Fair and the Age of “Frictionless Ownership”

Next47
Next47
Mar 20, 2018 · 3 min read

By T.J. Rylander, next47

“Hands holding and thumbing through an Apple iPhone smartphone” by Marjan Grabowski on Unsplash

Taking advantage of idle resources is a proven strategy for changing markets. Airbnb changed travel by renting out spare bedrooms. Uber turned idle cars into taxis. DogVacay turned pet lovers into dog sitters for hire. TaskRabbit turned the underemployed into valuable personal “swing capacity.” Consumers have changed their buying behavior as a result.

More U.S. households are renting their home now than at any point in the last 50 years, Pew Research reports. Car ownership is down close to 3% in Detroit, America’s auto hub. And as a group, millennials are more likely to live a life of experiences where it’s rare to own much of anything–a lifestyle Tim Ferriss championed in The 4-Hour Workweek.

Smart businesses are responding to this confluence of trends by ushering in a new era of “frictionless ownership” in every industry where there’s idle assets to be leveraged. We recently invested in one, Fair, and we think its novel approach to leasing used cars is a model for others.

Frictionless = simplifying complexity

With Fair, you’re essentially using a smartphone to subscribe to the experience of owning a car in the same way Amazon Web Services offers the experience of having data center-grade compute and storage anywhere, exactly when you need it.

Say you’re in the market for a used car. With the Fair app, you’d enter a driver’s license number and choose a monthly payment within your budget to get started. The app then finds affordable choices. Select a car, choose insurance if needed, sign in the app, and then pick up and drive away. Return the car or upgrade to a different car at any time knowing that, because you’re not financing the lifetime cost of the vehicle you’re driving, you’re getting a fair price. All the friction of acquiring a car — from the initial paperwork to insurance — is handled entirely inside Fair’s app.

Now think about what this means for a used car dealer. Most are under pressure to move inventory constantly to improve cash flow. Seasonal trends, the state of the economy, even gas prices contribute to how illiquid this business can be. By dealing with Fair, dealers improve liquidity through sales to consumers who might have been years away from buying a lightly-used vehicle.

Inefficiency driving innovation

Just as AWS changed buying behavior in the IT market — CIOs are now willing to rent more, while manufacturers are adding more “cloud-like” capabilities to servers and systems — we expect Fair to change buying behavior in the automotive aftermarket. Compelling economics favor frictionless ownership.

Fair isn’t the only company working on this problem, of course, we just think founder Scott Painter’s vision and commitment to frictionless vehicle ownership is better than anything else out there. No one should be surprised by that: Painter also founded TrueCar and CarsDirect.

Related efforts by car manufacturers convinced us Painter and his team are onto something with Fair. Volvo, Porsche, and General Motors’ Cadillac brand are all experimenting with subscription models right now. Fair’s edge is that it’s offering subscription flexibility to the vast majority of consumers who won’t pay for a luxury brand while creating liquidity in a traditionally illiquid market (i.e., used cars).

We expect to see a lot more businesses like Fair. Every market where friction and inefficiency prevents assets from becoming liquid is ripe for disruption. Office equipment, construction and basic materials, commercial and private aviation to name three, but we expect every industry could add velocity in a meaningful way.

Next47 Insights

Entrepreneurship and industry insights. Stories and perspectives from the Next47 ecosystem.

Next47

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Next47

Next47 is a global venture firm backed by Siemens. We partner with industry-changing start-ups to multiply their value through the power of Siemens.

Next47 Insights

Entrepreneurship and industry insights. Stories and perspectives from the Next47 ecosystem.

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