Zipcar Case Study

Zipcar

        At first when meeting with a venture capitalist I believe the most important thing to touch upon, besides the value proposition, and how would be the factors of the ecosystem that he might believe this venture would need to asses in order to become successful. So, in order for the venture to work we need to first:

1. Have the technology in order for people to enter the car and to properly record the cost of each person using the car.
2. We need to get financing to lease cars, because we do not want a depreciating asset in our books, rather we prefer having a lease expense and then change the car after each lease contract, without having to worry about the resale price.
3. Parking in convenient locations for customers to have access to a car and to park it to places that are favorable for them
4. Insurance and the customer’s driving history may be factors to take into consideration and are definitely preoccupations investor’s may have for this venture.
5. Marketing is always an important aspect

I would explain the technology to the venture capitalist in that it would allow customers to access the car so we can properly track his mileage and usage of the car. One of the best things about the technology Zipcar is planning on developing is the fact that it is patented. So, that buys us time before other competitors try to enter the market space with a similar concept.

        Leasing costs will go up, as we are a startup and this is an area in which we need capital to continue expanding. Car companies expect larger risks when we lease more and more cars so this needs to be taken into account when considering the cost/ car.

        Parking contracts will be signed at high traffic areas in the city. Some of these areas especially Boston have expensive parking. I would definitely reflect that the price the customer would pay per hour would depend on were the customer is using the car and where he is parking the car. Expanding on the parking I believe that $600 (based on the assumptions made Exhibit 5), parking costs per year are not as bad as people would think. That’s $50 per month, in our first year we would have 12 cars that comes to $7,200 per year. If we were to sign 96 members on our first year, the annual fee would help cover these costs for parking. Based on the assumptions ZC is going way over this number for members signed. The yearly fee gives us a sort of cushion for these more fixed/variable costs because they might fluctuate on a yearly basis.