Learnings from Turo’s IPO
Turo is about to go public. Below are the most interesting pieces of their public filing. The punchline: customer feedback drives the product roadmap, covid was crushing but the rebound has been strong, the host is the real customer and partner, and Turo’s P2P platform may be the ultimate marketplace.
What they do. “Turo is the world’s largest car sharing marketplace where guests can book any car they want, wherever they want it, from a vibrant community of trusted hosts. Whether they’re flying in from afar or looking for a car down the street, searching for a rugged truck or something smooth and swanky for a once-in-a-lifetime event, guests can take the wheel of the perfect car for any occasion, while hosts can take the wheel of their futures by sharing their underutilized personal vehicles or building an accessible, flexible, and scalable car sharing business from the ground up. We are the leader in this new way to access vehicles, with over 85,000 active hosts and 160,000 active vehicle listings in over 7,500 cities as of September 30, 2021.
Covid crushed financial performance. “In 2020, we generated net revenue of $149.9 million, representing 6% growth from $141.7 million in 2019, and a net loss of $97.1 million during 2020, down from $98.6 million in 2019.“ Gross booking value was $336mm in 2020 and $352mm in 2019, so Turo is keeping ~45% of the booking.
But they’ve rebounded. “For the nine months ended September 30, 2021, we generated net revenue of $330.5 million, representing 207% growth from $107.8 million for the same period in 2020, and a net loss of $129.3 million for the nine months ended September 30, 2021, compared to $51.7 million for the same period in 2020. Net revenue during the nine months ended September 30, 2021 increased primarily due to a recovery in Days booked combined with an increase in Gross Booking Value per day. We continue to improve the efficiency of our marketplace, and generated adjusted EBITDA of $(42.1) million and $(93.8) million in 2020 and 2019, respectively, and $69.9 million and $(36.7) million for the nine months ended September 30, 2021 and 2020, respectively.”
Hosts are also renters. “As of September 30, 2021, approximately 86% of our active hosts were consumer hosts who listed two or fewer vehicles. As hosts become more successful on our platform, we are able to improve retention and grow supply.”
Hosts can do well. “Our hosts can realize compelling economics by sharing cars on our platform. Below is an illustrative example of a host who finances the purchase of a $22,000 vehicle with a 10% down payment and shares it on Turo. In this example, the host is able to realize a cumulative profit of $9,466 over three years, representing a 4.3x return on initial investment and a 116% 3-year internal rate of return. We have assumed that the vehicle is made available on the platform every day over three years and applied a utilization rate based on historical utilization data of approximately 50%. Hosts of all sizes have earned more than $1.1 billion in the aggregate on our platform since inception.”
Most bookings are under 7 days. “We estimate that in the nine months ended September 30, 2021, approximately 2.4 million, or 32%, of all total days booked by our guests on our platform (net of days canceled in that period), or Days, were part of bookings seven to 30 days in length, and approximately 325,000, or 4%, of Days were part of bookings greater than 30 days in length.”
Organic drives growth. “Importantly, for the nine months and 12 months ended September 30, 2021, 88% and 87%, respectively, of our site traffic was organic and approximately 41% and 43%, respectively, of Days (as defined under “ — Key business metrics” below) were generated from bookings by repeat guests.”
Days booked is a key measure. “We estimate that in the nine months ended September 30, 2021, approximately 2.4 million, or 32% of Days were part of bookings seven to 30 days in length, and approximately 325,000, or 4%, of Days were part of bookings greater than 30 days in length.”
As is Gross Booking Value. “As a result of the COVID-19 pandemic, we saw a decrease in Days in 2020 as described above, as well as an increase in cancellations. GBV decreased by 34% in the second quarter of 2020 compared to the second quarter of 2019, and recovered in the third quarter of 2020 as certain regions reopened their economies and we benefited from an increase in car travel as a result of shifting consumer preference to car-based travel during the pandemic. At the same time, rental car companies that had reduced their fleet sizes during the early days of the COVID-19 pandemic were unable to quickly rebuild their fleets due to constraints in automobile manufacturing capacity that we do not face as a marketplace platform. With the increase in demand for travel, compounded by the rental car supply shortage, we saw an increase in pricing, resulting in an increase in GBV by 100%, 549%, and 226%, respectively, in the first, second, and third quarters of 2021 compared to the first, second, and third quarters of 2020.”
Host retention is excellent. “The table below illustrates the revenue retention of each calendar year Host Cohort and demonstrates our ability to retain and improve our Host Cohorts over time. For example, our 2014 Host Cohort retained 74% of its Year 1 net revenue in Year 2, while our 2017 Host Cohort retained 88% of its Year 1 net revenue in Year 2. These improvements are a result of the continued investment in providing our hosts with the tools and technology they need to be successful. In addition, each of our Host Cohorts from 2014 to 2016 demonstrated improved retention relative to Year 1 in subsequent periods, prior to being impacted by the COVID-19 pandemic.”
As is guest/renter retention. “Guest Cohort and demonstrates our ability to retain and improve our Guest Cohorts over time. For example, we retained 29% of the gross profit from our 2016 Guest Cohort in Year 2, and this increased to 33% of the gross profit in Year 4. In addition, the 2017 and 2018 Guest Cohorts have performed better in Year 2 relative to the 2016 Guest Cohort. These improvements are a result of the continued investment in our risk-based fees and platform capabilities, including Turo Risk Score.”
This is the founder’s 2nd successful marketplace exit. “Stumbling upon eBay, I was electrified. This notion of leveraging the internet to connect people to buy and sell stuff — at times, rare and quite hard-to-find stuff — struck me as pure genius. What may have been sitting lifeless in someone’s closet in one corner of the world could become another’s prized possession. A neglected Madonna album collecting dust could become the first building block in rebuilding someone else’s lost collection.
Inspired, I took a leap of faith and helped co-found an online marketplace site for Europe, iBazar, much to my family’s chagrin. They were puzzled by my decision to leave a steady job to leap into the unknown like that. But that leap set in motion what would become my life’s work. eBay acquired iBazar in 2001, and from 2001 until I left to join Turo as CEO in 2011, I helped grow eBay from $750 million in revenue to $11.7 billion.”
User feedback drove the product. “Many of our most successful product features stem from feedback provided directly by hosts, who shed light on market nuances, software shortcomings, and customer tendencies, sharing insight into what works and what doesn’t. Offering delivery, for instance, was an idea hatched by hosts, and now it’s one of the most unique differentiating features of the Turo marketplace. Extras (like coolers or camping equipment) sprung from host feedback. The ability to offer week-long and month-long trips, as well, was suggested by hosts.
As a team, we pore over customer feedback — in trip reviews, app store reviews, surveys. I’m personally obsessed with our feedback channels. I read them late into the night and early in the morning, as my family can attest. I firmly believe that customer feedback is the deepest well of insights available to businesses, and the ability to internalize and act upon that feedback is directly correlated to that down-to-earth attitude.”
The business has outperformed other P2P services. “We have also outperformed the ride sharing, rental car, home sharing, and online travel agency industries in terms of revenue growth in the last 18 months.”
Visit us at blossomstreetventures.com and email me directly at email@example.com. All founders and funds welcome! We invest in companies with run rate revenue of $2mm to $30mm, with year over year growth of 20% to 50%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, bridges, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $3mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.