Ford Acquires Chariot (YC W15)

https://techcrunch.com/2016/09/09/ford-mobility-solutions-acquires-chariot/

by aluminussoma • 10 years ago

111 57 10 years ago

mkagenius2• 10 years ago

No discussion of terms.

minimaxir• 10 years ago

Per Recode: Ford declined to tell us how much they paid for the San Francisco-based startup but said it was an all-cash transaction.

Per CrunchBase, Chariot only raised a $3M seed round a year ago (https://www.crunchbase.com/organization/chariot-3#/entity). Given the low-margin nature of the business (many other startups along these lines died out), I'm curious what dollar amount would make sense.

georgeportillo• 10 years ago

Good for those guys. I'm curious as well.

JonFish853• 10 years ago

Almost certainly an amount that wipes out common stock holders. People they want to keep will get a retention offer, but with the acknowledgment that their stock in Chariot is now worth $0.

frakkingcylons• 10 years ago

Yeah the next market is obviously Austin, they've been hiring for ops and marketing for months now. I know because I've been watching and waiting forever for Chariot to come here and show Capital Metro how modern, efficient transit is done.

enraged_camel• 10 years ago

Capital Metro doesn't have the budget for a modern, efficient transit system. You can thank your local politicians for that.

erispoe2• 10 years ago

Chariot does not provide "modern, efficient transit" by any metric. They are commuter shuttles, operating only during commute hours. They're miles away from a transit system you can rely on for most of your activities.

Commuter shuttles have trouble attracting significant ridership, because riders are using them just for that: one commute.

We know that for transit to be successful, it's gotta be a way of life. For many car riders, their way of life heavily depends on getting everywhere with a car. It's hard to replace that with mass transit. Cities have done it, but commuter shuttles do not achieve that.

mox12• 10 years ago

I find it very interesting and frankly quite stupid that Ford is attempting to become an Uber / Silicon Valley / Technology type company[1]. They practically made the auto industry and have been a leading manufacturer for ~100 years. But lets drop and forget all that, technology is cool!

I predict that in 5-10 years this will really come back to haunt them. I was planning to buy some Ford stock for a while, but after seeing this shift, not touching it with a 10ft pole.

1. http://www.bloomberg.com/news/videos/2016-09-09/ford-ceo-on-...

rm_-rf_slash• 10 years ago

Ford was also the only major American car company that didn't need a bailout when other auto Titans were groveling for cash. I wouldn't count them out of the race just yet.

malchow• 10 years ago

It was smart when semi companies became IP shops and outsourced fabrication, clambering up the value chain and expanding margins. I predict it will be seen as similarly smart for Ford to invest in software now.

simonbarker87• 10 years ago

A couple of big auto companies are doing this in one form or another, GM have a start up arm based in Kitchener and Nissan are advertising for jobs at a new connected transport "start up" spread across SV, Paris and Tokyo. I'm sure there are plenty of others doing something similar.

mkagenius2• 10 years ago

One of the biggest reason big companies fail is they get disrupted by smaller players mainly because they are not able to do new innovative things on their own because of drag of a giant company.

wahern• 10 years ago

Not only a drag, or not even a drag.

It's been a long while since I read The Innovator's Dilemma, but the ground-breaking thesis in that book as I remember is that established companies are disrupted because it's 100% rational for them to continuing pursuing and maximizing profit in their established market, even while obsolescence is knocking on their door.

The dilemma is that they have to choose between maximizing profits in their current market and returning unused capital to stockholders, or burning money on speculative investments in a bid to remain relevant in the future.

Were labor and capital markets frictionless, it wouldn't even be a dilemma. The answer would be obvious--choose the former. Any investments you divert from maximizing your current advantage is always a net loss. Excess capital is best given back to shareholders because "the market" will do better at choosing the next disruptive technology than any single person or business would be. That you're doomed to obsolescence and will eventually have to wrap up the business doesn't matter; what matters is maximizing profits.

But because labor and capital markets aren't frictionless, it's not optimal to let an existing business entity disappear. Think fixed costs like HR; or brain trusts. Finding the balance between maximizing your current market position and speculating on disruptive technologies is therefore arguably something worth pursuing.

But as labor and capital markets become more free and liquid, there's less of a dilemma.

Anyhow, long story short, companies aren't disrupted because they're dinosaurs and antiquated. They're slow to respond because it's often perfectly rational (i.e. more profitable) for them to ignore new technologies and to continue pressing their advantage until the very end. And that incentive aligns well with maximizing global profits and capital investments. The intuitive sense that companies are doing something wrong by not preparing for disruption is irrational as a general matter. You prepare for disruption by making as much money as you can and jumping ship at the very last moment; doing anything else is leaving money on the table.

pb2• 10 years ago

In ten years, all auto makers will either be tech companies, or they will be out of business. I'm impressed that GM and Ford have the foresight to understand this.

mox12• 10 years ago

100% disagree. Manufacturing is hard, ask everyone who has done a physical product kick-starter.

Giving X people mac books and asking them to write a "Clone of X Tech Startup" is not that hard, just potentially time consuming.

Now, Ford may USE technology to improve their manufacturing and core product (a transportation device). They may become an ultra high-tech manufacturer (if they aren't already)..., but they will not magically become Google or Apple.

treehau52• 10 years ago

Detroit will rise again in the next decade. They have pretty enticing offers for software engineers to move in. Right now you can get a stellar house for around ~150k which I am sure will triple in value in 20 years. Trying to convince my wife to move there from warmer climate, however... If anyone wants to help me there I am all ears, haha.

jdavis703• 10 years ago

Automakers are tech companies who just decided to put their money into researching how many cupholders you can add to a vehicle. It's like Yahoo!, focusing on content and branding and what not, instead of building technology that people want to use.

mbesto• 10 years ago

Can you define precisely what you mean by "be a tech company"?

awad• 10 years ago

Ford did $7.373 billion in net income on $149.5 billion in revenue 2015. If the $30 million number purchase price being thrown around is correct, that's ~ 0.4%. Not at all a terrible investment to make for a company of Ford's size.

Nokia, Motorola, RIM, Palm were leading manufacturers as well, and they all had their lunch eaten.

wyldfire• 10 years ago

I dunno -- if self-driving cars become so good, so safe, so ubiquitous -- they'll be more like a utility. Why own a car and all the maintenance hassle, or for a family -- why own two?

If that comes about, then the automobile market would likely shrink or growth would stagnate. Purchasing of automobiles would be much less about any kind of individualism/style/brand loyalty. Competition for share would be more intense. Ford would do well to try and integrate itself into the service-provider realm to stay relevant.

baccredited2• 10 years ago

OUCH. I invested in YC W15 companies (thirteen of them) through FundersClub but they missed this one.

Dear YC - please allow me to invest in the whole class, like you did for Michael Bloomberg!

wtvanhest• 10 years ago

1st, I am not sure if this is even a good acquisition.

2nd, That isn't how it works. Deal flow is the most rare, and precious, and valuable thing to investors. FoundersClub is trying to get deal flow and they will win some deals, but ultimately, the investors with the absolute best reputation will get to invest in the best deals.

In any event, Founders Club likely passed on Chariot, which I would have to agree with based on how the economics of that business works, regardless of whether they had a great outcome here or not.

baccredited2• 10 years ago

Ford paid more than $65 million for shuttle-van startup Chariot

http://www.businessinsider.com/ford-buys-chariot-65-million2...

badstrategy• 10 years ago

Former Chariot corporate (non-driver) employee here.

This is a rescue acquisition, pure and simple.

I could probably write a book about how not to run a company based on my experience there. Coordination failures at all levels and constant managerial abuse. In the words of an Uber employee familiar with the situation, "That company has employees solely so they can be a clueless, abusive megalomaniac's captive audience". Just read the Glassdoor reviews- the ones that aren't the fake 5 star reviews the CEO paid someone to submit.

Another employee has set up a Former Chariot Employee Alumni support group, FYI. Message https://www.suggestionox.com/r/Q5EWLs with your LinkedIn details if you are one and you need help.

habosa• 10 years ago

Glassdoor is blocking me out. Can you explain some of what went wrong inside Chariot?

From the outside it is very well run and I was amazed at how quickly it went from creepy white vans to a whole fleet of branded vehicles with a mobile app.

prdonahue• 10 years ago

Not surprising at all based on the responses I got to emails sent to him. I used to be a customer but the drivers I had (or observed) were absolute menaces on the road.

Here's one example:

<quote> Hi Ali et al.,

Wanted to bring your attention to an incident that happened this morning on my drive to work (though I'm a monthly customer, I drive probably 3x/week).

I was driving in my lane headed towards the Embarcadero when all of a sudden the driver of Chariot van #49, realizing she was in a left-hand turn only lane, swerved violently in front of me. Had I not immediately slammed on my brakes, I would have crashed right into her at a relatively decent rate of speed.

Somewhat shaken, I immediately grabbed my phone to document the incident and submit just a "heads up" to you to instruct this driver to be more careful. While taking pictures (included below), I notice the woman lean over towards the passenger seat and watch me taking pictures in the side-view mirror. She did not appear to be pleased with my actions and gave me a dirty look through the mirror.

Thinking no more of it, the light turns green -- we're in bumper-to-bumper traffic at this point -- and she begins accelerating. Then, out of nowhere, she slams on the brakes (a "brake check" if I didn't know any better), causing me to slam on mine, and bumping into her at about 2 mph. My immediate thought was that she was trying to induce an accident, or at the very least give me a scare. Either way, not at all a professional move by someone entrusted with the safety of your passengers.

As soon as this happens, the woman gets out of the car and I roll down my window to try to talk to her. I attempt to get her to exchange information, but she simply ignored me, took pictures, and drove away without a single word. Finally, at the spot I was previously* cut-off by one of your drivers (i.e., where they make a left-hand turn into that parking area), I was able to catch up to her to take my own pictures (these are below as well).

Given what happened today, and what I've observed before (see below), I'm inclined to bring this matter to the attention of the San Francisco County Transportation Authority. Before doing so, however, I wanted to hear you out and understand what sort of driver training your company has instituted -- and what actual re-training this driver might be required to take. While I'm a big fan of the service and convenience you provide, I can't help but think you're suffering from a serious driver quality issue. I've lived in this city for 10 years and have not had a single incident on the road outside of with Chariot vans.

Here are the pictures I took immediately after van #49 swerved into my lane:

1. Showing her stopped in my lane after cutting me off (when she realized she was in the wrong lane) [PIC]

2. The view from my car after I slammed on the brakes and swerved to the right to avoid the accident as she plowed into my lane [PIC#2]

3. How close we came to a decently high-speed accident [PIC #3]

And here is the picture that I took after I manage to catch up to her on Embarcadero:

1. Note that small scratch on the right side of the bumper (my car has somewhat more damage, including my license plate). This happened when she slammed on her brakes after immediately starting to go through the light -- inducing, I believe, me to bump into her:

* This is not the first time I've been aggressively cut off by one of your drivers. A month or so ago I submitted a report through the app. It should show up under support requests for my email address: prdonahue@gmail.com.

Please let me know if you need any more information.

Thank you, Patrick </quote>

To which the CEO replied: <quote> Hi Patrick,

Thanks for bringing this to my attention. We've logged tens of thousands of miles at this point and I will stand by our company's safety and compliance procedures and record of success firmly. Accidents happen, and regretfully you were involved; that's not an indictment of our driver's professionalism.

I have cc'd our manager Josh and team to investigate this matter immediately per our SOP.

You should expect to hear from them soon. </quote>

I got a boilerplate response indicating someone would look into it—but then radio silence.

bogomipz• 10 years ago

Could you explain what a rescue acquisition is? I am not familiar with this term?

ben_jones3• 10 years ago

I imagine its simply an acquisition as a last option for a company. For example, if the company was about to go out of business or face some kind of catastrophic event.

I think it also insinuates a less then lucrative outcome for employees and perhaps founders, as a rescue acquisition would give a large amount of leverage to the buyer who would then pay less for the company. I.e. early investors with preferences would get out ahead while common stock holders potentially come out behind.

EdJiang• 10 years ago

For some reason, this reminds me of when GM & co bought all the streetcar companies, only to kill off streetcars in favor of busses.

https://en.wikipedia.org/wiki/General_Motors_streetcar_consp...

brianbreslin2• 10 years ago

What was the other vanpool/private bus company that was recently selling off their vehicles on ebay? They had really pretty buses and were in SF only.

squishypirate• 10 years ago

I believe it was Leap: http://rideleap.com/

brianbreslin2• 10 years ago

They blamed their shut down on regulatory issues, but how did chariot get around them?

dlitwak• 10 years ago

Congrats to Ali. Been very impressed with Chariot's mastery of nitty gritty business & logistics fundamentals. That sounds like it should be obvious, but Leap and other competitors couldn't so much as file the right permits, let alone start what amounted to their own public transit network and get regular ridership. This is a hard, low margin, business to get right in a crowded space, and Ali managed to scale it to 40k+ riders per month and that's awesome. Well deserved!

jonathankoren2• 10 years ago

A rescue acquisition is a failure.

erispoe2• 10 years ago

40k+ riders per month? I've been trying to get ridership data for Chariot and couldn't get anything. So it's around 2,000 riders per business day? For 30 lines?

It's really low ridership by any standard. Not even a dent in SF Muni ridership of 650,000+ daily rides. It's the equivalent of a local, infrequent Muni line you probably never heard of like the 36-Teresita or the 37-Corbett, both of which are moving around 2,000 riders a day. On a single, modest line.

cmottau• 10 years ago

Darn, I was eagerly awaiting them to go out of business so I could pick up one of their vans (all Fords btw) at auction for pennies on the dollar. Their drivers in SF are absolutely clueless and honestly should not be alowed on the road.

alivahab• 10 years ago

From Chariot CEO & Co-founder:

Hi All, Thanks to those who have wished us well on this thread. Keeping everyone happy is tough, if not impossible, and it's even harder for them to swallow when they depart ahead of a very successful exit. Nevertheless, we wish everyone who spent time with us only the best since they contributed to our success.

We're really proud to be Ford Smart Mobility's first acquisition and become a building block in their strategy. Our mandate is to scale the effort with the considerable resources we can leverage from Ford.

If you're interested in learning more, check out opportunities to join us at chariot.com/careers. Hope to hear from you!

Ali Vahabzadeh

Ford Acquires Chariot (YC W15)

Related Stories