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Car rental startup Kyte, which describes itself as “the best alternative to Hertz,” is pulling out of nearly all of its major U.S. markets and cutting its workforce nearly in half in an attempt to survive after exploring a sale earlier this year. year.
The company is scaling back its operations to focus solely on San Francisco and New York City (including Jersey City) as it works to achieve profitability in the next 18 months, CEO Nicholas Falk told TechCrunch. Kyte has exited other major markets such as Atlanta, Chicago, Boston, Washington, D.C., Philadelphia, and Seattle. It began telling customers in Los Angeles that it would suspend operations in that city after November 7, as Curbivore I mentioned Thursday.
Kyte recently cut 40% to 50% of its workforce, Volk said. Former employees told TechCrunch that the engineering, consumer and growth product teams were among the most affected.
“In a capital-constrained environment, where capital is expensive, we have to focus on our strongest markets,” Volk said. “Difficult decisions had to be made in order to keep the business here.” Volk noted that New York and San Francisco are Kyte’s largest markets, accounting for about 70% of its revenue.
Kyte raised $9 million in 2021 and closed A $60 million Series B in 2022, all on the premise of being a flexible, easy-to-use car rental service that would go as far as delivering a car to your door. In announcing the Series B raise, the company said it wanted to become “the largest operator of shared, electrified and autonomous fleets in the world.”
The company quickly expanded into more than a dozen markets in the United States, and began borrowing heavily to finance the purchase of its cars. The company concluded a $200 million debt financing deal in 2022 with Goldman Sachs and Ares Capital, and last $250 million agreement in March 2024 with Barclays Waterfall Asset Management.
However, Volk said over the summer it became clear that the unit economics of Kite’s business were not currently working well enough to generate free cash flow in those markets. He said his team looked at selling the company at one point, but decided to restructure instead in favor of achieving profitability first.
He said this would only be possible if Kate narrowed its focus, hence the restructuring. Volk also said the company recently completed a new fundraising to capitalize the restructured business, but said he was not ready to share the amount.
The car rental and subscription service space has gone through tough times recently, especially for companies that have been leaning heavily toward electric.
In 2021, Hertz said it would buy 100,000 Tesla cars to fill its rental fleet with electric cars, but the company ended up purchasing only about 35,000 cars. The majority of those sold earlier this year. Autonomy, a startup created by TrueCar founder Scott Pinter, has failed to meet its goal of building a fleet of 23,000 electric cars; Earlier this year, it announced a pivot to selling software and data services.
Despite claims made by Kyte in 2022, Volk said his company never delved into the process of filling its fleet with electric vehicles — something that may have allowed the company to attempt this restructuring at all. “That was a very good thing, in retrospect, because we didn’t lose a bunch of capital here because of lower residual values,” he said.
This story has been updated with additional context on revenue and cash flow at Kyte Markets.
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