Solving a concealed problem. The architects of Ride Tandem are Alex Shapland-Howes, Tatseng Chiam, and Huw McLeod.
Impact investment is on the rise, but how simple is it for entrepreneurs to raise capital if the issue being addressed is largely unseen?
According to data from Research and Markets, impact companies are projected to raise $495 billion this year and $955 billion by 2027.
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This is likely, not surprising. Investors are always on the lookout for businesses that solve significant issues. And as things stand, businesses that provide solutions to, say, the ravages of climate change, inadequate healthcare, inadequate housing, or food shortages have the potential to deliver not only social and environmental benefits but also substantial financial returns to investors. Ultimately, these are large-scale concerns, and it is probable that capital will continue to circulate.
But what about ventures that are addressing problems that are not on the VC community’s collective radar? How simple is it to attract impact investment if the customers and beneficiaries reside in a largely neglected part of society?
Recently, I spoke with two members of Ride Tandem’s founding staff. The company has just raised £2.3 million, but initially, it was difficult to locate investors who understood the problem.
A Transport Answer
Ride Tandem is a comparatively new company based in the United Kingdom that provides transportation solutions managed by an app. There was nothing unusual there. From ride-sharing to e-scooter rentals, the world is teeming with similar transportation providers. However, Ride Tandem’s consumers do not fit the typical demographic profile.
Instead of targeting middle-class ride-sharers or young urban professionals riding scooters from the metro station to the office, the company is targeting blue-collar workers, the majority of whom earn minimum wage. Its impact objective is to provide low-income individuals with a means to commute to distant jobs.
A Hidden Customer Base
This is a consumer base that is rarely discussed. There are factories, warehouses, and offices all over the United Kingdom that are not served (or poorly served) by public transportation. This renders them inaccessible to those who cannot afford to purchase, insure, and maintain a vehicle. And herein lies the rub. Those who are unable to work due to a lack of transportation rarely appear in television documentaries, nor are they frequently discussed by legislators. To all intents and purposes, it is a concealed problem.
Alex Shapland-Howes first became aware of the issue when he addressed a group in Rochdale, a town in the northwestern region of England. In spite of their desire to work, they were unable to do so due to the fact that most available positions were located at great distances.
“I realized there were vast swaths of the country, primarily outside of London, where you need a car to get where you’re going,” he says.
Shapland-Howes saw an opportunity to use the app technology that facilitates mobility solutions in transport-dense cities such as London to help people in less well-served areas get to work. “We began with a pilot program in Skelmersdale (another Lancashire city), partnering with a local taxi company,” he explains. The concept was basic. Those who downloaded the app could use it to share a taxi, thereby significantly reducing the cost of traveling to work.
The company launched its first commercial service in Wellingborough following the pilot. The focus shifted from taxis to buses over time. Similar to Uber, Ride Tandem administered the service without providing the vehicles. Concurrently, a transition toward a B2B model occurred. Instead of marketing directly to end consumers, the company contacted employers to adopt the program.
The argument was that it was difficult for employers to locate the necessary personnel. Despite COVID, consistent growth has occurred. In 2020, revenue was £125,000, increasing to £1.25 million the following year and £4.4 million in 2022. “We hope to double that amount this year,” says co-founder Tatseng Chiam.
The company has recently raised £2.3 million in its latest round of equity financing. However, as Shapland-Howes acknowledges, convincing investors was initially challenging, not least because most VCs were unaware of the issue.
“It is very simple to explain to investors the benefits of a rapid grocery delivery service aimed at city dwellers,” he says. “None of our investors had encountered the problems we were attempting to resolve. We had no intention of inviting a group of investors to Skelmersdale. Therefore, persuading investors was difficult.
As Chiam notes, this was not an uncommon issue. Startups in the femtech industry confront a similar awareness gap, with predominantly male VCs unable to comprehend why a particular product could be a game-changer for women.
So what was the answer? “We started to segment the investor base,” says Chiam. Focusing on investors seeking social and environmental advantages in addition to financial returns.
The company also cast its lasso outside of London, locating angel investors and venture capitalists who may have been more familiar with the issue due to their proximity to it. In practice, however, identifying the appropriate investors required more than a simple list of names. “It was relatively simple to generate a lengthy roster. It was more difficult to identify the shortlist, according to Shapland-Howes.
This was partially due to the fact that even those investors who declare an interest in impact do not necessarily provide a great deal of detail on their websites regarding what this means for them. As Shapland-Howes notes, it can also be PR.
Therefore, Ride Tandem’s executives consulted portfolio founders for advice and direction. This allowed them to not only identify prospects but also determine whether there would be a genuine alignment.
Shapland-Howes states that he is extremely pleased with the company’s investors. The recently raised £2.3 million will be used to improve marketing and hire new developers. Additionally, the corporation is in the process of launching operations in Germany. “The same problems exist there,” he explains.
Chiam sees an opportunity for further internationalization with the United Kingdom as a launching pad. “We are selling to more enterprise-level clients,” he says. “They often have international operations.” Currently, consumers include Royal Mail, DPD, and the supermarket chain Lidl.
But what about the consequences? The most significant figure is possibly an estimate of £50 million in wages facilitated to date. This number represents the earnings of individuals who would not have been able to work otherwise. Another important metric is the cost of travel, which averages £12.59 per week compared to £75 per week to operate a car. Chiam asserts that investor interest in these metrics is a positive indicator of investor engagement.
A business that focuses primarily on blue-collar workers in Britain’s regions may not be an obvious magnet for venture capital, but it was possible to acquire the necessary funds by selecting investors carefully and presenting a strong business case.