Rental car startup Kyte, which bills itself as the “best alternative to Hertz,” is pulling out of almost all of its major markets in the United States and has cut its workforce roughly in half in a bid to survive after exploring a sale earlier this year.
The company is shrinking its operations to focus only on San Francisco and New York City (including Jersey City) as it works to reach profitability in the next 18 months, CEO Nikolaus Volk told TechCrunch. Kyte has been exiting other major markets like Atlanta, Chicago, Boston, Washington, D.C., Philadelphia, and Seattle. It started telling customers in Los Angeles that it is suspending operations in that city after November 7, as Curbivore reported Thursday.
Volk said Kyte recently cut between 40% and 50% of its workforce. The engineering, consumer, and growth product teams were among the most heavily affected, former employees told TechCrunch.
“In a capital-constrained environment, where capital is super expensive, we have to focus on our strongest markets,” Volk said. “Hard decisions had to be made in order to sustain the business here.” Volk noted that New York and San Francisco are Kyte’s biggest 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 rental car service that would go so far as to deliver the vehicle to your door. When announcing the Series B raise, the company said it wanted to be the world’s “largest operator of shared, electrified, and autonomous fleets.”
The company rapidly expanded to more than a dozen markets in the U.S., and started borrowing heavily to finance the purchase of its vehicles. The company struck a $200 million debt financing deal in 2022 with Goldman Sachs and Ares Capital, and another $250 million agreement in March 2024 with Barclays and Waterfall Asset Management.
Over the summer, though, Volk said it was becoming clear that the unit economics of Kyte’s business did not currently work well enough to generate free cash flow in those markets. He said his team explored selling the business at one point but decided to restructure instead in favor of reaching profitability first.
That was only going to be possible if Kyte narrowed its focus, he said, hence the restructuring. Volk also said that the company recently completed a new fundraise to capitalize the restructured business, but he said he was not ready to share how much.
The rental and subscription car service space has gone through hard times recently, especially for companies that leaned heavily into electrification.
Hertz said in 2021 that it was going to buy 100,000 Teslas to fill its rental fleet with electric cars, but the company wound up only purchasing around 35,000. It sold the majority of those earlier this year. Autonomy, a startup created by TrueCar founder Scott Painter, fell far short of its own goal to build a fleet of 23,000 EVs; earlier this year it announced a pivot to selling software services and data.
Despite the claims Kyte made in 2022, Volk said his company never got too deep in the process of filling its fleet with EVs — something that may have allowed the company to attempt this restructuring at all. That “was very good, retrospectively, that we did not lose a bunch of capital here on residual values falling down,” he said.
This story has been updated with additional context about revenue and cash flow in Kyte’s markets.