to reduce the need for concierges and increase its car usage, which could increase revenue further. 

Upshift has a clear path for growth and interest from customers. Upshift is more convenient than owning a car and reduces the time and money needed for maintenance, insurance, and more. It’s an affordable solution for people who need to drive only a few days a month and live in areas where cars aren’t a necessity. It also is environmentally friendly. Upshift’s system reduces its customers’ carbon footprints while providing them with the same flexibility as car ownership.

Upshift is a fractional car leasing service offering occasional drivers the convenience of having a car without the costs of maintenance, gas, parking, and more. Upshift can deliver cars to subscribers living in high-density areas in as little as 30 minutes for a cost starting at $279 a month.

The company’s product fits a specific type of customer — city dwellers who need a car routinely but not frequently. It’s targeting a fairly niche market and still needs to prove the scalability of its operations.

However, Upshift’s latest results are appealing. The company earned around $182,987 in the first six months of 2022. This half year of revenue is close to Upshift’s revenue for the entirety of 2021. Its growth in San Francisco is an encouraging sign for the company’s new launch in Washington DC. Upshift has developed software that makes it easily scalable and increases its defensibility. With its unique business model, its services are overall more affordable for occasional drivers than other car rental or ride-sharing services. For these reasons, Upshift is a Deal to Watch.

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Analysis written by Léa Bouhelier-Gautreau, July 29, 2022.