Melbourne-based Shebah is a ridesharing service with a difference; it’s all-female, focused on matching women drivers and passengers.

I spoke with founder and CEO Georgina McEnroe, who says she created Shebah specifically for women and children’s use, providing females with what she pitches as a safe rideshare experience.

The service is designed to appeal to users who feel unsafe or threatened by a mixed-gender experience in a taxi or other point-to-point transport system.

Ms McEncroe claims that the women-only service has become a necessity “as women interact differently to public transport than men”.

Underscoring Shebah’s value proposition is a substantial amount of credible research, McEnroe says, with much of it pointing to harassment and violence towards women passengers and women drivers in taxis and rideshare vehicles.

My analysis of the company — the history and background, its current valuation and its prospects going forward — is set out below.

Valuation

Managed by Birchal, Shebah’s crowd-sourced funding offer is for fully-paid ordinary shares in Shebah Pty Ltd to raise a maximum of $3 million.

The minimum investment is $100. With the offer closing on 31 March 2019, investor demand has already passed the $1 million mark with considerable support from around 800 of Shebah’s 1,200 drivers.

Ms McEnroe confirmed that the pre-money valuation is $20 million, so the shareholders participating in the minimum $1 million raise will be taking under 5% of the company.

Shebah is chasing a $1 million minimum but the possibility of hitting the $3 million target will provide significant flexibility to accelerate their roll-out plans.

Funds used from this raise will used to;

  • Launch operations in New Zealand;
  • Invest in driver on-boarding; and
  • Continued investment in the company’s software technology.

It will also free up some capital for some new initiatives the company is working on, although Ms McEnroe is keeping those under wraps for now.

Some brief history

Shebah got started with its first capital raise in 2017 using the social crowdfunding platform GoFundMe.

At that time, Ms McEnroe also attracted some cashed-up investors who got behind her and the concept and provided the much-needed capital to get the service up and running to the point that it is now producing revenues with year-on-year growth.

ASIC records show that a total of 13 investors have provided $2.1 million in capital to Shebah to date, so after closing out the Birchal crowd-sourced funding offer, these original investors will be sitting on a 10-bagger.

Business model

Shebah’s business model is a version of other competitors in the Australian ride-sharing marketplace, such as Uber and Ola.

Shebah charges a 15% commission on the value of each journey plus a booking fee and car seat hire fee.

The company has delivered 200,000 journeys, generating turnover across its booking platform of $2.3 million since its inception in 2017 ($1.8 million in 2018, up from $500k in 2017).

This would imply that 2018 annual revenue was in the order of $270,000. A great start, but very modest given the high costs that would be typically associated with building and operating a national booking and payment platform.

There’d also be cost outflows associated with customer and driver acquisition in a fiercely competitive market.

Risk

Ride-sharing is a well-established and proven concept, which means that Shebah’s technology risk and adoption risk is low.

Shebah proudly offers a female-only service, and I checked with Ms McEnroe on whether the company’s service is compliant with the Sex Discrimination Act 1984 (Cth) — which makes it unlawful to discriminate against a person because of their sex in areas such as employment and the provision of services. Ms McEnroe confirmed that Shebah’s offering is fully compliant with this legislation.

Industry attractiveness

The financial premise of Shebah is pretty straightforward (on paper); earn enough commissions from passenger bookings to cover the fixed cost of the operation.

This is achieved by scaling the two-sided business model (a delicate balancing act where others have struggled), and reducing customer churn such that the cost of acquiring a new customer is lower than the incremental profit it generates. Those operational costs also have to co-exist with ongoing investment in software development.

If you throw enough money at it, you may get there one day — well at least that’s the approach of all global players that currently have operations in Australia.

But what’s scary to me is that none of these firms have turned a profit yet. The largest player, DiDi — the Chinese ridesharing operator — is no bit player. Didi delivers a staggering 25 million rides a day (around 300 trips every second) which is almost five times more than Uber globally. Didi made a loss of USD$300 million last year and over the same period, Uber lost $US$6 billion.

In my opinion, the absence of profit from any of the major players raises questions about the current business model and the long-term sustainability of the ridesharing industry.

Conclusion

The raise is going well and has already exceeded the minimum $1 million which shows the appeal of not just Shebah’s offer, but also of Birchal’s platform.

The mission of Shebah comes from a good place that may attract customers because of its highly differentiated offering. However, Shebah operates in an industry that is highly competitive and its point of differentiation also puts restraints on growing the number of drivers and customers across its two-sided business model.

That may turn out to be the biggest challenge to Shebah achieving the volume of trips needed to reach profitability.
 

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Former fund manager and finance academic, Dr Nigel Finch advises growing business on strategy execution, corporate governance and capital raisings. He has worked across all stages of the business cycle from start-ups to seasoned ASX-listed companies including many who have tackled Asia’s emerging markets. Authoring more than 5 books and 100 scholarly articles, Dr Finch has a thing or two to say about business.