Apr 8, 2014 · 5 minutes

At what point does a company become real?

When it launches a website? When it raises funding? When it gets its first customer? Just like Pinocchio’s efforts to become a real boy, there’s a whole gray area between lifelessness and life.

In the case of ZephyrCar — now rebranded as Breeze — the birthing moment was an unwelcome and unanticipated phone call from Pando. We came across ZephyrCar months ago, through its Craigslist ad announcing it was looking for people who wanted to become ridesharing drivers but didn’t have their own cars.

It was an intriguing business proposition that addressed the biggest pain point Uber and Lyft face — driver supply. Yet the physical logistics around such an operation would be mind-boggling: Renting cars to people on a daily basis? Making sure drivers used the same car every time (per Uber and Lyft's requirements)? Sourcing such cars to begin with? Navigating insurance issues? The list doesn’t end.

At the time, founder Jeff Pang kept his mouth shut and didn’t pass on many details, explaining that the company’s operations were proprietary secrets. We suspected that “proprietary” just meant “hasn’t got their shit together”:

Zephyr is such a young company that its founder(s) likely haven’t figured out all the details yet. They’re still honing their logistics and testing what works best. They’re in that nascent startup stage, slowly wrapping itself into a cocoon, hoping not to fall out and die before ever getting the chance to grow.

Now, three months later, the real story behind ZephyrCar has come to light. The company has officially launched, rebranding as Breeze, and Pang has confided a dirty little secret. At the time we discovered ZephyrCar, Pang hadn’t even purchased any vehicles for the venture yet. In fact, he didn’t even have an office, a business plan, or a customer.

He was still working at cleaning services company Homejoy. His Craigslist ad and landing page were his efforts at a minimum viable product — testing out whether there’d even be a demand for his idea before he maxed out his credit cards purchasing vehicles.

In the months since, Pang and his co-founders, Ned Ryan and Charlie Fang, have come a long way. They drove for Lyft and Uber to understand the experience, and Pang even took a taxi course and leased a medallion for a few weeks. They maxed out all their credit cards to buy a few starter cars for the fleet. “The trick is you have to do it all in one day before it hits your credit,” ginger-bearded Ryan says, grinning.

They soon realized that maxing out credit cards to buy cars wasn’t particularly scalable. They managed to find a mysterious unnamed business partner to lease them new vehicles which they could in turn rent to willing drivers. They quit Homejoy, found some cubicles in a co-working space, rented spots in a parking lot on the corner, and eventually on-boarded some 50 drivers and 25 cars.

I took a ride with one such driver the week of Zephyr’s relaunch as Breeze. “I didn't know if I wanted to do [ridesharing], so it's a good way to test it out,” Luke says. “If I decide I really like it I’ll buy my own car.”

Luke didn’t want his last name used in case his insurance for his personal vehicle — which was too old and too big a gas guzzler for ridesharing — found out and decided to kick him off his plan. “That’s the elephant in the room with this kind of business,” Luke says. 

And what an elephant it is. Ridesharing companies like Uber and Lyft are still trying to figure out insurance situations, with both companies expanding coverage in recent months although still not coming anywhere close to the 24/7 protection of commercial vehicles like taxis.

Adding a company like Breeze to the chain of liability is mind boggling. If a Lyft or Uber driver injures someone or damages property, and said driver is in turn using vehicles rented to them by a third party company, which in turn leases the cars to the drivers from an unnamed fourth party, where the hell does the blame lie? Who’s ponying up cash when those accidents occur?

The Breeze founders say they aren’t too worried about complications resulting from the muddled chain of insurance. They give drivers a stipend each month to buy personal insurance for cars they lease through Breeze, insurance that extends beyond the state's minimum requirements for personal --but not commercial -- insurance.

Breeze’s founders believe that personal insurance will cover drivers in between Uber and Lyft rides. If an accident occurs during a ride (or when the app is open in the case of Uber), then the ridesharing companies’ insurance will kick in.

Allegedly. As we’ve seen in practice, there’s all sorts of nuances to these situations. And because such chains of liability are so new, we've yet to see how insurance companies will react. It’s a possibility that Breeze drivers’ personal insurance policies won’t cover them if the providers find out the drivers are working with Lyft or Uber. In that case, Breeze would have to pony up the liability funds, or fight the lawsuit the way Uber is doing with Sophia Liu’s family.

Breeze isn’t the only company doing this. There’s other car providers out there — albeit more local shops that aren’t coming from the startup ecosystem — that are also advertising on Craigslist.

J.P., another driver who didn’t want her last name used, said she switched from one such provider to Breeze. The other company required her to pay half of all her Uber profits to it, whereas Breeze was a cheaper deal with $20 a day rental fee plus 25 cents per mile. Now she makes about $17-$18 an hour, after the cost of gas and Uber and Breeze both take their cuts. “I’m content,” J.P. says. “I like what I'm doing. I'm doing pretty well doing it.”

Now that Breeze has established itself in San Francisco with its 25 cars, the founders are eying other cities, hoping to move into Los Angeles next.

As for whether the big boys of the ridesharing industry have noticed the young upstart in their midst?

“We’re in talks with Lyft and Uber,” Pang admits. “They're curious about what we're doing. Since we're solving their number one issue of supply so far we've seen nothing but support.”

[Image via Thinkstock]