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How Zum's marketplace focused on schools and took off

A brief chat with Zum CEO and founder Ritu Narayan and how schools are key

Financial trends and news by Bambi Francisco Roizen
April 3, 2018
Short URL: http://vator.tv/n/4b4e

For marketplace observers or investors or operators, one thing is clear: getting the flywheel going and scaling isn't very easy. For those who want inside tips as to what it takes, read our "Winning the marketplace revolution" on some best practices and lessons learned.

CB Insights put together a nice list of on-demand startups that failed. If you read up about these failures, most reports point to running out of money as a reason the startup failed. That's true. But running out of money or failing to raise money aren't causes behind startup failures, they're the effect or the consequence of bad business models around either the supply or the demand side. 

A good focus on the demand side of the marketplace equation is likely one reason Zum is rising above the dustbin of on-demand marketplaces that have failed, such as Shuddle, a Zum competitor that shut its doors in 2016. It was reported that Shuddle failed because it ran out of funds due to losing money on every ride. But that's almost always the case in the beginning. The problem for Shuddle it seems had more to do with maintaining a steady flow of demand to bring down those costs per ride. In other situations, marketplaces fail because they can't scale up the supply, one of the concerns with Airbnb early on -- how to continually scale up more places to stay. 

But in the kids ride-sharing marketplace, drivers and babysitters are readily available. The question is: how do you get a steady flow of demand from kids and parents whose number one concern is trust. 

Recently, Zum raised $19 million to expand its service and to better compete with existing competitors Kango and HopSkipDrive. I chatted with Ritu Narayan to learn how her marketplace started and how it got scale, particularly with the demand side. Sounds like Zum had a far better game plan than Shuddle, and maybe some of the other competitors.

Turns out Zum didn't just consider parents or kids as the demand side, but schools. One might think getting kids to-and-from school activities is a parent problem. And it is, but it's also a problem for schools, and Ritu put the onus on the schools to solve it. For Zum, the parents and schools represented the demand side of their marketplace.

"One of the reasons parents have a big problem is because schools haven't been able to solve that problem for them," Ritu explained. If she could help the schools solve the transportation conundrum, then she could help the parents. 

"In 2015, we had one pilot school in the South Bay and we learned a lot by providing services to them," Ritu said. "Schools spending $500k annually, but are stuck in an old infrastructure, Ritu said. "They don't have door-to-door flexibility." Schools traditionally use buses and vans, but they lose money if they rent a bus for 20 kids but only 5 of them return on the bus. In effect, schools are paying for excess capacity, when they don't need to.

"They have lots of needs that don’t get served, such as carpools for parents, and this is where Zum comes in, and provides access to our network," she added.

Today, Zum has partnered with 1,000 schools and has saved schools over $10 million. 

That's a compelling proposition to schools. Not only does this build the demand side, it also establishes instant credibility, an attribute Zum doesn't take for granted. 

"Trust was our No. 1 thing," said Ritu. All the the drivers go through fingerprinting and are certified. 

So how's it paid? Parents pay $16 per ride. Beyond that it's based on number of miles. A five-mile ride would be around $20. Ritu explained that the company pools up the rides so drivers get a minimum number of them in an hour. In one hour, they can expect to earn $32 an hour.  

Source: Siliconbeat