Ridesharing app SideCar raises $10 million Series A

Funding comes only days after receiving cease and desist letter from the government

As someone without a car, I know how hard getting around a city without great public transportation can be. You can spent forever waiting for a bus or train, and then even longer waiting for it to actually get where you need to go. It can be an absolute nightmare, and you can only bum so many rides off of friends before they’re sick of it.

Ridesharing company SideCar has raised a $10 million Series A round of fundraising from Lightspeed Venture Partners and Google Ventures, it was announced Wednesday.

The company says that it will be using the money to grow operations, develop technology and expand into new markets outside of San Francisco nationwide.      

The company also announced that SideCar has acquired US Patent #6356838. The patent was issued to Sunil Paul, CEO of SideCar, in 2002, and it involves a "method for accepting a transportation request for passenger pickup, determining location and directing a vehicle to the requested location."

SideCar is a peer-to-peer system, where users sign up to be drivers, who will then give rides to other SideCar users. The app, which is currently available on iOS and Android, lets passengers find nearby drivers, and alters drivers to passengers in the nearby area. The idea is for it to be an alternative to a taxi, which can be expensive and hard to find, especially in San Francisco.

"We created SideCar as an easy way to get around, but also as a first step in transforming transportation on a larger scale," Paul said in a statement. "We will use this investment to build our team, take our innovation to the rest of the world, and roll out products to accelerate the crowd-sourced transportation movement."

Founded in June 2012, the San Francisco-based company says it has facilitated nearly 50,000 rides in San Francisco in just that short amount of time. Despite only being around for four months, the site has added hundreds of drivers and thousands of passengers to its network.

This was the company’s first fundraising around, but it previously received seed funding from Spring Ventures, Huron River Ventures, SV Angel, Lerer Ventures, First Step Fund, Jeff Clarke, Lisa Gansky, Robert Goldberg, Jared Kopf, Konstantin Othmer, Mark Pincus, Martin Roscheisen, Josh Silverman and Thomas Varghese.

Trouble ahead

While SideCar seems to be doing well with gaining users, and now with raising money, there is one major problem that it has, along with others in the same industry: the government.

The announcement of SideCar’s fundraising comes just two days after it confirmed on its blog that it has received a cease and desist letter from the California Public Utilities Commission in August.

“Public Utilities Code section 5371 states that no charter-party carrier of passengers excepting transit districts, transit authorities, or cities owning and operating local transit systems themselves or through wholly owned nonprofit corporations shall engage in transportation services without first having obtained from the commission a certificate that public convenience and necessity require the operation, except that certain specific transportation services as defined in Section 5384 may be conducted under authority of a permit issued by the Commission,” the letter said.

”Continued violations of law may result in criminal prosecutions and termination of telephone service.”

Some of SideCar's competitors, including  Lyft, Zimride and Tickengo received similar letters. Another similar service, Uber, has also been locked in legal battles with the government over regulation. 

SideCar responded to this letter on its blog, saying that it has not violated the law since passengers are not required to pay their drivers.

“To the contrary, SideCar is a first-to-market donation-based rideshare platform that connects regular riders who need a ride with regular drivers willing to give a ride. Payment is voluntary, drivers and riders are vetted for safety, and drivers use the extra cash to help offset the costs of their vehicles.  SideCar is not a charter-party carrier,” SideCar wrote on its blog.

“Rather than ‘suggested donations’, the SideCar app provides a ‘community average’, which is a true reflection of what others are donating for similar trips.  To-date, approximately 1% of all rides have resulted in a $0 donation.  This is important.  Drivers using the SideCar app do not set prices and are not operating as ‘cars for hire.’”

While the company says it looks forward “to a healthy, productive discussion with the PUC,” it plans to “protect the rights of everyone involved with the sharing economy.”

“We believe collaborative consumption is the path forward to a better world with less congestion, more convenience and, most importantly, a better sense of connection with each other.”

SideCar could not be reached for comment.

(Image source: https://www.msc.navy.mil)