Australia is desperately trying to foster a vibrant, viable start-up culture. However, creating the types of companies that will dominate the future of commerce from a country like Australia is no easy feat. Take Sydney-based taxi booking app goCatch, which is backed some of the country’s most prominent investors, including Alex Turnbull (the son of federal Communications Minister Malcolm Turnbull), Seek co-founder Paul Bassat, small cap fund manager David Paradice, Square Peg, a technology venture capital firm backed billionaire James Packer, and Tank Stream Ventures. Last week, goCatch hit a significant milestone: more than 2 million taxi rides have been ordered using the app.
Based on an average $29 fare, goCatch has delivered about $60 million worth of business to taxi drivers since its launch in 2011. It’s not clear how much the company receives in commissions, but the business is growing nicely. As there were more than 227 million taxi rides in Australia last year alone, there is plenty of room for more growth. However, there’s one problem: a $US50 billion ($68 billion) elephant in the room called Uber. The US-based, app-enabled ride-ordering service has booked more than 5 million rides through Uber X since its launch in Australia more than a year ago. And that number doesn’t include taxis or private cars, which can also be booked through the service.
Technically, Uber X is not legal in Australia and the company has been fighting with state governments around the country over various issues, including tax. However, it’s clear its product is a smash hit with consumers. Which is a problem for Australian companies like goCatch or Cabcharge, which reported its company results on Friday. Cabcharge shares have fallen 34 per cent this year. In a recent note to clients, Goldman Sachs said it was worried that the rise of ride-sharing services like Uber, which might soon be licensed, “could substantially erode taxi patronage”. However, goCatch’s predicament is arguably more interesting than Cabcharge’s situation. It’s shaping up as an interesting test case for Australia’s consumer technology ambitions. Is it possible to create the companies that will dominate the future of commerce in this country? Or is Australia destined to be a branch office in the global digital and sharing economies? The goCatch proposition is slightly different to the Uber one. It does not offer a ride-sharing product (although it may explore that option in the future). However, it does enable users to book and track a cab from their phones. It competes with despatch companies like Taxis Combined and Silver Service for taxi bookings and corporate accounts.
GoCatch chief executive Ned Moorfield acknowledges that Uber is making serious waves in Australia’s transport market, but believes his company can carve out a niche with corporate customers. “A lot of people that are doing personal travel that are price sensitive, we think they have been attracted to Uber X,” he tells Fairfax Media. “But we don’t believe there has been a large uptake of Uber business users. “GoCatch has already snared one large corporate account – EY – from the traditional taxi networks. This year, The Australian Financial Review’s Street Talk column reported that Washington H. Soul Pattinson-owned advisory firm Pitt Capital Partners had been hired to explore a sale. Moorfield confirms the company engaged corporate advisers.
However, he is keen to clarify that report.
“The business isn’t up for sale,” he says. “We raised $5 million last year; we’d been approached a number of parties in relation to a transaction, but we are not actively pursuing a sale. We are handling inbound inquiries.”
The goCatch service has been authorised in NSW and Victoria. While Taxi Industry Association chief executive Blair Davies says its status is “questionable” in some states, such as Queensland and South Australia, it hasn’t suffered anywhere near the number of regulatory problems Uber has faced in Australia. Moorfield says no taxi drivers using the service have been fined, for example. While Uber X is technically illegal, multiple state government reviews might mean it is authorised soon. Moorfield thinks this could end up levelling the playing field for goCatch and other providers. “The cost advantage they have is going to be reduced over time,” he says. “We’ve seen that with the 10 per cent GST increase to Uber X fares already. “We are expecting off the back of the state government reviews [that] our operating costs will be reduced through the changes in regulation, and there’s going to be added requirements that Uber has to meet. So we are expecting things to meet in the middle.”
So what can Australian policymakers do to help companies like goCatch succeed on the national (and, at some point, international) stage? For Moorfield, it’s simple. “The best thing that the state and federal governments can do to help is just to move faster,” he says. “It’s really unhelpful if there is this regulatory vacuum. It’s taking a long time today, but we are beginning to see more urgency.”