Tech start-up of the week: WeGo

17 Jun 2012

Dan Leahy of WeGo, pictured with his son in a WeGo car

WeGo is a new Dutch-based car sharing platform set up by Dan Leahy, an Irishman who has been living in Amsterdam for the past 15 years. The idea of WeGo, which has just secured €1.5m in financing, is to allow people to rent their cars out to others, and make some money in the process.

The car-sharing start-up is aiming to provide a handy platform for people living in Amsterdam to rent out their cars to others who don’t have a car but who might need one from time to time to make a road trip, for instance.

The investors in WeGo’s €1.5m funding round are Stichting Doen, the foundation of the Dutch National Lottery, which invests in ventures that reduce CO2 emissions.

Future Human

“We also had a private investor who invests in commercial models that provide a social return,” explains Leahy. The final investor was a Dutch government agency, which has a focus on sustainable mobility.

“This agency matched the investment of the other two parties,” he says.

Making use of cars

According to Leahy there’s an over-supply of around 214,000  privately owned vehicles in Amsterdam that are generally not being used during the day, with many people instead choosing to take public transport or cycle.

He says the model works by accessing such cars and making them available for rent by the hour or by the day to people to make some money.

“We are also giving car drivers the choice of a wide range of low-cost mobility that is a viable and more cost-effective alternative to owning a car”.

Genesis for the business

So how did the idea for WeGo all come about, then?

It was in late 2009 that Leahy started to work on the model for the company, which launched last August.

He says he was looking for a new business model and started looking at the idea of sustainability and its opportunities.

Leahy looked to similar business models such as RelayRides, which was set up in Boston in 2010 by a group of students from Harvard University. Since then, RelayRides has raised around US$13m from investors including Google Ventures and GM Ventures.

Says Leahy: “RelayRides caught my attention, and I looked at its model, evolved it slightly and also built a community-based brand around the service. I’m a believer in the emotional premium people will pay for this type of branded service.”

He says that WeGo is a low-margin business that requires scale to be viable.

“I launched the business with a great belief in the idea, insufficient funds to break even, and in the midst of the financial crisis. Ironically, it’s a model that is perfectly suited to today’s world, as it both helps car owners make money, and saves drivers the expense of owning a car.”

A new model

He says that the primary focus was about proving that the model works, and securing the funds to make it grow.

“We grew very strongly from launch, and had almost 100 vehicles within the first three months – some of whose owners were earning over €400 per month as a result of their neighbours driving their car.

“We ran out of money by the end of January, and informed our customers that we were putting the platform on hold until we secured funding. Fortunately it’s now in the bank.”

Expansion plans

WeGo employs four people at the minute, but Leahy says that with the investment injection, the aim is expand the car-sharing platform across the Netherlands.

“We expect to have 12 people on our books by the end of the year,” he says.

On-board hardware

But, there’s also a big technological element to the way WeGo works.

Looking to traditional car sharing where companies have been using on-board hardware since the early Nineties to make cars available for rent, Leahy claims that WeGo is one of the first companies to have a service that places this technology in the vehicles of private individuals.

He says the hardware for WeGo vehicles enables keyless access to vehicles and also provides information about driver trips back to its software system.

“Each unit is placed under the dashboard of the vehicle, connected to the central locking system of the car, and to a small RFID reader that sits on the windscreen.

He says that the details of each reservation are sent from WeGo’s software system to the hardware on the vehicle five minutes before a reservation is due to begin.

“When the driver swipes his/her membership card over the RFID reader, the hardware recognises it is this member who has made the reservation, and therefore opens the car doors and mobilises the car engine.”

But as the keys of the car are kept in the globe compartment, what about car theft?

“The engine is immobilised remotely until the membership car is recognised, so the car cannot be stolen or driven without a booking being made. In fact it’s so safe that our insurance company pays for the boxes to be fitted,” explains Leahy.

The idea is that the car’s renter and the car’s owner never have to meet.

“Once the trip is over, the driver leaves the keys in the car, and closes off the trip by swiping their membership pass over the RFID reader on the windscreen. This closes the vehicle, and all trip details, including fuel usage and the distance travelled, are sent back from the hardware to our billing system.

He says that the hardware also contains a GPS that allows the car owner to go online and see the exact location of their vehicle once the trip has been finished.

So, does Leahy think the model will work in Ireland? “We have developed an infrastructure that allows us to develop the WeGo service everywhere. Our main focus is on the Dutch market, but we do plan to go abroad. I would love to launch the service in Ireland, as I believe the time is right for people to benefit from it.”

As for now, he says the initial aim is to launch the service in the key cities in the Netherlands this year, and then grow from there.

The revenue model

The way the model works, says Leahy, is WeGo’s primary revenue stream come from subscriptions from drivers.

The company will then take a 20pc commission on the total revenue from each trip.

“There is no VAT on the prices charged by car owners (due to a ruling in Dutch tax law), so the rates are extremely affordable. The car owner sets a price per hour, per kilometre and for fuel per kilometre.

“The car owner also pays approximately 10pc of the total trip value, for insurance. Therefore, car owners receive 70pc of all trip revenues,” he says.

Growth, says Leahy, will also come from alliances with parties that can benefit from working with WeGo.

“Among those are local authorities who want to reduce congestion. We have an agreement with the West of Amsterdam that if you put your car in the programme for 40 hours a week, that the owner gets a reserved parking place outside of their house.

“We will also look for infrastructure alliances with leasing companies, and brand alliances with brands that can improve their brand image by being associated with supporting the growth of the WeGo model.”

Challenges around insurance

As to challenges while setting out, Leahy says that getting the right insurance policy was one of the big ones.

“I basically had to find an insurance company that would create new policy that would enable individuals to rent out their vehicles to strangers, and to ensure that the no-claims bonus of the car owner was not affected if there was a crash. I have now secured two policies from two different companies,” he says.

And his advice for other self-starters out there is not to have a fear of failure.

“Setting up WeGo has certainly been one of the most challenging and yet rewarding things I’ve done. There are massive personal and business learnings that come from trying your own venture, whatever the outcome, so you are going to win anyway.

“And a healthy dose of belligerence wrapped up in the charm of being Irish can get you a long way,” he adds.

Carmel Doyle was a long-time reporter with Silicon Republic