CAPVEE Equity Crowdfunding Pick: Obi
This company's app saves two things people cherish most: time and money.
Summary:
Company: Obi
Sector: App (Ridehail aggregator)
Platform: Republic
Minimum Investment: $250
Investment Structure: Crowd SAFE ($19.5 million valuation cap)
Funding Status: >$0.1 million ($0.5 million target)
CAPVEE Call: Buy (>10x Return Potential, High Risk)
Overview
In less than four years, Obi has become the world’s largest rideshare, black car and taxi aggregator with more than 300 companies representing 11 million drivers in its global network. Obi enables users to access pricing, pickup and dropoff locations and journey times from all of the major services. The app, available on iPhone and Android devices, is free. Obi makes its money by charging ridehailing companies a booking commission as high as 10%.
The company previously raised $3.5 million from angel investors and is now raising $5 million, partially filled by the $500,000 crowdfunding campaign on Republic.
Obi was founded in 2017 by Payam Safa, a computer engineer turned serial entrepreneur, and is backed by Plug and Play Tech Center, a start-up accelerator, and Amadeus Nexwave, an incubator focused on the travel & leisure industry.
The Problem Obi Solves
Frequent ridehailing app users are likely familiar with the process of checking Uber, Lyft, and Curb to compare prices and ETAs. It’s cumbersome, and the alternative is overpaying or waiting for way too long.
Globally, there are tons of ridehail services, many of which people don’t know about. Until now, there hasn’t been a convenient, reliable way to compare services. With Obi, riders can view competing prices and journey times in the same app. Once riders choose their preferred ride, they’re redirected to the chosen provider with all the pickup and dropoff information filled out. All riders have to do is book it.
Check out how Obi works here:
Sounds great, right? There are a few areas for improvement. Obi does not include discounts or credits that riders might have in their respective accounts. Another issue is that the app’s price estimate is less accurate than the price estimate riders get directly from the service provider.
The Team
Payam Safa, Founder & CEO: Payam is a serial entrepreneur. He began his career as a software engineer in the defense contractor space, and moved on to starting several companies. Payam moved to South East Asia to co-found Batiqa Hotels, a hotel chain with 8 locations across Indonesia. Continuing his entrepreneurial journey, he started two additional companies in the hospitality tech space.
Payam holds a degree in Computer Science and Engineering from UCLA and an MBA from INSEAD.
Ji Young Choi, COO: Ji is a serial entrepreneur with two successful exits. Ji began her career as a management consultant at Accenture and Booz Allen Hamilton before leading strategy at an emerging market development firm. She then joined General Assembly, a provider of data science courses, working on the enterprise business before GA sold to Adecco for more than $400 million. After that, she co-founded Teckst, a messaging solution providing tools for B2C communication, which was acquired by LiveVox in 2019.
Ji holds a degree in Business Administration from Cornell University
What We Like
- Obi’s TAM is huge and rapidly growing. According to Statista, the global ridehail market is projected to grow at an 11% CAGR (compound annual growth rate) from $260 billion in 2021 to $386 billion in 2025. Obi’s SAM - which focuses on mobile apps exclusively - is $70 billion in 2021 and is expected to grow at an even faster rate as online penetration continues to increase.
- As determined in a 2018 study by University of Chicago’s Booth School, most travelers use fare aggregators when booking a flight. Aggregators make life easier. We believe the same will be true for on-demand local transit. The value-add is a no-brainer, especially for anyone living in a larger city with competing services or traveling frequently. Instead of opening several apps, plugging in destinations and comparing, riders find the cheapest and fastest journey in one place.
- Obi has entrenched its position as the world’s largest aggregator of its kind. The company seems to have found product-market fit with more than 150,000 users booking more than 250,000 rides. Users love the product. Obi has received more than 600 reviews with a lifetime average of 4.7 stars on iPhone and 4.2 stars from more than 300 reviews on Android devices.
- The company plans to add additional modes of transit, like scooters and bikes, to increase the app’s utility.
What Makes Us Nervous
- Obi’s closest competitor is Migo. Even though Migo has only 80,000 users compared to Obi’s 150,000, it’s backed by a strong management team with experience from Kayak, Trivago, and TripAdvisor. The company recently announced a $9 million investment round that included participation from Clayton Venture Partners, and Hyundai CRADLE, an investment arm of auto giant Hyundai. Time will tell if Migo’s business model, which has prioritized multimodal options (as opposed to Obi’s initial focus on ridehailing), is the right one.
- Google Maps should be considered a serious competitor. It already has Uber and Lyft estimates, and it could decide to fully integrate with the other service providers as well. Tech and travel executive Mario Gavira recently pointed out that, since its acquisition of ITA in 2010, Google steadily increased its share of the fare aggregator market, especially since it did not charge airlines for the referrals.
- Another major concern is that Obi is entirely dependent on the underlying ridehailing companies. There is a risk that Uber and Lyft could block Obi if it captures too much of the pie. For a while, Uber didn’t make its data available to Migo for this exact reason.
The Investment
The company offers investors a SAFE with a valuation cap of $19.5 million. For those new to private market investing, a SAFE gives you the right to buy common stock in the company at the next financing round. Unlike a convertible note, future equity is not a loan. As such, it does not accrue interest, have a maturity date, or have a legal obligation to be paid back. You should therefore only invest in a SAFE, if you believe that the company can and will raise financing in the future, as there is no time-limit which forces the company to convert the future equity into common stock.
Obi’s $19.5 million valuation cap is the number to focus on. You are essentially betting that the company will be worth more than $19.5 million in the future.
We arrive at a max valuation of $21.0 million, suggesting the company is reasonably valued today. Assuming that Obi reaches $137 million in sales in year 5 (equates to a 0.20% market share of SAM) and an EBITDA margin of 22% (5% below the industry average), a >10x return is possible.
Please refer to our valuation model for a more in-depth explanation.
As always, if you have any questions or comments regarding the valuation model, please feel free to directly contact our valuation guru Olof on Twitter. He is more than happy to talk shop (and basketball).
The CAPVEE Call
We view Obi as a buy with >6x Return Potential. As with most startup investments, this opportunity is high risk, high reward.
Further Reading:
Disclosure: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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