HAILO is a business that improves the experience for customers and employees and fits all the things I look for in an investment,” said Virgin tycoon Sir Richard Branson on investing in the smartphone app that acts as a matchmaker between empty cabs and would-be passengers earlier this year.
As far as endorsements go, you don’t get much better. But Branson is hardly alone in seeing the potential in Hailo, the black cab app developer that launched in November 2011. Founded by three taxi drivers and three entrepreneurs on a barge on the Thames, Hailo has now raised more than $50m (£31m) from investors including Union Square Ventures.
With such backers – USV was one of the first institutional investors in Twitter and also backed Facebook – Hailo can be confident of a bright future. Since its launch in London, the number of capital cabbies using the app has increased from 500 to 16,000, while turnover has soared to more than $100m on the back of global expansion into 15 cities worldwide and almost all of its direct competitors have fallen by the wayside.
Such rapid expansion has naturally proved a challenge for Hailo’s finance director Nick Lally – a challenge compounded by the fact that Lally was the company’s first full-time appointment when he joined June 2012.
On joining the company, Lally was confronted by a back office made up of different systems across seven subsidiaries that all had to be consolidated on Excel for the month end. “That was a real headache,” he tells Financial Director.
“Pulling business information together from multiple systems … from our offices around the world was a painstaking task. It took the team ten or so days of manual spreadsheet entry to generate a month-end report which was far too slow – not to mention the worry about financial errors.”
Apart from being time-consuming, the solution clearly wasn’t scalable for a business that was expanding rapidly around the world. One of Lally’s first tasks was to move Hailo’s finance function into the cloud and consolidate its accounting systems into one platform, which, following a tender process, ended up being online provider NetSuite.
“We quickly realised that … the solutions weren’t going to scale with our growth plans,” says Lally, and explains that a system run entirely in the cloud – just like the rest of the business – would make the business “more agile”.
“We wanted a solution that would integrate and work quickly. We can run up a city and have it live in a couple of days,” he explains.
And that expansion has carried on at pace, with recent ventures into New York, Madrid, Dublin and Tokyo. But the company can’t afford to have local back-office staff in every city, hence the need for a cloud system and engagement with local accountancy practices on the ground.
“We meet the book-keepers early on to see how we do our processes. As we hit scale, we know it’s not a solution that can last forever … and will probably move some of the infrastructure in-house. At this stage, it is easier and cheaper,” he says.
For instance, when the US hits scale Lally expects to hire someone internally. “It will be a lot easier once they are in-house,” he explains.
About 16,000 black cab drivers, or some 60% of the London market, are now signed up to Hailo, while a Hailo hail is accepted around the world every four seconds from its global network of half a million passengers. Lally isn’t kidding when he says that it is a “very transactionally intensive business”.
“We have about 30,000 drivers set up; some we pay daily and some weekly. It means we have to make sure our processes are rock solid,” he says.
The local knowledge
For the passenger, using the app – a yellow button on your smartphone – couldn’t be easier. It allows users to hail one of the city’s cabs with a simple tap. They are located using GPS, the nearest driver is notified, and the passengers are sent details of drive and estimated time of arrival. At the end of the journey, card payment is taken – or not even that, if details have already been entered.
But behind the scenes, some interesting decisions have been made about the company business model, which varies from city to city. In London, a 10% commission is levied against the cab on fares booked through the app, while in New York customers are charged $1.50 every time they book a taxi using the app.
“In London, we charge the driver a 10% fee. In the US, where people are used to tipping and drivers don’t really earn a lot of money, we charge the customer,” Lally explains. “In Asia, it is very much a fleet-driven profession. When we go into markets like that, we need to develop a new model.”
That naturally means the business has to partner with the drivers to find out what works best for each locale. “We go in to the city, download local knowledge and, based on that, we determine what our core business model will be in that city,” Lally says.
However, models can be changed and Hailo’s decision to have a minimum fare policy has caused some degree of opprobrium. In a blog post last month, Hailo announced a minimum fare policy of £10 between 6am and 10pm and £15 between 10pm and 6am.
Transport for London has since said it is investigating complaints about the minimum fare policy, while Hailo said the move was made in order to give customers “the most chance of getting a cab”.
In many ways, Hailo is the epitome of a successful, entrepreneurial start-up business, which for Lally was a stark change in environment from what he had experienced before in his career.
He began his career at the Commonwealth Bank of Australia in a corporate environment that is about as far removed from a tech start-up as you could imagine. A native Australian, Lally joined the bank’s graduate programme straight out of university but even at that early stage, he knew his ambition lay elsewhere.
“At the back of my mind, I knew I never enjoyed it much and that there was no affinity with the product,” he says.
After switching to a role at a film distribution company, which he says was an “eye opener”, Lally joined Hailo and found a very different environment. For one, decisions are made faster at a start-up, while the FD gets involved in running the business from end to end.
“The thing that really changed for me was having to deal with everything, and see the business, from end to end,” he says.
Lally also found that the tolerance of risk is very different in the space he entered and, as an accountant, something he had to learn to accept. “Accountants are a bit more risk averse but they can still be entrepreneurs if they are willing to leave their comfort zone,” he says.
Though the entrepreneurial spirit that has made Hailo a success is alive and well – its CEO and founder is considering new areas in which to leverage the company’s technology – there are signs that the business has started to mature.
For a start, it has now got some heavyweight financial backers, and – for the first time since its launch – it is producing audited financial accounts, a sure sign that this young start-up is well on its way to adulthood.
IN BLACK & WHITE
2012 – present Hailo, finance director
2007 – 2012 Canonical, financial controller and finance director
2005 – 2006 Openreach, finance manager
2002 – 2005 Village Roadshow, financial reporting manager
2000 – 2002 Commonwealth Bank of Australia, graduate programme with roles in finance and audit
What can you do to ensure your employees know the company policy and stick to it? Hear from other CFOs and experts in our free-to-view video
The finance chief of the Daily Mail has been recruited by Rolls-Royce after a management shake-up at the engineering group has resulted in the departure of its chief financial officer
Global mining company Anglo American has appointed Stephen Pearce as finance director, following René Médori's decision to retire
Three former Tesco executives, including the former finance director of Tesco UK, have denied charges of fraud and false accounting in relation to a £326m accounting scandal at the supermarket