A desire named Streetcar

Hannah Bullock talks to Andrew Valentine, the man who aims to “take the hassle out of driving” – while taking our cars off the roads.

You probably picture a ‘sustainable entrepreneur’ as an idealist with bagfuls of ideas on how to save the world – who just needs the funding to do it. Not so Andrew Valentine, who set up Streetcar with Brett Akker simply because no one else had cashed in on the concept.

“Brett and I decided at university that we’d start a business of some sort together,” says Valentine. They researched everything from organic food to alcoholic drinks, going through quite a “structured process”, but found nothing which fired their entrepreneurial zeal. “Then we read an article about a car share company abroad and thought, ‘Wow, this is the one!’.”

Streetcar’s USP is its relative cheapness and ease of use – at least compared to a conventional car hire firm. Its vehicles are scattered at thousands of locations across London, simply parked on the street or in car parks. Members can book online or by text, just minutes before they need the car, anytime day or night. It’s all automated, with access by swipecard and pincode. This helps keep costs down to less than £4 an hour for the smallest models, and, unlike normal rentals, the car can be hired for as little as 30 minutes at a time, so assuming one’s available (there’s roughly one car for every 40 members), it can make sense to use one simply for an impulsive dash to the supermarket or an emergency school run.

Valentine’s adamant that it’s these aspects, rather than any green credentials, which have triggered the rapid rise in membership. Streetcar’s sold as a “money saving scheme”, he says, claiming that users who give up their car save up to £2,000 a year, once depreciation, MOT, insurance and parking permits are taken into account. Equally appealing, he believes, is the fact that they’re also getting rid of the “hassle factor” involved in sorting all that out.

Sounds like a no-brainer – but that wasn’t the reaction of the 70 banks and specialist motor funders who turned them down flat. “They all said the same thing,” laughs Valentine. “‘Great idea guys – come back and let us know when it’s operating profitably and we’ll be delighted to support you.’ With hindsight it’s very amusing, but we didn’t find it funny at the time.” The breakthrough finally came when a broker in Aberdeen offered them the first eight cars, which helped persuade an investor down in Sussex to stump up the initial £100,000 needed.

“The banks all said the same to start with: ‘Great idea guys – let us know when it makes a profit and then we’ll support you’”

This step-by-step funding model has helped them grow by degrees, explains Valentine. “We were able to show that a certain number of cars will generate x amount of revenue within a certain period, and another chunk of cars will do the same... so slowly we got more and more banks to buy into us.” For a while it was a strictly two-man job: just Valentine and Akker, “cleaning cars, handing out flyers – the works”. But gradually the funding grew to scale. Last summer they secured £6.4 million from private equity firm Smedvig Capital, and have landed a £10 million funding line from Barclays – no mean feat in this climate. The company’s yet to show a profit, but is expected to come close to breaking even in 2008 – and there are now plans to take it public.

Streetcar aren’t sole players in the car club game, but they’ve stolen a march over rivals Zipcar and City Car to take 75% of the market. Valentine identifies two factors behind its success: service levels and the proximity of locations – in other words, the fact that, thanks to the strategic scattering of Streetcars, there’s a good chance you’ll find one within reasonable walking distance – at least in inner London.

With his silky-smooth accent and pink shirt, it’s easy to imagine Valentine would be just as happy selling loft conversions in Islington as running a green enterprise from a Wimbledon industrial estate. But he’s not oblivious to the environmental benefits. According to Transport for London, each of their 1,000 pay-as-you-go cars means 20 fewer privately owned ones on the streets (the company’s figures come out at 27). And Valentine says he’s delighted at surveys which suggest Streetcar members drive 65% fewer miles, on average, then they did before joining. Instead they walk, cycle or use public transport more. “If you have a car sitting outside, the marginal cost of using it is zero, because you’ve paid for everything already,” he explains. “Whereas, if you’re using Streetcar you’re paying only when you consume it.”

He hopes to hardwire that type of thinking into young drivers across the country as the business expands into more university towns. Catch ’em young, and in several decades we might “start to see some pretty dramatic changes”. And of course, carless, cash-strapped students represent a perfect business opportunity...

With the service so well suited to short hops across town, are we going to see an electric Streetcar, then? Not yet, says Valentine; there just aren’t enough charging points around. It’s a caution which extends to other types of alternative technology. Right at the start, he and Akker decided against the Toyota Prius because of its high cost and rapid depreciation rate, and went instead for the Volkswagen Golf and Polo. They’re gradually adding VW BlueMotions to the fleet, whose Polo version is one of the only three non-electric cars on sale in the UK that emit less than 100g/km of carbon dioxide. It even outdoes the Prius on that front, too (99g/km versus 104g/km).

Sticking to petrol cars makes for easier expansion, says Valentine, particularly among business and the public sector – currently their fastest growing client base. Overall, the company’s set a target of 250,000 members across London by 2012.

But isn’t it beyond the capital that we need car share schemes the most? That’s the argument of national car share charity Carplus: “The real test now is to make the benefits of car clubs accessible to all drivers in the country,” says director Antonia Roberts. “Significant effort needs to go into creating a national network of pay-as-you-go vehicles.”

Valentine’s response shows his true entrepreneurial colours; Streetcar isn’t a public transport service, he says. “The countryside doesn’t tend to offer the density of population that would sustain it.” But new partnerships may change that. “If a rural development agency, for example, wanted people to give up cars in a village, that might support a couple of vehicles. It would need a combination of public and private money to make it work.”

So is there one thing Valentine would have done differently if he could? The mask of confidence slips, but just for a second: “I wish I had known how successful it was going to be; it would have prevented a huge amount of worrying!”

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5 January 2009

Hannah Bullock

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