Uber competitor to offer drivers shares

Competitors of Uber think they have found a chink in the armour of the ride-hailing juggernaut: disgruntled drivers who can be lured away with better rates and equity.

That is the strategy of one of Uber’s newest and most high-profile challengers, Juno, a start-up that plans to launch a competing ride-hailing service in New York this spring.

Juno’s founder Talmon Marco, an entrepreneur who co-founded Viber, says the company is specifically targeting Uber drivers and offering them a better deal with lower commission rates and equity in the company.

“What Uber left out in the process of building their company is that they completely and totally forgot about the people who do the work, the drivers,” he says. “Imagine a company where all the employees hate management; that is not a good place to be.”

Groups of drivers in some of Uber’s largest US markets, including New York and San Francisco, have been protesting over fare cuts that were introduced in January, saying that the cuts affect their take-home wages.

While ride-hailing companies’ efforts to attract consumers with low prices and promotions usually receive the most attention, behind the scenes a battle is under way to attract the best drivers.

Lyft, Uber’s main competitor in the US, has been wooing drivers with its tip system as well as lower commissions for full-time drivers. Uber changed its commission structure this week to mirror Lyft’s in rewarding full-time drivers.

Drivers have also become the focus of increasing efforts to unionise. A bill was introduced in the California legislature this week which, if passed, would allow drivers for Uber and Lyft to form unions. Seattle passed a similar measure last year, although it is being challenged by a lawsuit.

Mr Marco says that Juno would classify drivers as employees, not as independent contractors, if they drove exclusively for Juno.

In an unusual twist, he proposes to distribute shares in Juno to drivers each quarter, so that over time the drivers can build as much equity as the founders.

However, the transportation market in New York is highly competitive, and has already seen at least one ride-hailing company, Hailo, give up entirely.

Mr Marco said that Juno would try to avoid the price wars that have defined the New York ride-hailing market so far. “Every time that either Uber or Lyft reduce their prices, it is a war that is fought on the back of drivers,” he said.

Juno is recruiting Uber drivers specifically, and requires that drivers have a high Uber rating to join. The company is already paying some drivers for permission to gather data on their Uber journeys.

Mr Marco would not disclose how much Juno has raised so far, saying only that it was in the tens of millions.

Uber declined to comment. The company has previously said that gross fares per hour have gone up in New York, rising from $26 per hour in 2012 to $39 per hour in 2015. However, Uber has also increased its commissions over the period by adding fees, such as the booking fee; the company does not disclose how drivers’ net pay has changed.

Uber has raised more than $10bn from investors and is the world’s most highly valued start-up, with a total valuation of $62.5bn.

Credit: The Financial Times

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