Flywheel raises $12 million to help taxis fight Uber

Despite the quick rise of ride-hailing apps Lyft and Uber, one San Francisco startup is out to prove that the taxi industry is not down and out.

Flywheel, a mobile app that lets riders order a traditional taxi cab from their smartphone and track its arrival, has raised $12 million from venture capital firms to fuel the company’s growth as it aims to beat back gorillas Uber and Lyft. The round, which Redwood City-based Flywheel announced Thursday morning, was led by TCW, Shasta Ventures and RockPort Capital.

Their timing could not be better. Uber is in hot water this week after reports that it proposed retaliating against critical reporters and evidence that it has spied on passengers. Revelations about the company’s aggressive tactics prompted a letter of inquiry from Sen. Al Franken.

Flywheel, which has gone through a few leadership, name and branding changes since its 2009 founding, also announced new additions to its executive ranks. Percy Rajani, formerly the CTO of Humin, will become chief technology officer at Flywheel. Oneal Bhambani, a partner at TCW, one of Flywheel’s investors, will become Flywheel’s chief financial officer.

CEO Rakesh Mathur, who just recently joined the company, said he took the job on the condition that Bhambani would later join him at Flywheel. The two had worked on investments together previously. Mathur is a serial entrepreneur and investor, exiting four companies in the last 10 years.

Mathur is adamant that the taxi industry is still booming, despite the global spread of Uber and Lyft and consumer sentiment that — with the exception of the recent backlash against Uber’s aggro culture — is quickly shifting in favor of car service startups. Mathur said with 45 million taxi rides a day in the U.S., Uber can’t catch up to the industry’s dominance, particularly outside of the tech-obsessed Bay Area.

“The taxi industry isn’t going away, and it’s also significantly larger in scale,” Mathur said in an interview this week. “They have better service, better price, and better availability than Uber and Lyft.”

Many passengers have complained about surge pricing with Uber and Lyft, which billed themselves as the cheap alternative to taxis when they first launched. While there are ample Uber and Lyft cars in the Bay Area, taxis do have better coverage in other parts of the country.

Flywheel hopes to give taxis the high-tech solution to compete. Flywheel contracts directly with cab fleet owners who agree to use the app in addition to the fleet’s own dispatch system. Passengers can view what cabs are available when they open the app, and not unlike the Lyft and Uber apps, can view the driver’s name, information and location, and track its arrival.

“The key element of the taxi industry needs technology,” Mathur said. “They are technologically behind. The best thing that happened to the taxi industry is Uber.”

Mathur said about 1,800 taxis use Flywheel, primarily in San Francisco, where the company has agreements with about 85 percent of taxi fleets. Still, most taxi rides are street hails, not Flywheel calls.

“I certainly believe that we have the blueprint to go out and be in most major US cities,” he said.

But Flywheel has announced grand expansion plans before, which never really came to fruition, in part because of competition from similar taxi apps such as Curb and the rise of startup car service apps.

Mathur acknowledges that Uber is an ominous foe, but the company wants to make sure consumers leave room for the app on their smartphone.

“In city after city, Uber is taking dollars away from the taxi industry,” he said. “The taxi industry has been a little bit shook up. But what we are seeing is that people have Uber, Lyft and Flywheel, all three apps. I’m finding that everybody in this market is receptive to someone like us.”

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