The CEO od ZipCar told Bloomberg that the company may be considering an IPO in 2010. The company subsequently issued a statememt disavowing any specific timetable.
Zipcar Seeks IPO as Once ‘Wacky’ Car-Sharing Gains (Update2)
By Julie Ziegler
June 10 (Bloomberg) -- Zipcar Inc., the world’s largest car-sharing company, is gearing up to publicly sell shares in 2010 as it fends off rivals such as Hertz Global Holdings Inc.
<bThe company, which has grown from a single lime-green VW Bug to a fleet of 6,500 autos, will post its first profit in the third quarter, Chief Executive Officer Scott Griffith said. Zipcar’s success has prompted Hertz to announce its own sharing service with 1,000 vehicles in New York City by year’s end, up from 100 in May.
Zipcar, conceived nine years ago at a café in Cambridge, Massachusetts, is aiming for an initial public offering at a time when smaller companies have been shut out of the market by the industry’s worst drought in at least 38 years. The number of venture-backed IPOs this year is down about 90 percent from the same period in 2007, the last year before the slump began, according to the National Venture Capital Association.
“We’re succeeding and we’re growing in a year where flat is the new up,” said Griffith, 50, referring to the global economic recession. Sales will reach $120 million this year and grow to $1 billion within a decade, he said.
Car-sharing differs from conventional automobile rentals. Zipcar customers pay an annual membership fee, currently $50. Reservations, pickups and returns are self-serve through the Internet or by telephone. The reservation system tracks where a Zipcar is left by the last user and can even lock out a driver who’s kept the auto past the agreed time.
Keys Stay Inside
Users swipe an access card over a reader in the windshield to unlock the Zipcar through a wireless data link. The keys are inside, attached by a cord to the dashboard. The cars can be rented by the hour or day, and fees include gasoline and insurance. The service is available in 28 U.S. states and Canadian provinces, as well as in London, Zipcar said.
Griffith joined as CEO in 2003, when Zipcar had 5,000 members. There are now 300,000. The company acquired competitor Flexcar in 2007 and this year started licensing Zipcar’s proprietary software to city governments to reduce costs.
David Brook, who in 1998 launched CarSharing Portland Inc. in Portland, Oregon, the first such for-profit service in the U.S., said it wasn’t long ago that car-sharing was viewed as a “wacky idea.”
“The car-rental companies were sitting on the sidelines for years, watching” to see who’d survive, Brook said.
While Zipcar hasn’t talked to bankers yet, the company’s growth makes it an IPO contender, said Paul Bard, an analyst at Greenwich, Connecticut-based Renaissance Capital.
‘Fresh Ideas’
“It sounds like a candidate for an IPO as the market recovers,” Bard said in an interview. “People are always looking for fresh ideas.”
OpenTable Inc., the restaurant-reservation service based in San Francisco that went public in May, was smaller and less profitable than ZipCar, according to regulatory disclosures. OpenTable commanded $20 a share, above its pre-IPO target range. The shares fell 28 cents to $27.70 at 4 p.m. New York time in Nasdaq Stock Market composite trading.
For Robin Chase, who co-founded the company with Antje Danielson, the once “fringe” notion of using the Internet to rent cars by the hour has been validated as Enterprise Rent-A- Car Co., Hertz and others started to vie with Zipcar.
“This isn’t niche, this isn’t fringe,” said Chase, 50, who holds a master’s degree in business administration from the Massachusetts Institute of Technology. She says her stake in the company is now “insignificant.”
The potential market for car-sharing worldwide may amount to 37 million customers and yield $10 billion a year in revenue, Zipcar said, citing a June 3 report it commissioned from the Economist Intelligence Unit. It didn’t specify a timeframe.
Whimsical Style
Zipcar underscores its whimsical style by calling members Zipsters and giving each car a name (at least one was called Betsy). The quest for profitability has disappointed some customers.
David Frey, 36, of New York, said he’s less enamored with Zipcar after the company raised his annual membership to $50 from a promotional rate of $25. Frey, who owns culturehall.com, a Web site that showcases emerging artists, said he might consider other options such as Hertz.
When he started using Zipcar in 2003, “it felt much more like a movement,” Frey said.
An IPO may benefit Zipcar’s largest investors, venture capital firms Greylock Partners, Benchmark Capital and Revolution LLC, the fund started by America Online Inc. co- founder Steve Case.
IPO ‘an Exit’
An IPO is “a way for our shareholders to get an exit,” Griffith said. Selling shares would also help the company expand in Europe and the U.S., he said.
“It’s a cool technology. My two sons use Zipcar,” Hertz Chief Executive Officer Mark Frissora said. “They said, ‘Dad, you have to get into this.’”
Hertz, the second-largest U.S. rental car company, slipped 8 cents to $7.08 at 4:04 p.m. in New York Stock Exchange composite trading. The Park Ridge, New Jersey-based company has gained 40 percent this year. Closely held Enterprise, based in St. Louis, is the largest rental car company.
Enterprise started offering car-sharing in 2007, spokeswoman Lisa Martini said, in a partnership with Google Inc., owner of the world’s most popular search engine. Hertz announced a car-sharing venture last year and in April acquired Paris-based Eileo SA to compete with Zipcar’s reservation system.
Zipcar also faces competition from local non-profit operators such as PhillyCarShare.org and Chicago-based I-GO. Griffith is banking on customers such as Alice Speck, who says neither price nor competition could pry her away from a Zipcar.
Speck, 31, used Zipcar for her 2006 honeymoon when she was a student in Washington, D.C. Unable to afford a fancy getaway, the couple checked out a Mazda Miata convertible and headed to Annapolis, Maryland, for two days.
“We are absolute loyal Zipcar customers,” Speck said. “It’s like being a Red Sox fan.”
To contact the reporter on this story: Julie Ziegler in Boston at jziegler@bloomberg.net.
Last Updated: June 10, 2009 16:12 EDT
Link to Bloomberg story |
