Despite their self proclaimed belief in thinking different, many of today’s internet entrepreneurs tend to travel in flocks and follow the whichever business model is currently being hyped by Silicon Valley’s insiders.
From the original dot com boom in the late 1990s to today, web entrepreneurs and their investors jump onto the bandwagon of the day – it could be online shopping, photography applications, group buying services and taxi apps which are the flavour of the moment.
The latest taxi app is Click-a-Taxi, a European venture which has raised a stingy $1.5 million in second-round funding, which joins a legion of taxi and hire car apps following in the wake of market leader Uber.
Unfortunately for the investors in these taxi and hire car apps, these services are making some pretty powerful enemies.
Around the world gatekeepers such as taxi companies and booking services do their best to keep drivers in poverty while over charging passengers for a poor service.
The new apps disrupt that business model by offering a better service for customers and a better deal for drivers – most importantly it deprives the gatekeepers of their cut.
Predictably, the backlash is fierce with 15 US and Canadian cities proposing to tighten the rules on the use of GPS and smartphone apps.
These backlashes are going to prove expensive to the investors as Silicon Valley entrepreneurs have a habit of under-estimating the power of regulatory barriers. How the current crop of taxi apps deal with this will determine which lemmings go over the cliff* and which ones survive.
One group of Silicon Valley lemmings lying dazed at the bottom of a cliff face are those who invested in the group buying hype of the last two years.
Market leader Groupon is now reportedly moving away from daily deals to ‘always on’ deals, which kills the whole point of group buying sites. Most of the copycats are already dead.
Former Cudo CEO Billy Tucker predicts that in the Australian market – which was flooded by a wave of Groupon imitators in 2010 and 11 – will only have a dozen survivors out of the top 50 listed earlier this year.
Investors in these look-a-like services had a gamble that a greater fool would buy the operation, usually a big corporation run by executives with a fear of missing out. The ones who missed out quietly swallowed their losses and moved on to the next mania – which appears to be taxi apps.
For the taxi applications, the buyers of the apps will probably be the incumbent gatekeepers, who aren’t really fools at all.
It wouldn’t be surprising to find the smarter look-a-like operators are already talking to the taxi companies about an app which will, miraculously, comply with all the requirements of the local regulators.
As for the rest, they’ll do their dough.
What is going to be interesting though is the battle between Uber and the various taxi regulators around the world, particularly in countries where politicians jump to the whims of their business cronies.
*lemmings don’t really throw themselves off cliffs, that myth was invented by the Walt Disney Corporation. Sadly Australian, particularly NSW, politicians favouring ticket clippers and rent seekers is no myth.