"Where to next with Blablacar ?" w/ Peter Zemsky, Nicolas Brusson & Frédéric Mazzella

Well, I think I did not really think too much about what we were achieving at this time. I was just trying to build it, trying to make it happen, but not really looking at the scale. For me, the scale it was reaching was kind of normal. I've always been in this state of mind that this thing should exist and it should be big. Someday, other people realized it was big, but it was already big in my head anyway. Then the mission itself really helped to fuel the energy. The mission of making a service that would reduce CO2 emissions, connect more people, bring affordable mobility... It really played this role. And by doing so with our guts, I think we built a service which is now considered as an example. Yeah, as you're showing here, it's 1.6 million tons of CO2 saved in a year. That's the calculation we made last year or the year before. To give you a sense of scale, it's more than the entire CO2 emissions that come out of the road traffic in Paris, including the buses and the périphérique per year. So it begins to be quite sizeable. All right.

Yeah, it was as Fred was saying, it was a very interesting phase from 2012 to 2016 where essentially it was all about growth and all about international expansion. So I would say the big focus of the company was global mobile. Essentially it was about doing everything: moving into an app and moving global. We went extremely fast, and the obsession was planting flags in as many countries as we could. We raised tons of money to do that, and we went from essentially one country to 22 countries in about four years. As you do that, you create massive growth, but you also create a massive mess, because you launch lots of countries at the same time and you optimize for speed, not for perfection. I think we've done that: we made those mistakes but we did it pretty well. So in 2016, it was an interesting turning point in many ways. First, we had to do a bit of triage and clean up in the global expansion. You step back and look at where you've gone, and you realize that some countries are doing phenomenal: we had Russia, LATAM doing well; we had some countries like the UK not taking off; some took longer and the model was not perfect. So we had to make adjustments on the existing business. We also decided, as Fred mentioned, to slightly change the dynamic in the founding team. From the beginning to 2016, the founding team was kind of the board, the founders, and the executive committee all in the three of us running the show. We changed that. The CTO was someone I knew from before INSEAD – Francis, the third co-founder, the guy doing the work actually. I had met Francis before joining INSEAD, and he decided to join the project but was still working at his other company. He decided to come join about the same time as INSEAD, maybe 2007. Anyway, a big shift in approach back in early 2017, but also and probably more importantly, it was about opening a new chapter. We thought together: what do we do next? We've been doing global expansion, demonstrating that we can scale that model in many countries. What's next for BlaBlaCar? It became pretty obvious that the next chapter would not be mostly about geo expansion, but about product expansion. We had built something pretty unique: this community of travelers with a very rich profile, which you don't have on an airline site or an OTA. People came to the platform essentially for free; we had very sticky traffic, very high NPS around 60 to 70 depending on countries. We only offered carpooling to people, but we could offer much more. Actually we saw that they expressed lots of travel needs that we didn't fulfill. So essentially we decided to expand the product offering, going into short distance carpooling as Fred mentioned briefly, but also pretty much anything on the road. We started to aggregate buses, we acquired a company called Ouibus in France and Bus4 in Russia. If you think of it, it's the same scaling model: a mix of building and buying and going fast. Over the last three years, we've been building that new journey and redefining the mission of BlaBlaCar. Now we talk about a go-to marketplace for shared travel, not just carpooling. Obviously carpooling is the bedrock, the DNA, but the mission is broader: we talk about zero empty seats as an obsession – how do we optimize transport with the car being the centerpiece, but also buses and trains and all of that.

Yeah, maybe carefully. I think you have two parts to that. One was a fundamental conviction that we developed over time and became mature in 2016-2017 in our heads: we have to become multi-modal, leverage this large community to do more than carpooling, use the car as universal connector in transport. The long-term vision we have not reached yet is to offer buses and trains and connect all of that and become this go-to marketplace. That's an obvious move for many passengers to book whatever gets them from A to B in mid to long distance. So that was pretty clear. Then there is how you get there. Suddenly you're like 'how do we get buses on the platform?' Buses were in play at that point, lots of innovation coming around Europe. You can't sit around and do it slowly. It was a moving world. Essentially you could split the world into two: Europe, which discovered long distance coach with deregulation in 2015 (between 2014 and 2016), and the rest of the world – Russia, Ukraine, Latin America, India – huge markets, highly fragmented, mostly booked offline. I get a lot more excited about the rest of the world because it's a rare play: tens of billions of dollars of bus booking, highly fragmented, not sophisticated, all offline. The question is how, by who, and when, but it will go online. Digitizing this world was interesting. In Europe specifically, it was a different play because you had a few people moving in, creating a new market, not fragmented, not offline, directly online. The only fast track was an acquisition. It's true that back in 2016 or 2017, if you had told me 'maybe you're going to go and acquire a subsidiary from SNCF and transform it to accelerate that journey,' I think we would have both laughed. But over time, we had good contact with SNCF, we were never in direct competition, always saw it as complementary. It turned out that their best strategy was to divest from non-train business; our strategy was to become multi-modal. Yes, it became this strange M&A where the startup acquires a subsidiary from the large national rail company to get to the goal. Yeah, we followed an overall strategy. We had two choices mainly in 2016. We had two assets: the community which was already big and growing, and the possibility to address transport needs and propose several means of transport. We could have gone fully on community and proposed other services like classifieds modernized with transactional models, Airbnb-like services. Or we could go the multi-modal way. We saw that in the multi-modal way we would exploit our two main assets: the community and the fact that we were labeled a transport solution, which gave us legitimacy in offering several means of transport.

So I would say two things. I don't know about surprises, but two things that have been pretty interesting to me. One very positive on strategy: the whole idea was to create two very complementary networks. Carpooling is extremely good at point-to-point, and we changed the product paradigm in 2017. We decided to push carpooling not to compete with buses and trains, but to map out the rest of the network dominated by cars. The real enemy of carpooling is not trains or buses; it's people driving their car alone – empty seats in cars. That's what we fight against. We found that as we integrated buses in France, same in Russia, now in Brazil, it's highly complementary. There is very little cannibalization. We increase the pie without cannibalizing either mode because the topology of the network is highly complementary. Then from a cultural point of view, it's more challenging. When you start integrating a company that was a subsidiary of SNCF, with a team of 150 people, while we were roughly 500, it's a big proportion. It came from a different culture, less digital marketplace, more operator culture. Post-merger integration takes a lot of time and smart people. Even if you have the right theory on strategy, you can screw it up if you do very fast M&A build-up. We acquired two companies in 2019: one in Russia with 100 people and one in France with 150. The challenge was how to digest that and take the juice.

No, I would say it's not yet... So the fact you in 2016 we decided to pose...

International expansion. And as I said, we moved to a product type expansion, and now we're building that carpool plus bus offering plus train in markets where it's relevant. In most markets, so in France we're going to do bus, train, carpool. In markets like Brazil there are no trains, so it's going to be BlaBlaCar plus carpool. The ambition – and I hope we'll talk about the COVID context which might slow down that type of ambition by a year or two, we'll see – but the ambition is to go back with that multi-modal model in other countries. Clearly there are lots of countries we have not done yet. Africa is an obvious place where we could and should go at some point. Some countries in Asia are also untouched territory. So we'd probably go back to international expansion, but not the same way we've done it in the past. The passage was: okay, we need to create that carpooling community because we have a good product and we want to scale that in as many countries as possible. Here we probably go back with that multi-modal offer and say, okay, now we have this new playbook and your recipe, let's go and apply that to two more markets. So basically, yeah, we need to go on one foot, but we may go back with two feet or more.

Yeah, and maybe just before we jump into that specifically on the impact of COVID, I think that's a good reminder of what I call the unknown unknowns. That's the thing that was not on the business plan, that's on no business plan, no investment memo, that there would be a global pandemic and that's going to stop the world. And that's a risk for your business. I think no one could foresee that. And that's interesting because those type of events happen actually more often than we think. If I look at my 20-ish year career, there was 9/11 and the dot-com crash in Silicon Valley I was there, then I had the great idea to go into venture capital in 2007, boom, 2008-2009, that's my massive financial crisis. But it happens more often than we think that you have these massive externalities completely changing the game more so than any competitor, fundraising, and sort of normal incremental operations. So anyway, that's what happened, big tsunami in the world and specifically in the transport industry. Essentially in Q2 we were shut down, like no one was traveling pretty much on a global scale. We went back to volume of activity that you, Fred and I would see back at INSEAD kind of thing, it was back to square one in terms of volume on the platform. Now, clearly if we take the overall context, there are less people traveling right now. We are in a world where demand for shared travel has lowered for sure. How long it's gonna stay we don't know, but we also in a world of highly unpredictable demand. Beyond the fact it's lower, it's highly unpredictable. And when you say that, it becomes interesting because if you look at this C2C model, very marketplace C2C model, it's actually really good at taking shocks because it essentially shuts down on itself and restarts on itself, and you have no fixed cost. You don't need to buy planes, trains, buses, you don't need to contract operators, you don't need to prepay, you essentially don't need to take risk on inventory. So from a P&L point of view we absorbed, from a cash point of view we absorbed the shock really well. And as you can see on the graph you're showing, I don't know if people see the slide, but you see a very fast rebound in activity post-COVID because people came back and people started to share again and travel again. So I would say that the fact that we are a community, that we don't have fixed costs, that fundamentally we are driven by domestic trips not international trips, we are driven by leisure not business trips – you don't Zoom to see your girlfriend, boyfriend, or parents, you need to move – and we tend to be a pretty young, price-sensitive audience. If you put all of that together, actually we rebounded much faster than any alternative. So today, you know, in absolute terms we are doing less than we thought we would do clearly in 2020 given the context. Interestingly, in relative terms, we gained market share in every market. And I'll add actually one interesting element: in specifically non-European markets where we aggregate buses, actually we see these activities still grow on a year-on-year basis. Why? Not because people are traveling more, they're traveling less, but because the other story of COVID is offline to online acceleration. Lots of people, online payment is exploding, online e-commerce and all these things have been exploded in those markets. So actually the proportion of people booking their trips, their bus journey online in markets like Brazil, Russia, and Ukraine has increased faster than the overall tide has gone down. So in relative terms we're doing pretty well. Maybe just to finish on that also, culturally I think we absorbed that pretty well by keeping all the engineers, all the product staff – no, I mean we have not used for this for VP, it's part of the company – all the unemployment benefits and different schemes you have available in Europe. And we decided to innovate, so we launched actually a couple of new products during the lockdown. One of them is called BlaBlaHelp, and essentially what we've done is leveraging the trust in the community so that people actually can connect to their neighbors and help them do groceries during the lockdown. We launched that on a global scale as a free product, and that's a way to stay engaged with your community. So I think part of the rebound is also those type of things: when you keep on communicating and you're doing good, and you being proactive during that type of crisis and offering the community something they need, actually probably also help to get people back in cars and sharing their cars in June and July and today.

Yeah, I mean, I actually not really. I think it's just like now it's becoming more topical, but if anything, I think COVID has been a wake-up call for Europe that was long due, very long due. Suddenly we realized that yes, tech is strategic, yes, the biggest companies in the world today are whatever we want to call that tech digital companies. But it's been long coming. You know, for me, like I was in Silicon Valley back in 1999-2000, and you could see that the Intel and the Cisco and the Apple of the world were building the future. And Europe was just like harvesting the past. And I think we've been doing that way too long. So there's been this wake-up call. So in a way I'm glad. I still think, to make it in a more blunt way, I still think we are incredibly naive in Europe. Like if you look at the way it's been managed, and now we're waking up to the fact that yes, we need to build some kind of protectionism at the European scale, and we have a hard time to organize around that. But it is time. There's always been some type of protectionism obviously in China, but even in the US as Fred was saying, the US government is buying from US companies. They're always protecting the market indirectly. And I think we've been pretty naive around that in Europe about tech because it was not recognized as something important and strategic and creating jobs because we've done that in any other industry. So now it's bound to change. And I just wanted to add something that I think the opportunity is actually thinking of not really what's been done but what's coming next. And what's coming next is probably some sort of industrial revolution around the environment. Like we need to rethink lots of industries. And that's going to come in some shape or form. Regulators have a great role to play. And if you look at Europe, we're doing pretty well in terms of CO2 reduction, in terms of consumer awareness. So some of these big companies should come out of Europe. Like Tesla should be a European company except you know we don't wake up early enough. But I think the next companies like Tesla ought to be European. So I think as founders today, surfing on the environmental European momentum is hopefully a good thing anyway.

So, we've been talking about Uber as competition for many, many years. I think the reality is they operate in the in-city short distance arena, which is huge. We operate in the mid-long distance arena. Maybe one day they're gonna cross, but short term I don't think there is – I mean, there are synergies, but no direct competition. Blanca, next question.

We jump on – before we jump on this one, I think it was an important question actually because over the last few years essentially we transformed carpooling into a driver declaring they are going from point A to point B and wants price P, to something where essentially they just tell us when they're leaving, where they're going, and we match them at the right price on the route. And we define that using machine learning. So we've become very much like a machine learning data company, and that's something people don't see actually because the product has not changed and we make it simple. But it's all about matching optimization. But just to give you – because people sometimes ask what's the return on machine learning, do you have a sense how much extra revenue you get because you're able to better optimize the routing? Is it a 1% thing, is it a 10% thing? So I'll give you an interesting number on that. 25% of the activity today – and it's growing fast – is actually generated by what we call smart stops, that essentially a machine learning algorithm has calculated to better match the passenger and the driver. So it is huge, and frankly it's going to go to more than 50% in the next couple of years for us.

My advice would be follow your guts. You have two brains: your reason and your heart. And we are using sometimes too much the reasoning and the analytical brain. I would say you know what is good to be done for the next decade or more in the business. And so, especially if you want to create something new – I don't know how many people are watching who want to be or already are entrepreneurs – but when you're an entrepreneur, you're creating something that does not exist. So any analytical document or study that you may read will not give you the main passion for building what's next. You should follow your guts and what you know inside you. Your heart is actually your best counselor.

And in terms of what I've always looked for when I hire people, whether it's MBA or when I do angel investing, it's really three things. I often describe it this way: it's passion, because you need tons of passion to change things and create great products and so on; stamina, because that's a hell of a journey and it's not going to go right all the time and you get COVID and you get competition and you get naysayers and so on; and something special, like you people either are super identical or artistic. So it's passion, stamina, and something special.

It's, I never know how to answer those questions because I think I'm always optimistic. I always think that next year is better than the year before. So if I answer for 2021, post-COVID is going to be interesting. I think the fact that we kept on investing and that we gained market share, I think 2021 and beyond actually might be a massive acceleration ramp for us. But you know, in general I'm pretty optimistic we're going to get out of that. It's just going to be different. We just need to acknowledge that if you expect the same in '21, '22, you'll be sad. If you expect change, you'll be happy.