What do venture firm Andreessen-Horowitz and successful internet companies Opentable, Paypal, Netflix, Yelp and Shopzilla have in common? Rental eCommerce company, Rentcycle and its first $1.4 million round.
Finding the right investors, let alone advisors and board members, can be an intense process. Even big companies, like dot-com survivor Cvent, which waited 10 years to accept funding, put a lot of stock in creating the best partnerships. Tim Hyer, founder of Rentcycle (pictured left), understood that challenge. Now he has funding from Andreessen-Horowitz, co-founder of Paypal Max Levchin, founder of Shopzilla Farhad Mohit, Collaborative Fund, and others.
He also added founder of OpenTable Chuck Templeton to his board and enlisted Netflix cofounder Marc Randolph as an advisor.
“We’re basically trying to build the biggest rental e-commerce website,” Hyer told Venturebeat.
Rentcycle is a marketplace for product rentals, from tools to tuxedos, and also includes a back-end management feature for vendors.
“We’re trying to enable this old-fashioned industry and bring them into the web today,” he said.
Consumers use Rentcycle to compare rental items side by side and make decisions based on price, location, and reviews. The review content currently come from Yelp.
According to Hyer, this is the first time rental companies have had their inventory visibly stacked up against competitors on the web. That might make some companies nervous, but Rentcycle’s customer feedback shows that the benefits outweigh the negatives. The cloud-based back-end allows clients to keep track of inventory, rental orders, analysis and market back to those in Rentcycle’s baked-in customer relationship management tool.
“It’s everything they need to manage their operations,” said Hyer.
The real bread and butter is Rentcycle’s “rent now” button that lives on rental vendors’ own web pages. A drop down tab expedites browsing and check-out with social sharing options. Purchases made here automatically populate the Rentcycle back-end log.
Rentcycle takes 10 percent from purchases made on its site, 5 percent on purchases made through its “rent now” button.
The latter feature is reminiscent of Opentable’s “find a table” button (pictured below), available on hundreds of restaurant web sites. Hyer agrees with the comparison and takes it one step further: “Our business model is identical with Opentable.”
When Hyer began looking for funding, he reached out to Jeff Jordan, then chief executive of Opentable. Like Rentcycle, Opentable also brought an “old fashioned” industry – restaurants – into the twenty-first century with web-based reservation options.
Hyer explained that Jordan, who left Opentable in 2011 to become a general partner at Andreessen Horowitz, saw the similarities and felt akin enough to have the venture capitalist firm invest.
“He’s such a smart guy and brings such relevant experience from Opentable,” said Hyer. “Jeff also has a background at eBay, so he understands the marketplace we’re trying to build.”
Separate from building practical business relationships, however, Hyer also wanted to align his company with a more philanthropic investor. He was inspired by the movement of collaborative consumption. The idea is to move away from an economy of “hyper consumers,” or those who want to buy more and buy new, toward reusing things that already exist. A one year old venture firm, Collaborative Fund, fit the mission.
“Essentially it’s about owning less and sharing more,” said Hyer.
Collaborative Fund’s goal is to be the “leading source of capital…for creative entrepreneurs who want to change the world,” according to its website. It also focuses on “decisions we make about who we work for, what we buy, and how we spend our time.” Notable investments include Kickstarter, which connects creative ideas with people who want to fund them.
Zipcar and Netflix also fall into the “collaborative consumption” circle, which is one of the reasons why Hyer also partnered with Marc Randolph, the founder of Netflix.
“He really understands online rental and he’s really great with the early parts of getting a company off the ground,” explained Hyer. “Similar to Chuck [Templeton], I think he’s going to be helpful with earlier challenges and making the right partnerships.”
Rentcycle must consumer more, despite its connections to collaborative consumption, and will start by hiring engineers. “We’ve built everything that you can see with one CTO [chief technical officer], who is amazing. He did everything that is there in just over a year’s time,” Hyer said, but admitted that more engineers are needed if the company is to continue innovating.
Hyer also hopes to create a point of sale device for vendors, which factored into his partnership with Max Levchin, co-founder of Paypal and current chairman of Yelp. Levchin’s expertise may also be useful as Rentcycle builds its own review system.
Currently, Rentcycle has 100 clients and is focusing on the San Francisco market to prove it can be successful. The company does not provide DVD, real estate or car rentals. Its biggest verticals are tool and equipment, party, and sporting good rentals.
Rentcycle was founded in 2009 and is headquartered in San Francisco, Calif. The company has five employees, but Hyer would like to expand this to 10. Until now, Rentcycle has been completely bootstrapped. Investors in this round include Collaborative Fund, co-founder of Paypal Max Lovechin, founder of Shopzilla Farhad Mohit, Founder Collective, SV Angel, Andreessen-Horowitz, and other private angels.
VB's research team is studying web-personalization... Chime in here, and we’ll share the results.