Welcome! This week, I had an interesting conversation about the Subscription Economy and the future of transportation-as-as-service with Flexclub CEO, Tinashe Ruzane.
We covered everything from the differences between top-down and full service car subscription models, how subscriptions help open opportunities for those without the assets for ownership, the potential of “life-as-a-service”, and the importance of creating more diverse technology that’s reflective of the global population as a whole.
It was an enlightening conversation that can shed some light on what it means to service deserving, but underrepresented communities with vehicles, as well as some of the struggles that rental companies with antiquated business models might encounter while the markets continue to transition to subscription-based services.
Below is an edited transcript of our conversation.
Welcome, Tinashe! You’ve got this awesome company, now Flexclub, congrats. Before Flexclub, you spent a few years at Uber, right?
That’s right, prior to starting Flexclub, I was at Uber heading up their vehicle solutions unit across Europe, the Middle East, and Africa. “Vehicle solutions” means my team was focused on the drivers. At the time we had grown to over million drivers using the Uber app in our regions.
That sounds like an important job. Most of us know what it’s like as a rider using Uber or Lyft. But of course, the system doesn’t work without drivers, or cars.
Of course! And one of the things I’m most proud of is that we enabled a lot of people who rely on making a living by becoming drivers.
Now, one of the things we had to figure out was what to do in regions where car ownership is rarer. Before Uber, a New York cab driver basically had to take out a mortgage to pay for a taxi medallion, if they wanted to make a living driving cars. In Europe, we saw Uber drivers renting cars from companies like Avis or Eurocar, and make a living that way.
But this didn’t work in many places. After all, there’s a perceived risk with providing vehicles to people that creditors would consider “sub-prime”, like in Mexico or South Africa. Problem is, people who need vehicles but otherwise can’t afford to buy them in cash, also wouldn’t be able to lease or loan a vehicle with a bank, if the financial institutions thought of them as a risky or bad investment. Nor could they afford the deposits that the rental car companies were asking for.
A solution to this driver problem didn’t exist, so we sought to change that. And as we studied the problem, it became increasingly apparent to us that the best way to put more drivers on the road would be through a flexible car subscription product.
And so Flexclub was born!
That’s right. We went to the folks with cars, acting like middlemen, and made it easier for prospective drivers to get on board. You could draw parallels between what we do with commerce offerings like Shopify. Just like Shopify is the middle man creating a simple ecommerce experience for a small business, Flexclub connects car owners to users who might not otherwise be able to own a car dedicated to ridesharing.
Does Flexclub have any competitors? What do you think about Kyte, a car subscription service that plans on adding 30K Tesla Model 3 vehicles to its fleet in New York City, starting this summer?
In fact, I think one of the Kyte founders is ex-Uber like myself! It’s worth disclosing I am also a very small investor in Kyte. I’m excited about what they’re doing, although we don’t necessarily see Kyte as a competitor! This brings us to an interesting distinction between the two transportation-as-a-service approaches that we’ve seen out there.
One, is you can build technology. It enables traditional companies to now lean into subscriptions and create subscription offerings more seamlessly. That’s more like Flexclub.
On the flipside, there are companies out there that I call “full stack companies” – where they themselves will go out, raise debt, buy the cars, keep the cars on their balance sheet, and manage those cars. Kyte, as you know, is more like the latter. They get a few million dollars in credit line, go buy a bunch of Teslas, and seed them out directly to users.
It brings up a good point, I get asked a lot: what’s the difference between a subscription and a rental and/or lease?
A good subscription offering includes insurance plus maintenance, and thus removes the complexity. It’s a more inclusive approach to gaining access, rather than the gatekeeping requirement of being wealthy.
I think there are two components to transportation-as-a-service: duration and access to continuous access to a pool of assets. Rental car services typically focus on short-term use cases or short-term usage, like if I need a car for a weekend. If I want a car for 3-4 years, then by default you think of a lease or a loan.
What we’ve found is that – at least in our case – folks are coming to us because they’re looking for a use case that is longer than a month, but shorter than a few years. In this scenario, a traditional short term car rental service is obviously very expensive if you go by the daily rate for a month or two. Flexclub exists as that middle-ground, allowing the merchant to have access to a vehicle for say, six months, without the high-cost of a traditional rental car service or the obligation to bank payments with a lease or loan.
The other pillar to consider is the idea of access to a pool of assets. By helping traditional car rental companies (like Flexcub with Avis in Europe) readjust their product to really speak to the subscription construct, the subscriber has a better experience. Hypothetically, if you were driving a Prius for six months and Avis caught wind of a new model being released while you had the old car, they could replace and upgrade you to the newer vehicle, at no charge.
As a customer, you still get to achieve the same outcome: the exclusive use of a vehicle for almost any use that has a certain set of features, for a period of time.
So far we’ve been talking about cars. Where else can it go?
I actually think what we are building is not limited to cars. I was talking to a phone distributor in Johannesburg, for example, who obviously has a set of phones and wondering if they could use Flexclub to offer phones-as-a-service, like what we just heard with Apple.
So is this “life-as-a-service”?
I think we’ll all move to “life as a service” as an industry and planet as a whole. If you can get a car, laptop, robot vacuum, or home security system as a subscription, then why not a car with Flexclub? Life-as-a-service is possible.
This is an awesome vision. Before you go, two more questions that you may have a unique perspective on. If we’re in a world of usership vs ownership, what happens to the historical idea that ownership is a path to wealth and stability? Are we leaving low-income people behind?
I think there are misconceptions of ownership. Historically, there was a view regarding physical assets, that if you wanted to kind of build financial value or equity, you have to own assets. However, in the modern-day, I don’t necessarily have to own property to have stability. I can own shares or invest.
The default way of thinking is outdated: taking a loan, buying the asset, getting equity on the asset, and ultimately, improving life for my family. A different approach, where access equals equity, helps my family build value. For example, access to a pool of vehicles (a depreciating asset) is better than having a loan against a single depreciating asset (loaning/leasing a car with a bank).
OK, second question: how can newer technologies be built to encourage more diversity in usership, as well as for those working in the tech industry?
There’s a lot more that the tech industry can do to be more inclusive. A lot of the tech being built right now is for “the next billion”. You need to ensure that these products being built for Asia, Africa, etc. actually include that geographic diversity in their cohorts. Creating more inclusive technology that’s reflective of your user base introduces solutions to problems only those people might have.
You want to avoid being in the bubble that is Silicon Valley. Ensure that you’re building for people in Latin America, Africa, and Southeast Asia, for example. The only way to do that successfully, is if you actually have people from those regions be included in the process, allowing them the opportunity to contribute new, diverse technologies.
There’s a lot more work that needs to be done to ensure that we are building more inclusive technology, and just not building in these vacuums.
That was an eye-opening conversation, Tinashe. Thank you so much for your time.
Thank you for making the time! I’m always very excited to have a conversation with more like-minded folks. It’s always a pleasure.