This Estonian Start-Up Has Become a Thorn in Uber’s Side

TALLINN, Estonia — Uber used to dominate ride-hailing in Poland and Kenya. Over the previous two years, that began to vary.

In Poland, a small competitor opened a rival service and commenced profitable clients with cheaper fares and attracting drivers by charging decrease commissions. In Kenya, that very same upstart grabbed enterprise by providing motorcycle rides and letting passengers pay utilizing a standard cell funds supplier.

In each international locations, Uber responded by spending extra money on new incentives to entice clients and drivers.

The rival that put Uber on the defensive known as Bolt. Based in Estonia, it was based six years in the past by a 19-year-old school dropout, Markus Villig. Since then, the corporate has become an surprising success story by turning into Uber’s most formidable challenger in Europe and Africa.

“Transportation is a completely different space,” Mr. Villig, now 25, mentioned in an interview at Bolt’s places of work inside a former furnishings warehouse in Estonia’s capital. “You will have these regional champions.” He added that Uber didn’t make Eastern Europe and Africa a precedence as a result of “they have bigger battles elsewhere.”

Bolt is an instance of a troublesome pattern for Uber, the world’s largest ride-hailing firm, which is about to go public subsequent month at a valuation of as a lot as $100 billion. Everywhere Uber turns, a conveyor belt of recent antagonists retains rising across the globe. In India, Uber is battling a service called Ola. In Brazil, it is dueling Didi Chuxing, a Chinese company that bought the local ride-hailing operator 99 last year. (Uber owns a stake in Didi.) And newfangled transportation companies, such as electric scooter providers, have popped up.

In 2013, Mr. Villig started Bolt, initially named Taxify, after dropping out of college and mustering the courage to ask his parents to let him use the few thousand euros that had been saved for his tuition. He had been frustrated by Estonia’s taxi service and didn’t expect Uber to become available anytime soon in a country that some Americans cannot find on a map. (Estonia is west of Russia, south of Finland.)

Raising money from his parents turned out to be easier than persuading venture capitalists to invest in Taxify. A few local investors, including alumni from Skype, ultimately backed the new firm. But Mr. Villig was rejected by dozens of others who figured Uber would squash him.

“It was just a taxi app in Tallinn; you couldn’t see it was going to be big,” said Rain Rannu, an investor in Estonia who was one of the first to put money into Bolt. As for Mr. Villig, Mr. Rannu said, “he was just out of high school.”

Bolt focused on working with taxi companies before switching to a business more like Uber’s: offering rides through a smartphone app and using unlicensed drivers. The company homed in on markets in Eastern Europe, the Baltics and Africa where Mr. Villig felt Uber wasn’t making a big effort.

The company struggled until business in Africa began to grow. The continent now makes up about half of Bolt’s business. Today, Bolt operates in more than 100 cities and 30 countries. It opened in Sweden, Croatia and Finland in the past six months, and will soon be available in Russia. More than 25 million passengers have used Bolt to take a ride since it was rolled out.

Mr. Villig said raising money for Bolt had been difficult: He pulled together less than $5 million over the company’s first five years, while Uber has raised more than $24 billion. Then last year, investors including the carmaker Daimler and China’s Didi put $175 million into Bolt. It is now working on a new round of funding.

Bolt’s long-term success is far from assured. Like Uber and Lyft, it loses money. For every $10 it makes in fares, Bolt loses about $1 because of the cost of expanding to new markets and offering incentives to riders and drivers, Mr. Villig said.

But that is less than Uber and Lyft, he added. He said Bolt was on a pace to have more than $1 billion in total bookings this year and could break even if it slowed down its expansion plans. He hopes to take the company public in three to five years.

Bolt also is more frugal than Uber, Mr. Villig said. The company spends about half as much on an engineer who works in its offices in Estonia and Romania than it would in California, he calculated. The company also saves money by forgoing a large research department. Instead, it posts Facebook ads for drivers to help it decide which cities to open in. Bolt focuses on areas that get big responses.

The company keeps most support operations centralized in Estonia and hires just three to five employees in each country it operates. And Mr. Villig said he had no interest in spending on autonomous vehicles.

Even so, Bolt faces challenges. Uber has vanquished many rivals and will add as much as $10 billion to its coffers from its initial public offering. Bolt also has many of the same labor and regulatory challenges that Uber has grappled with over the past decade. In Africa, payment fraud has been a consistent problem.

Yet Mr. Villig said that even if Bolt disappeared, new rivals to Uber would emerge.

Uber’s “becoming more dominant is not going to happen,” he said. “There isn’t any geography in the world where they will have a monopoly.”

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