Exits in the ride hailing market

There were two important developments in the ride hailing market over the last week. First, Daimler announced that it is buying 60% of Hailo and merging it with MyTaxi, another taxi hailing app that Daimler acquired in 2014. Second, Didi announced that it is merging with UberChina in a deal where Didi will own 80% and Uber will own 20% of the new entity.

Prior to these developments, several investors I spoke with shared their concerns for exit prospects in the ride hailing market. They pointed out that exits have yet to take place in either of the licensed taxi hailing or unlicensed ride hailing markets.

Since the inner city delivery of people and food are markets with broadly similar transaction frequencies, average transaction values, and fragmented supply sides, I would respond with an analogy from food delivery marketplaces. The largest player in the US, GrubHub, was founded in 2004 and acquired its biggest US competitor Seamless 9 years later, in 2013. The largest player in Europe, Just Eat, was founded in 2001 and made its first acquisition 10 years later, in 2011.

Leading ride hailing companies like Uber, Didi, Lyft, and Hailo were founded in 2009, 2012, 2012, and 2011 respectively. So it has been only 7 years since the launch of the first big ride hailing company. While that might seem like a long time, it isn’t in the context of the time that’s necessary to validate a business model, scale a company, see the emergence of local winners in a business with heavy local operational requirements, and shift the resulting optimal strategy from competition to consolidation.

It took 9 years for this to begin to happen in the food delivery market. At 7 years, it’s happening earlier than I predicted in the ride hailing market.

Also published on Medium.