Like many tech entrepreneurs, Sean Behr had a young business that was popular with consumers, but was also losing money. So in February of 2016, he decided to refocus his San Francisco startup on the small, but unexpectedly profitable aspect of his service that could operate in the black.
That pivot put Behr in a prime position to reflect on the coming sea change in the automotive industry—big fleets of autonomous vehicles—and carve himself a niche in it. The future he sees on the way, and sooner than he expected, is far from the big financial payoff tech investors dream about.
Behr is predicting a fierce multiplayer competition that keeps ride fares low for mobility fleet services, which will profit only if they can keep costs down for nitty-gritty expenses like tire changes.
In February of 2016, Behr shut down the valet parking service for consumers he’d launched under the name Zirx in 2014, and concentrated on the needs of his three car-sharing firm customers. They wanted to use his company’s logistics software to manage the many tasks of keeping their fleets going, such as getting their cars to the repair shop, and fueling them up.
The software company Behr co-founded, renamed Stratim, now has paying contracts with 50 customers, including BMW, Ford, and GM, he says. His support company for the nascent generation of mobility services, which are now deploying both conventional and autonomous vehicles, emerged from stealth mode this week.
Although most cars are still driven by individual owners, auto manufacturers and tech companies—such as Alphabet’s Waymo and ride-hailing giant Uber—are racing to create the driverless vehicles many see as the inevitable car models of the future. That vision also includes the fading out of individual car ownership in favor of on-demand rides provided by big companies and their fleets of tens of thousands of vehicles—or hundreds of thousands.
Back in early 2016, Stratim gave Behr a front row view of the mundane operating problems that fleet owners would face, especially as they scaled up to deploy vast numbers of cars. It’s a big shift from the pattern going back for decades, when carmakers and then ride-hailing companies have had a hands-off relationship with vehicles for most, or all, of their lifespan on the road. For now, it’s still the car owners that clean out the food wrappers left by the kids, hose off the muddy tires, ferret out the best repair shops, make gas station runs, and pay for routine services like oil changes.
Currently, if a breakdown keeps an Uber driver’s car sidelined for six hours, the driver suffers the lost revenue, Behr says. But that won’t be so if the car driver-owner is out of the picture, because the car is part of a company fleet. “In the self-driving world, that responsibility shifts,” he says.
In the future, what used to be Saturday car maintenance chores for millions of individual consumers could turn into complicated back end logistics problems for corporate operators of thousands of vehicles distributed among multiple neighborhoods and cities, Behr says. While most company-operated mobility service fleets are still in pilot mode, Behr says, they’re starting to face this challenge.
“We’re talking to a lot of autonomous car companies,” Behr says. “They’re already feeling some of the pain.”
That massive change expected in the transportation business model, which is likely to include trucking as well as passenger rides, could open up niches for various kinds of support businesses, Behr says.
Stratim pitches itself as a one-stop hub where fleet operators can find repair shops and other vendors, schedule services, and pay for them. The company doesn’t cover the consumer side of the on-demand ride and car sharing business, such as ride-hailing apps or car rental ordering. Stratim has raised a total of $36 million from investors including Bessemer Ventures, BMW iVentures, Norwest Venture Partners, and Trinity Ventures. It currently has 35 employees.
In San Francisco, Stratim’s customers include Ford Smart Mobility unit Chariot, which ferries commuters to work in employee-driven Ford Transit Wagons; and on-demand car rental company Maven, which was launched in 2016 by General Motors.
There’s no monthly fee to use the Stratim software; customers are charged based on the number of transactions they arrange through the system. The company is operating in 20 markets, including San Francisco, New York, Chicago, Toronto, San Diego, Milwaukee, and Austin. Stratim is now handling more than 150,000 transactions per quarter, and Behr says he expects the firm will be profitable by 2019.
As it tracks the movements of cars and the billings of vendors, Stratim is also collecting data that can help fleets assess their expenditures in various categories—and maybe alert them when they might need to do some penny-pinching.
Behr predicts that profit margins for on-demand car rides will be as low as 10 percent, in large part because so many big companies are competing to develop autonomous vehicle capabilities, and some are already jumping into the mobility fleet business.
“It’s not going to be a winner-take-all market,” Behr says.
Navigant Research named well over a dozen of the leaders in an April report summarized by Business Insider. The global list includes Ford, General Motors, Renault-Nissan Alliance, Daimler, Volkswagen Group, BMW, Waymo, Volvo, Hyundai, big European carmaker PSA, Tesla, Honda, Toyota, German auto supplier ZF, Uber, and NuTonomy, a four-year-old Boston-based startup acquired in October by automotive supplier Delphi for about $450 million.
Such high valuations for young self-driving technology companies are a sign that
