An ex-Drivezy employee claims that around 120 cars and 200 bikes were purchased under a decentralized asset model after the first ICO. While Singh told The Ken that the company currently has 8,000 two-wheelers and 3,000 cars on its platform, he refused to comment on how many of these are on the P2P model.
The single biggest problem facing companies in India’s urban mobility space is scaling.
This has been a problem in the country since at least 2015 when Bengaluru-born Ola found itself at a crossroads. Having grown steadily since its inception in December 2010, and faced with competition from global ride-hailing giant Uber, it needed to scale its supply of cabs.
In a country like India, plagued with poor public transport infrastructure, rising fuel prices and a burgeoning population, demand wasn’t the issue. Ola made its move, launching its cab-leasing operations the same year. Drivers and fleet owners could lease Ola-owned cabs. Uber followed suit. But this was no silver bullet to their cab supply woes. In recent years, both companies have seen their cab-leasing operations run into trouble.
Ola and Uber aren’t the only ones struggling with this problem. Car rental startups also face such issues. The problem ultimately comes down to one thing. As the number of cars on each platform goes up, so does the cost of ownership. Worse, these are depreciating assets on the company’s balance sheet. Actual ownership of vehicles is a burden no one wants to bear.
Zoomcar attempted to reduce this burden in its own attempt to scale with its Zoomcar Associate Programme (ZAP). ZAP invited individuals to purchase one or more vehicles and lease them to Zoomcar. This lends a P2P car rental aspect to the platform. Alternatively, individuals could lease vehicles from Zoomcar through a downpayment and subsequent EMI fees. This meant that vehicles are also on Zoomcar’s books until the cost of the vehicle is paid off by individual investors. Still not ideal.
According to Vipul Goyal, co-founder of car servicing platform CarCrew and investor in Drivezy, P2P car rental models and leasing programmes haven’t been able to help companies achieve scale. “I don’t think they (leasing and P2P rentals) have scaled at the moment, and a lot of these companies claim to be asset-light and they are just using different vehicles or different entities to own the vehicles and supply on the platform,” adds Goyal.
Which is where Drivezy’s crypto-based model was supposed to come in.
Drivezy was one of the first Indian firms to dip its toes into the ICO pool. Their white paper was released in November 2017, a time when the ICO craze was nearing its peak and there were no clear guidelines around this fundraising mechanism across the globe.
Drivezy’s timing seemed perfect. Two back-to-back ICO offerings that raised $13 million, followed by a $100 million asset financing deal via a special purpose entity (called Harbourfront Capital, in collaboration with AnyPay), capped by a $20 million Series B round. Everything it touched was golden in 2018.
But inside its pile of golden coins was trouble. Crypto trouble.
Because blockchain is more complex than just a layer on top of the conventional business or financing models. Properties like decentralization, security, transparency, and immutability that are associated with blockchain don’t come pre-installed in a custom-made blockchain. These are acquired over a period of time and are subject to many variables.
Catch a tiger by its tail
Through the first phase of the ICO, Drivezy was not just able to decentralize asset ownership, but, as co-founder Sah explains, also avoid the interest costs it would have incurred had it financed its asset purchases through banks or NBFCs. While the legality of this funding method is still uncertain, the more problematic part is its planned second phase, RentalCoin 2.0.
Because while having a distributed network is useful for Drivezy’s business model, having a private token to fuel its entire network—RentalCoin 2.0—is more questionable. Especially when it could simply use a more stable fiat-backed cryptocurrency, mature cryptocurrencies like Bitcoin or Ethereum which are on a public blockchain, or just local currency like the Rupee or Dollar.