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Turo picks up funding, celebrities in bet on peer-to-peer car sharing

Despite recent troubles in the car-sharing industry, Turo has raised new funding to continue developing its peer-to-peer model.

Operators of car-sharing fleets had a rough 2019. To summarize: ReachNow halted its Seattle operations in July, with LimePod reportedly following suit in September. And by the year’s end, Car2go had pulled out of five cities across North America.

The challenges are numerous: Traditional car-sharing companies must sustain a capital-intensive business of owning a fleet of vehicles, while also competing with ridesharing giants and effectively catering to an ever-evolving transportation market.

Alternatively, peer-to-peer car-sharing providers allow car owners to rent their vehicles to other people, generating extra income through what would otherwise be an idle asset. The P2P model successfully circumvents the higher costs of vehicle ownership—such as maintenance, parking and depreciation—that are typically incurred by the traditional car-sharing model, according to PitchBook mobility analyst Asad Hussain. This helps improve margins and enables operators to scale in line with demand.

A couple of startups in the space, including SoftBank-backed Getaround, and Turo, pulled in VC mega-deals at unicorn valuations in 2019.

But P2P car sharing has also had its share of challenges. Getaround announced in early January that it will shed a number of jobs in an effort to reduce costs, with The Information reporting that around 150 people —roughly one-quarter of its staff—will be let go. Meanwhile, customers seeking to make extra cash from renting their cars have reportedly faced insurance and regulatory hurdles.

Still, investors funneled nearly $330 million in VC financing into car-sharing companies last year. The data for 2019 doesn’t include the latest round for Getaround, as the deal is yet to be closed.

Turo, which offers P2P car-sharing services in more than 6,000 cities, on Wednesday said it has added $30 million from Manhattan Venture Partners and Allen & Co. to its ongoing Series E round. In July the San Francisco-based company raised $250 million from InterActive Corp, valuing Turo at $1.2 billion, according to PitchBook data.

However, Turo’s expansion plans are limited. CMO Andrew Mok said the company’s margins make sense only if it focuses on customers seeking to rent a car for at least a day trip.

“The hourly car-sharing business is generally being eaten up by the rideshare players, as it’s a lot more convenient,"Mok said.

Achieving larger scale is another challenge for fleet-owned car-sharing businesses, as expansion means that they sustain capital expenses related to the purchase of new cars. Mok added that Turo leverages existing car owners who live in the cities where it operates, and it can expand to more locations without incurring significant incremental costs.

Mok said Turo is making a brand-awareness push over the next 12 months. As part of the latest investment, the company has added several celebrity shareholders, including NFL star Larry Fitzgerald, NBA player Victor Oladipo and rapper 2 Chainz.

“Bringing these folks on board will really help spread the word and make the brand more of a household name,” Mok said.

Featured image via Unsplash

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    Written by Priyamvada Mathur
    Priyamvada Mathur writes about venture capital at PitchBook.

    She is an Indian chartered accountant and has studied economics and journalism.
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