Zipper Case Study

Analyze the reason the company is facing cash problem, and difficulties to catch interest from the Venture Capital community ? What recommendation would you make to Zipcar founders?

Zipcar has a similar business model than regular renting car companies except that their logistic is way more complicated because of the number of rent required, since they allow short rental period for the same equipment cost.

Such a company needs heavy investments as it requires a lot of equipment to exercise their basis function: cars and parkings.

Along with that fact, it’s well known that cars are bad investments due to its quick loss of values whereas it still very expensive.

In other words, the company will have to find a way to keep those investments for their benefit.

The only way to do so is to develop the car utilisation at the maximum which will create profit for the company. But the more people are using the service, the more the company has to provide available cars which means more fundings research and more investments.

Then, they have to find new customers to depreciate the cost of the cars and so on.

As we are reading the case, it appears that the main issue of this business concept remains in the offer’s inability to meet the demand.

As it gets more and more notoriety, the company hasn't enough cars to satisfy the demand and need to buy more cars to respond it. Meaning that eventually, the market will balance and grow.

The fact is, that balance might count a lot of customers as well as cars and in that perspective, the cost may quickly sores and require heavy investments and fundings for a start-up.

Now, let’s put this assumption in our context and see why Chase and Danielson had difficulties to catch investors’ interest: two well educated women than haven’t known each other for a long time and have never work together, mother of at least two kids each. With strong professional experiences but inexperienced at running a company, who are launching a start-up based on a new european concept that requires serious assets from the beginning otherwise it will never get-off the ground.

Firstly, and as Chase said herself, their difficulties to catch investors’ interest were because investors weren’t confident in their team and their capacities to run a business mainly due to their lack of car and business running expertise.

Secondly, they probably didn’t feel confident about giving Chase and Danielson such an amount of money - considering what the founders already injected themselves in the company - dedicated to build a small start-up that has such important costs and overhead expenses and couldn’t even afford a decent marketing strategy. Once competitors will hit the market, they probably will take all the market shares because they have more money and a stronger strategy.

Thirdly, the technology on which is based the business concept looks a little bit advanced for the early 00’s. Of course Internet wasn’t a revolution anymore but people hadn’t the same usage of it than today. Even nowadays, one third of the population would still have issues to rent a car this way and unfortunately,