When a handful of startups earlier in the decade began offering to drive kids to school and soccer games, they fashioned themselves as safer alternatives to ride-hailing market leaders Uber and Lyft. Despite financial support and demand from busy parents, those early movers, like Daimler-backed Boost, struggled to gain traction.
Skeptics at the time questioned whether the companies would generate enough demand for the higher-touch, costlier rides to become profitable. They wondered how these services would keep carefully screened drivers busy. During a 2016 downturn in venture funding, one previously well-funded company, Shuddle, closed after failing to secure additional capital. Boost, which had pitched services in Palo Alto, California, shut soon after.
But three years is a lifetime in the digital economy, and now some of those companies are beginning to secure toeholds in the ride-sharing industry.
Current leaders Zum and HopSkipDrive have driven close to 1.5 million children combined and cover more than 16,000 schools. HopSkipDrive this month started service in Houston to go along with its current coverage areas in four other states, plus Washington D.C. Both companies have arrangements with hundreds of school districts, which tell parents that the services are available.
Earlier this year, Redwood, California-based Zum raised $40 million in a round led by BMW’s venture firm. Los Angeles-based HopSkipDrive has raised more than $21 million over multiple rounds. Both are expanding into new markets, as are two other companies, Kango and GoKid. Kango raised $3.6 million this spring and earlier this month, GoKid secured a $90,000 Michigan-based PlanetM Mobility grant to pilot its services in that state’s school districts.
“A lot has changed in the last three years,” Harry Campbell, founder of the Rideshare Guy blog and industry consultant, told Karma. Campbell had previously expressed reservations about the industry’s potential. “My viewpoint has shifted,” he said.
He added that Zum and HopSkipDrive seem “the furthest ahead” at this point.
The industry’s growth underscores ongoing demand for a part of the ride-sharing market that Uber, Lyft and others don’t address. Many families, particularly those in which both parents work, struggle with work-life balance and are looking for help getting kids to school and activities. A 2017 National Household Travel Survey found that 54% of children 5 to 17 — about 27 million students — travel to school in private vehicles, while just 33% took the bus.
At the same time, only about one in three ride-share users in a 2016 Pew Research study saw Uber and Lyft as a good way to transport children. Those companies don’t allow riders under 18 unaccompanied by adults, even if drivers only occasionally check ages. “Most drivers don’t know you can’t take a passenger under 18,” said Campbell, who still occasionally drives for Uber and Lyft. He added: “I’ve never carded anyone.”
Zum, HopSkipDrive and Kango have addressed concerns about driver backgrounds, which have grown following multiple assaults and other incidents involving Uber and Lyft drivers. “You can apply to be an Uber or Lyft driver from your couch,” Campbell said.
All three child-ride companies tout their extensive screening procedures that include fingerprinting, background and driving checks, and vehicle inspections. HopSkipDrive requires at least five years of child-care experience, Zum three years, and all three companies conduct some form of face-to-face meeting.
Kango’s insurance policy allows it to drive children of any age, and the company can provide car and booster seats, along with pre- and post-drive childcare. Many of the drivers are nurses, coaches and teachers looking for extra cash. In a phone interview with Karma, Kango co-founder and CEO Sara Schaer called Kango “a childcare-on-wheels solution” in which “you’re not putting your child in an unknown driver’s car.”
Kango’s name riffs on both its kangaroo corporate logo and the words “can go,” Schaer said.
GoKid does not use drivers; rather, it organizes invitation-only carpools from networks of families who sign up for its app. The three-year-old New York company says that it operates in about 250 cities in 23 countries. “The driver-based models are a great short-term and on-demand option,” GoKid founder and CEO Stefanie Lemcke told Karma in written responses to questions. “Since we don’t hire drivers and don’t put vehicles on the road, we can expand faster.”
Zum, HopSkipDrive and Kango are largely focused on San Francisco and Los Angeles. That narrow focus may also present a huge opportunity for the companies among major urban markets. HopSkipDrive’s Houston launch followed its expansion into Washington, D.C., and northern Virginia. The company is eyeing an additional rollout in Dallas. “It is a fascinating and fast-growing part of the ride-sharing market,” HopSkipDrive co-founder and CEO Joanna McFarland told Karma.
McFarland, a former financial services executive, and two other working moms started their company after seeing families struggle with the same after-school, logistical problems they were facing. Among them, they have eight children attending five different schools. “It was very much solving our own problem,” she said.
About 95% of the company’s drivers are women, most of them over 35, McFarland said.
Prices and Obstacles
Critics say that the industry is too cash-intensive to generate profits, given the amount of time that it takes for vetting and training, coupled with insurance, technology and other costs.
Shuddle burned through nearly $13 million in less than three years before folding. Boost didn’t last much longer and said its business was not sustainable.
The higher prices may simultaneously limit use to all but wealthier families. Kango’s average ride is $24. HopSkipDrive’s prices start at $17 per ride; Zum, just under $20. McFarland said customers use the service an average twice weekly, which some using it almost daily.
Both McFarland and Schaer say that they’ve been able to keep quality drivers increasingly busy as their businesses expand, countering one of the primary criticisms of child ride-sharing. Still, they acknowledge that their service faces challenges convincing consumers of its value and building wider brand awareness. HopSkipDrive has more than tripled revenue growth since its founding in 2014, although McFarland would not provide additional financial information. Kango is not cash-flow positive.
“We not only have to create awareness but trust,” Schaer said.