AI for Car Rentals?! Prove It! | Pitch.Tech EP 2

00:00Right. That doesn't sound like an AI recommendation, but because they told us they all the pitches talked something about AI. To be honest, like many of these these are more of like a buzz word. They are using it more like a buzz word. Hi, I'm John Willie.

00:12Uh I'm a three-time founder. I graduated from MIT and from Stanford. I I won the best thesis award at Stanford. Had multiple exits so far. also started Inception Studio which is now the top accelerator program for early stage AI founders here in Silicon Valley.

00:29You know I've I've been an engineer since I was 5 years old when I start started programming. I won the USA computer olympiad as one of the top 15 programmers in the US. As an investor I'm looking for venture scale opportunities where I can put in a million dollars and then I have an opportunity for at least 100x return you know coming back to me within you know 5 to 7 to 10 years.

00:48Pitch.te Tech is where bold startups on tech domains get game-changing insights from top VCs.te domain instantly signals you're all about cutting edge tech and innovation. Building a tech startup build it on tech. So we are raising around our preed round of 1.5 million.

01:07The goal of today is to meet investors and potentially close our round. Let's go. My name is Laurana. Uh I'm a co-founder and the CEO of Rexalto. We have developed and introduced an AI dynamic pricing engine. We previously co-ounded one of the largest European car sharing companies.

01:24Company generated 75 million uh annual revenue and what's more important it was cash flow positive. What's happening now in the car rental industry? Increasing prices of uh vehicles, uncertain residual values, and growing percentage of electric vehicles are forcing car rental and mobility companies to put more focus on not just reselling cars as they used to do before, but actually making sure that they do money on their cooperations.

01:50On top of that, for mobility companies especially, they strive to increase their utilization to improve uh fleet distribution and all of that can be done with the correct pricing. Taking all of that into account, we have engineered an AI dynamic pricing engine that basically sets the right price at any given time.

02:10First class of economics, bringing supply and demand into equilibrium. So the way it works is we look into the company's historical data, market historical data, competitors prices, and many other factors that help us forecast demand. Things like weather forecast, flight information, booking information.

02:28We not only set the price for the for our customers but we also push it back either into their fleet management system or to the OTAAS the aggregators where they get rents from. We currently focus on the North American, Europe and the Middle East.

02:42The segments that we look at and work with are either small companies or large enterprise companies. What differentiates us is that we uh work not only with car rental industry but with mobility industry and of the technology because for mobility companies we use up to 500 data points for car rental companies it's about 20 30 maybe 40.

03:03We offer three pricing as a service for our traction. We currently have uh 20 customers paying customers plus piloting customers. We have integrated six uh reseller solution. We uh generated about 200,000 uh annual revenue. Uh this year we are raising a round of 1.5 million.

03:21We closed 950. We're now closing the remaining 550. Thank you very much. You mentioned kind of in the presentation. Okay. Like you have uh some of your customers are using this for kind of rental car rental car rates. Are there other kind of things in the automotive space that you're using for that dynamic pricing today or is it a lot of companies in mobility are using that.

03:45Look at Uber, Lift, other mobility companies. It depends because you have a lot of smaller players players for micromobility for instance and they use third party solution. They don't have their proprietary software and this is for us they are resellers because we integrate into their platform and they sell us to their uh to their customers.

04:03you know, for any tech enabled platform. I mean, I imagine like they're already doing something like this or they're doing some version of this where they have they're going to have some pricing engine. They're going to be able to like determine prices like this is kind of a common thing.

04:14I mean, you mentioned Uber and Lift, they obviously do all of that, but then now I mean everything from concert tickets to, you know, things anything e-commerce kind of often doing this type of this type of dynamic pricing, this might be like core to their business, very important.

04:28So, like they may want to like develop that themselves. they have all the data about it like what type of customer would use like a service like yours uh versus like hey we're going to de we either develop this in our own inhouse or like use some other very good good question first I'll answer who are the companies that develop their own like I talked to head of revenue management of get get around they spent a lot of money and many years developing the dynamic pricing and it didn't work it's not that simple right because you need to know how to do it not to reduce your re revenue even by 1%

05:04right because if you do that you're fired. So they said we cannot just use your service software because we need to make sure our work so we'll keep on advancing our technology and use it at the end of the day. Who answering your question who are our customers?

05:16We have either very small companies that have 50 hundred of cars. They don't have their proprietary basically their fleet managers right they're operating their fleet and they want to do it in the most effective way. they have a third-party software solution and they compete with a budget enterprise etc.

05:32So they need to make sure that they somehow stand out. So these are our customers and they use our standard dashboard self-service dashboard. Then we work with large companies and these companies are not as big as enterprise herds but they have hundreds of thousands of cars still huge.

05:50They basically manage their franchises. So they need to make sure that their pricing is consistent throughout their uh network that they offer the same quality of service and that they actually their franchises do well because they get a percentage of the what franchises earn.

06:04So that's our second type of customers big groups and enterprise companies that manage franchises. What what makes your dynamic pricing engine better than the competition? First, as I said, like it's it's the number of uh data points that our engine can absorb and make this decision and judgment.

06:24You saw that we have an AI in the beginning of of this. Every company now flexing internet. Yeah. But I'll tell you where the AI comes. Uh so it's it's it's it's a bunch of ML models that work together, right? So that's not there's this is this is not AI but where the AI comes is that we every time our model works in a certain location for a certain customer it learns from its past uh performance and next time makes better predictions make better assumptions and improves the quality.

06:53I mean, and and on that topic, I noticed your pricing model is that you're charging like per car, you know? I mean, and if if you actually are really confident about, hey, we're gonna have this R this is the ROI that we're going to get. Like, why are you not like saying, hey, well, you get you're going to have 90% of the up and we'll just take 10% of the of the one customer with who did that.

07:15And that was the I was like telling my team like, let's move into that like we will make sure our customers do better and we'll do better. It didn't work. uh we we still have one customer on that contract and I'm just waiting for the contract to renew to get get away from the the reason why you always have to you need to have a baseline.

07:31So what are you comparing to? So usually you would oranges to oranges December to December, January to January. But then when things like Easter or Ramadan happens, they move from one month to another. Then they like yeah but the increase was not because of your pricing model but because it was uh Easter was in this month and last year it was in a different month.

07:52So much time is spent on actually this argument because they don't want to pay you more, they want to pay you less. And we said like at this point we cannot do this. It's it's it's crazy. So we said we want to be uh clear and straightforward.

08:04We'll do uh standard pricing per car per month and that's that's good enough. Yeah. I mean but that that also I mean you point to like kind of fundamental problem which is like that is like measuring like the the improvement in lift that you're going to have like from this because Yeah.

08:20I mean, how do you compare apple to apples like when you're kind of revenue over time? still compare. We still they have dashboards. They see how their pricing increase over a longer period of time. Like okay, maybe one month to another might be tricky.

08:32But then if you look on a year scale, you still see the increase. Do your customers do AB testing. They can run two side by side. We usually start with AB testing especially with big uh customers but we don't do it within one city because you can't you cannot do it in with one location.

08:49The customer will choose what is cheaper. So you have to do it different locations. So we would choose few selected location usually the way our pilot works two three locations one would be maybe the top location another one would be midsize location and third would be like the small location and then we will see the results in those those and what has been the result worst result that we had was plus 5% of revenue increase.

09:11Our best was it was six times but that was a very particular case a luxury uh car rental company that was staying within within its boundaries. We analyze also the supply and we said it's Dubai end of December there are two Lamborghinis available and there is a demand for 100 you can put whatever price you want you will still sell it right that doesn't sound like an AI recommendation no that I mean like that because they was cap they called us because they called me they were like a brilliant your system is crazy that tells me to put I don't remember the price something is wrong

09:45with that I was like hold on let me uh look into this so I looked into this and then we said like that's what you should put customers don't like dynamic pricing because it's like wait a second. Oh, you got you got a different price than I got when I like when I went you know went to for this or like it's you know there's a lot of backlash around pricing and like these these sorts of things which ultimately ends up kind of a brand risk there which is like why sometimes like even though they can you know they could potentially uh you know try to do this like kind of they're they're careful

10:15about time to do this. So what what are your thoughts on that side? First of all, uh revenue is not the only KPI why our customers use us. In many cases is they want to avoid human mistake. Many most of them they do uh they look at competitors prices and they do their manual and I mean the level of complexity you have different codes zip codes like cars are divided into codes.

10:37You have different lengths of rental one day, two days, three days etc etc. You have different locations. So actually the number of price points you have to change every day sometimes even every hour it's tremendous. So if you do it all manually you do mistakes and this this is what our top managers of the companies tell us.

10:55We know that this is not ideal or we often have to actually cut cut cut the road. So like okay we'll like not put too much effort here because just too much. So we'll make an assumption. So without basing their assumptions on data. So automatization of the process and pushing it back into the system is number one KPI for many of our large companies.

11:17Secondly, we don't change the price depending on the customer. So this is up to the company whether they want to charge C different customers have their loyalty programs for mobility companies. We do we don't look at a particular customer because we don't have the data but we cluster them.

11:32So we understand that this customer falls into this cluster at this and so there's a different coefficient but that's what all mobility companies are famous for because they uh they give the car to to different audiences. This is very interesting because I mean I went to your website actually to very nice looking website uh to be honest looking at your website I had no clue what you guys did.

11:50Uh, so like this is uh like uh hearing the pitch is like actually like now I have a much better idea of like uh what what you're doing because like I think it just at least in terms of like the copy that was on the website they didn't it didn't come across like on on there.

12:05You you cover the team extremely early. Um which to be honest like before I know what problem you're solving it's hard to be able to judge wait is this the right team that sort of thing right? Um, so like you know sometimes better like say that later like after oh and by the way this is why the this is here's the evidence is why we're the right team to do this right and so like what is your connection to this problem this space and like how about the rest of the team like how like why are you uniquely suited to be like you're the ones in the world to solve this problem.

12:33So that yeah the actually the reason why I showed it in the beginning is that in our past company when we exited and decided to do something else together we started thinking okay let's share our knowledge with other companies we definitely decided not to build another car a car car sharing company anywhere in the world it's very operationally intense business and then we thought maybe we do consultancy maybe we do that that that we said listen let's do what we did best and we really were best on the market in terms of pricing correctly distributing the fleet pricing

13:04uh being considered to be the low coster and yet making more revenue than our customers competitors. So that's what we did and we said let's try to replicate it uh for other companies. So we started initially with car car sharing and mobility companies but then we said listen there's a much bigger market here car rental which has it's a dinosaur industry.

13:24So we started looking into that talking to potential customers and that's how it all started. Thank you. Thank you very much. I grew up in a very international environment. I'm half Russian, half Indian. So I was always exposed to different cultures.

13:38I graduated from two US universities, both in Russia. Then I traveled abroad. So I started my previous uh together with my co-founders. We started the previous company back in 2014 and we were running the business for 8 years. I left the country in 2022 for for the war reasons and it was one of the most difficult moments of my life was very stressful was very uncertain and we came here to US together with my family with my husband after maybe half a year I said I want to build something new together something new here we wanted to use our knowledge that we gained in our previous

14:18company and the experience that we had and the understanding of the market and share it with other companies not only cautious sharing companies but mobility companies and also car rental companies. The thing I like about Rick Alto is is that uh she is a successful founder that she built a very successful business before and based on that experience has come up to solve this problem in a compelling manner.

14:43What would been great for me that I would like is uh uh fairly early on that once she explains that this is her product is to have a slide that first says I have six customers right now because in the beginning I'm wondering is this an idea?

14:58Does she have customers? Does it work? All these things. But if I know she's got like six customers that like it then I know this is great. And then the next is uh in the same slide is to show in one year I'll have 20 customers and these are the customers that I'm working on.

15:16And then maybe 5 years from now this is what I want 1,000 customers. All the pitches talked something about AI. To be honest like many of these are these are more of like a buzz word. They using it more like a buzz word. I know we need to talk about AI so let's like try to craft an AI story like on onto our business.

15:36didn't really talk about why is a why using AI, why is this important, why we have a tech domain. I think the domain that you choose it should reflect what you're doing, right? I like the idea of highlighting that it's a tech company, it's a tech product.

15:50And I think it also we stand out uh to our competitors because it we highlight uh highlight this point. [Music]