Sunday 24 November 2013 10:38 pm

The unlikely bedfellows driving a cab revolution

Annabel Palmer talks taxis with Russell Hall and Ron Zeghibe, two of the founders behind Hailo

IN 1639, a licence was granted to the Corporation of Coachmen, allowing its members to compete with the then-dominant licensed sedan chairs. Today, there are over 23,000 licensed taxi drivers in London. They’ve become a British institution – described by Boris Johnson as “synonymous with London,” and The Knowledge (where wannabe cabbies spend years learning 25,000 streets, 20,000 landmarks and 320 routes within a six mile radius of Charing Cross) has a reputation as the hardest taxi driver test in the world.

Nonetheless, cabbies didn’t fare too well in the financial crisis, with London residents’ trips by licensed taxis and private hire vehicles (combined) falling by an estimated 23 per cent between 2007-08 and 2008-09. So, in 2010, three London cabbies, Gary Jackson, Terry Runham and Russell Hall, started work on a technology project, Taxilight. They wanted to tackle the biggest problem faced by most cab drivers: the fact that they spend an average of 40 to 60 per cent of their time looking for fares. The trio now form half of the founding group behind Hailo – the black cab app which puts customers two taps away from a licensed taxi.

MEETING OF MINDS
Hailo enables its registered passengers to e-hail, pay and tip for taxi journeys using the card details they have stored within Hailo’s cloud wallet. But Hailo would never have existed had the three cabbies not been approached by three Americans – Ron Zeghibe, Caspar Woolley and Jay Bregman – who had been trying to build an ambitious e-hailing app of their own.

Zeghibe, Woolley and Bregman had the idea and the technology; what they lacked was in-depth industry knowledge. “And if you don’t understand the business intimately, its culture and the players in it, you will never deliver a service in a way that will be adopted by the market,” says Zeghibe, who I meet with Hall at Hailo’s Somerset House offices. It is a fitting location for Zeghibe at this time of year – in a former life, he was a professional ice skater.

But the Americans wanted more than industry insight – they needed partners who also knew how to make a business commercially successful. When they heard about Taxilight (which, by 2011, was flailing due to a lack of funding), they swiftly arranged a breakfast meeting. “It was love at first sight,” says Hall. “We each had something the other wanted.”

A NEW APPROACH
Seven similar companies launched in London before Hailo. But Hailo differentiated itself by approaching the problem with a supply-side focus. “Terry, Gary and I knew we had to do more than matchmake drivers to passengers. We had to attract and hold drivers in advance – that was how we would erect a high barrier to entry. We built an app, allowing card payments and providing real-time traffic updates, that was being used by 400 drivers every day before we launched to any customers,” says Hall.

Today, the three cabbies offer more than just insight, and work closely with Hailo’s driver teams in every city. Bregman, meanwhile, is “the visionary”; Woolley takes care of operations (“we’re a tech business, but the first product we offer is a taxi booking service, and that requires boots on the ground in every city where we operate”); and Zeghibe’s experience (he was former chief executive of Maiden) will guide the business through its growth phases (“it’s the breadth of knowledge that has allowed us to scale,” he says).

WORLD DOMINATION
In London, Hailo has just passed 400,000 registered users and is adding 750 to 1,000 every day. Here, it charges drivers 10 per cent commission of the fare, because “90 per cent of something is better than 100 per cent of nothing,” says Hall. It has expanded to a number of foreign markets, adapting the business model accordingly. In Chicago, for example, where the average fare is much lower, the customer is charged for each booking.

But there have been bumps along the road. In February this year, Black Car Assistance Corporation and Livery Roundtable filed a lawsuit to prevent e-hailing companies from expanding to New York City. Hailo joined the lawsuit, after a temporary restraining order was issued against its pilot programme.

“Could it have been our Vietnam? Yes. And we’ve learned not to get caught in those dogfights in the future,” says Zeghibe. “But we had no choice. To be in the US, we had to be in New York. That’s why you raise capital – to fight those battles and persevere.”

THE POWER OF NETWORKING
Hailo had initially set out to raise £500,000 in seed funding. As Zeghibe recounts the process, you start to realise the power of a good network. “Through Jay’s contacts,” he begins, “we were introduced to tech buyout fund Silverlake. Two of their senior founders happen to be personal friends of mine. They also happened to know Jim Breyer of Accel – and introduced me to a young partner in London, who did us a favour and contacted all the VCs he knew to tell them about an exciting new opportunity”.

In the end, Wellington Partners, Atomico, and later Accel, along with nine angels, collectively invested over $3m. Since then, Union Square Ventures has invested $30.6m, and Hailo now counts Sir Richard Branson among its backers.

But even for a company that aims for £500,000 in seed funding and gets close to six times that amount, the finances of a startup are tough. It’s a balancing act of having the right amount of money, and being conservative in spending it. “It’s not something we’ve always done as well as we could, and we’re constantly re-evaluating and repositioning. Because until you are truly profitable, you’re burning other people’s money,” says Zeghibe.

The company is not yet profitable as a group, though London and Dublin are, and Zeghibe hopes the remaining 12 cities will be by 2015. What about applying this technology to other industries? “We have an ambition to start a demo on a service that isn’t taxis by the end of the year.” For Hall, the sky is the limit. “In the future, you may just need three apps. Amazon to buy something. Ocado for food. And Hailo for a service.”

In the meantime, the potential to expand into foreign markets is huge. Seoul, for example, has 72,500 taxis, giving 2m rides a day. “But could you, as a Western company, waltz into Korea claiming you want to shake up one of its most established industries? No. You have to learn about the country, its culture, and find partners there first,” says Zeghibe. After being widely heralded as “the next big thing” in disruptive technology, you suspect they’ll find a way.

CV RUSSELL HALL
Company name: Hailo

Founded: January 2011

Job title: Co-founder

Age: 53

Born: Stepney, London

Lives: Orpington, Kent

Drinking: Light and bitter

Eating: Rib-eye steak (medium rare)

Currently reading: My Autobiography, by Alex Ferguson

Favourite business book: Losing my Virginity, by Richard Branson

Talents: Singer, footballer, Podcast host

First ambition: To play for West Ham United