Alto, a small rideshare with roughly 10,000 active subscribers, is expanding in its home city and pushing into another Texas city and California. The company wants to operate in 15 large U.S. metro areas in 3 to 4 years.
(TNS) — Alto CEO Will Coleman is used to getting lots of questions when he tells people he leads a ride-hailing company. When he founded the startup a year ago, Uber and Lyft were already household names. Now they’re publicly traded giants.
But the Dallas-based company is showing signs of growth, even in a competitive industry. It has about 10,000 active members who pay a subscription-based fee. It’s driven nearly 100,000 rides. It serves more than 900 square miles of the Dallas-Fort Worth area.
Alto has also raised an additional $6 million to expand in Dallas and enter two new markets — another metro area in Texas and one in California — by the end of the year. Its venture capital backing now totals $20.5 million, with most from Road Ventures, a Swiss fund focused on transportation.
The company wants to operate in 15 large U.S. metro areas in 3 to 4 years, Coleman said.
Alto’s business model is nearly the opposite of its better-known rivals, who rely on contract workers who drive their own cars. Alto owns a fleet of about 60 SUVs. It employs more than 100 drivers who get health insurance and other benefits, along with pay. It has a membership-based model and a higher price tag.
Instead of competing on price, the company seeks out riders who are willing to pay for a more upscale experience.
“We are an accessible luxury," Coleman said. "We are focused on safety, consistency and quality, and for people that care about that, we think we’re the best in the space. If all you care about is getting the absolute cheapest ride from point A to point B, that’s not Alto.”
Coleman would not share Alto’s annual revenue but said the company’s Dallas operations will become profitable in late 2020 or early 2021. Starting in October, Alto’s revenue covered the direct operating cost of each ride, including drivers, vehicles, fuel and insurance.
Coleman, a Dallas native and former McKinsey & Company consultant, said Alto’s focus on profitability is timely. Uber and Lyft are under pressure from Wall Street as investors push for proof that they can make money.
Alto spends a higher percentage of its revenue on employees. About 60% of its overall costs are employee salaries and benefits, Coleman said, but that allows the company to train and screen drivers, he said. It also translates to lower insurance costs and lower vehicle expenses, since the company can buy and maintain the SUVs at scale.
Alto’s major backer, Road Ventures, was instrumental in its founding, and it led the recent round of funding. Road Ventures is majority owner of Alto. Patrice Crisinel, a Road Ventures board member, said it owns “just a little more than the majority" but wouldn’t disclose the percentage.
The venture firm hired consultants to explore investing in a ride-hailing company. Through the research, the firm’s leaders met Coleman and decided to fund a new company instead.
Crisinel said the research uncovered large segments of the market that didn’t use ride-sharing as much — particularly professional women and families. He said Road Ventures believed a new kind of company focused on safety and superior customer service could appeal to those customers.
“Our bet was right,” he said.
In addition to drivers, Alto has grown to about 25 home office employees, including software engineers and a customer experience team. It hires an average of eight drivers a week to keep up with demand.
Customers are equally split between men and women but tend to be more affluent. Most have household incomes of $100,000 or higher, Coleman said.
Unlike Uber or Lyft, Alto doesn’t raise prices during busy times — but riders must plan ahead for trips. Riders request a ride through a smartphone app. The wait is typically about 10 minutes. It doesn’t have a shared ride option either. (Uber and Lyft don’t have a carpooling option in Dallas but offer it in cities like San Francisco and New York.)
Over the past year, Alto has expanded its coverage area in Dallas and tweaked its approach. It launched with a members-only subscription model but now allows guests to pay per ride. Membership costs $12.95 a month or $99 a year, in addition to the cost of rides. For guests, there is no membership fee, but rides cost about 30% more. About 85% of its rides are taken by members.
Alto isn’t the only company putting its own spin on ride-hailing. Via offers ride-hailing in several major cities and has struck deals with public transit agencies. Zum and HopSkipDrive market themselves as a solution for busy parents who need help with kids’ pickups and dropoffs. Dallas-based Bubbl hires drivers who are off-duty police officers, veterans and first responders.
Alto has tried to stand out with unique touches. Uniform-wearing drivers pick up customers. All rides are in white Buick Enclave SUVs with vanity license plates and a leather interior. Riders can pick music or select “Do Not Disturb," if they have a work call or prefer quiet. And the company borrowed a strategy from high-end hotels by developing a signature scent that drivers spray before each ride. It’s a subtle mix of cypress, vetiver and bergamot.
Alto plans to add other customized features, such as allowing riders to turn up the air conditioning or dim the lights. In the future, the seats may be preprogrammed to adjust for customers, for example, Coleman said.
“We want our customer to feel like they are in control and to feel like they are getting in their car — not someone else’s car,” Coleman said. “That’s really the feeling that we think differentiates us from our competitors.”
©2020 The Dallas Morning News, Distributed by Tribune Content Agency, LLC.