Carpooling Gets a Boost with $6 Million In New Funding for Zimride

One of the biggest problems with casual carpooling is that in most cases you really don’t know who you’ll be riding with. It can be a great person and the beginning of wonderful friendship (hey, that’s how Harry met Sally!), but you might also find yourself riding eight hours with some weirdo making it your worst ride ever. The emergence of social networking tools was supposed to make things easier and safer and promised to make us more open-minded to share a ride with strangers. One of the companies leading this trend is Zimride, which has just received $6 million in funding to help it fulfill this promise.

Zimride started in 2007 with the mission to change transportation one seat at a time. Four years later, the company has become the largest online ride-sharing service in North America with 350,000 users. Last week Zimride announced the company closed a $6 million Series A funding round led by the Mayfield Fund, in what looks like a clear vote of confidence in both the future of carpooling and the ability of Zimride to become a leading player in this market.

Zimride is basically a marketplace matching drivers who are looking to sell empty seats in their car with passengers looking to travel along the same route. Zimride users (Zimriders, as the company calls them) are connected via Facebook, which adds a layer of trust to the system – there they can view profiles for common networks, interests and friends before deciding to share a ride. You can even read reviews if available on past trips with the driver/rider you’re checking.

Zimride from Harrison Bowden on Vimeo.

The company’s operations have been mainly focused so far on creating networks in universities and companies, where riders and drivers need to be to be from the same school or business in order to participate. So far Zimride established networks in over 120 university and corporate campuses across 30 states in the U.S.

The company’s focus on these networks is very obvious – they are the key to Zimride's business model. The company charges companies and universities for participating. Right now, they don't take a cut from transactions between drivers and riders, though this might change, especially since payments go through Zimride’s payment system. As the company looks to create more options for riders and drivers outside the networks, usage fees are a natural expansion route. Last month, for example, Zimride launched its first public ride-sharing route between L.A. and San Francisco. The Los Angeles Times reported that this is the company’s first attempt to build up a critical mass with a predictable and growing number of trips between the two cities.

Zimride has already reached some impressive milestones such as helping users travel over 100 million miles and creating over $50 million worth of savings in vehicle operating expenses. The interesting question is, can such a start-up can also grow to become a profitable and sustainable business? The latest funding round provides an indication that the answer is yes.

The $6 million funding round was the Zimride’s second round – last year the company landed a $1.2 million in seed funding led by FLODGATE, K9 Ventures and a group of Angels. The current round is led by the Mayfield Fund, while existing investors FLOODGATE and K9 ventures are also participating.

The investors are impressed from both the potential of carpooling and the positioning of Zimride in this market. “The Zimride team is addressing a multi-billion dollar market opportunity by building new transportation infrastructure in a country where 75% of the seats on our highways remain empty. Their early success on college campuses lays the groundwork for their network effect business in what will be a winner-take-all market,” says Raj Kapoor, Managing Director Mayfield Fund on the company’s press release.

These investors recognize carpooling is an untapped market, with clear benefits for participants, from individuals who want to save money on rides, to companies and universities trying to reduce transportation costs and provide better service to their employees/students. In a way, Zimcar is reminiscent of the car-sharing market a decade ago, and I guess investors hope Zimride will become one day the Zipcar of the carpooling market. Actually, if you think about it, Zimride as an online service doesn’t have to deal with infrastructure issues and costs that a car-sharing company needs to deal with, so in a way they might have an easier way to the top comparing to Zipcar.

Zimride is not yet Zipcar and it still has a lot to prove, but the new funding should help them to move on to the next level. Logan Green, co-founder and CEO of Zimride says the funding will be used to significantly scale their networks, build out new markets and expand product functionality. If they do it right, and hopefully they will, we might finally see more people sharing less cars on the roads for the benefit of everyone, from mother earth to the investors in Zimride. Raz Godelnik is the co-founder and CEO of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.