When Will Coleman was deciding where he would stage his bid to compete with Uber and Lyft, he never seriously considered Silicon Valley. Instead, he started searching for office space in Dallas. For starters, it’s Coleman’s hometown. But there was another reason why he picked a city that, despite its burgeoning tech scene, has never produced the sort of sexy start-up “unicorn” he aspired to create. “People from Dallas don’t love to hear this,” Coleman says, “but Dallas is very average.”

He’s referring mostly to key factors that ride-hailing companies take into account when considering a market, like traffic congestion, customer demographics, distance to airports, and the number of students in the area. “If you asked Uber, ‘Is Dallas a good market?’ they’d be like, ‘You know, it’s not bad,’ ” says Alex Halbardier, who joined Alto as its chief customer officer in the company’s early days. Coleman and Halbardier’s bet is that if Alto can make a profit in Dallas, the company can make one just about anywhere.

Profitability would certainly distinguish Alto from the competition. Even as ride hailing has revolutionized urban transportation, neither Uber nor Lyft has ever come close to turning a profit. Instead, the two tech darlings have burned through heaps of investor cash, using venture capital backing to keep the price of each trip artificially low. (At the time of its IPO, Uber was losing an average of 58 cents on each ride.) In the first three quarters of 2019, Uber posted total losses of more than $7 billion, while Lyft shed more than $2.2 billion. When Uber began selling shares on the New York Stock Exchange, in May, its disclosures included a warning to potential investors that the company “may not achieve profitability.”

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That’s bad news if you’re a global investment firm like SoftBank, which has sunk $7.65 billion into Uber. (SoftBank also wrote down $9.2 billion in losses in WeWork, a company that achieved its wildly inflated valuation in part by promising to become Uber for office space.) But Coleman and Halbardier see the ride-hailing giants’ troubles as an opportunity. Even if Uber and Lyft disappear tomorrow, people in Dallas—and Delhi, for that matter—will still want to get around by summoning a car with a push of a button.

Compared to its rivals, Alto’s business model is based on slower growth, higher prices, early profitability, and a gentler relationship with its employees and customers. Instead of relying on gig workers who drive their own vehicles and get paid by the ride, Alto directly employs its drivers, pays them a decent wage (starting at $13 an hour), offers benefits such as health insurance, and provides the Buick Enclave SUV that picks up each passenger. Though the service is similar to the other apps, the company emphasizes safety and customer service, in part by carefully screening its drivers. It also offers amenities such as curated playlists and a custom scent that the company developed for its vehicles. The trade-offs are that customers wait a little longer for their rides and pay more for them—about double the economy “UberX” rate and comparable to the higher-end “Uber Select” price.

Coleman looks the part of a tech start-up founder—tall, white, with an affinity for wearing company T-shirts. Upon graduating from the University of Texas at Austin, in 2007, he spent more than a decade as a consultant at the global management firm McKinsey. In 2018, when he came up with the idea for Alto, he was working on transportation projects with Road Ventures, a venture capital firm based in Geneva. Together, he says, they decided to “create a third player in the mobility space in the U.S.” Alto raised $14.5 million in seed funding, the bulk of which came from Road Ventures, and Coleman approached Halbardier, a friend who worked at a rival consulting firm in Dallas, to see if she might be interested in signing on. “I said, ‘I need to take you to lunch. I’ve got a crazy idea.’ ”

Halbardier, who followed up her education at Dallas’s prestigious Hockaday School with an undergraduate degree from Princeton and an MBA from New York University, offered a lengthy résumé of work in the travel and hospitality sectors.

The two launched Alto in January 2019, starting out with a tiny coverage area that stretched roughly thirteen miles from downtown through the wealthy enclaves of North Dallas. These days, you can take an Alto from Grapevine to the Bishop Arts District, up north to Plano and the Sam Rayburn Tollway, and to and from Arlington—though its coverage of the Dallas area is by no means comprehensive. (Alto won’t, for instance, take you south of the Bishop Arts District, in Oak Cliff.) To date, Alto has delivered nearly 100,000 rides. 

Coleman and Halbardier are convinced that 2020 is going to be the year Alto not only expands to the rest of the city but breaks out of Dallas and begins showing the rest of the state—then the nation, then maybe the world—an alternate vision of our ride-hailing future. 

Alto ceos in Dallas

The Alto executive team in front of one of the company’s cars: CTO Jonathan Campos (left), founder and CEO Will Coleman, and chief customer officer Alex Halbardier.

Skylar Fike/Alto

Before Uber went public, back in May, true believers speculated that it might be worth as much as $120 billion. Instead, it opened with a valuation just north of $80 billion, and it shed a third of that value over the course of the year as investors began to sour on tech companies that lacked a clear path to profitability. Alto’s founders don’t harbor any such twelve-figure ambitions, but they do intend to be more than just a minor player in Dallas. Coleman says that the company plans to expand to Austin or Houston, as well as a few other not-yet-announced cities across the country, in early to mid-2020. He hopes to become a national (perhaps even an international) presence in up to forty cities over the next three to five years. “We think we can be the trusted brand in transportation and personal mobility,” Coleman says.

If they succeed, the product they’ll be selling is not just a ride but an experience. When I met with Coleman and Halbardier in November, the Buick SUV that came to pick me up from my Dallas hotel was bright white, like an Apple Store, with “ALTO” printed on the side in gold letters. The driver, Stephen, got out and opened the door for me, and I sank into a leather captain’s chair. Leon Bridges was already playing on the stereo, as part of the “vibe” I had preselected for the ride. Stephen, who was wearing a gray Alto-branded polo shirt, called out points of interest as we made our way through the Design District. When we arrived at El Bolero, a hip Mexican restaurant a few blocks from the start-up’s headquarters, he got out, opened my door, and drove off.

Some of this is familiar. Both Uber and Lyft have experimented with ways to let passengers pick the music during their ride, and more-experienced drivers know that offering passengers a bottle of water is a cheap way to get a tip and boost their all-important in-app rating. The fancy car, the uniform, and the door-opening, meanwhile, are the sorts of luxury touches that private car services have long used to make people feel like they’re getting their money’s worth.

Alto falls somewhere between the two approaches. My nineteen-minute, six-and-a-half-mile ride cost $29.29, though a $12.95 monthly Alto membership saved me the $1.95 booking fee. Alto’s price was comparable to that of a traditional taxi, which would have run about $20 plus tip. But it’s a lot more expensive than the same ride on Uber or Lyft, which might have cost half that, depending on demand at that particular hour.

One big reason Alto is more expensive is that its business model is different from the “disruptive” one pioneered by Uber and Lyft, which offered to turn everyone who owns a car and a smartphone into an independent business owner, the CEO of their own personal not-quite-a-cab company. Alto’s model, with its company-owned cars, good pay, vacation time, and health insurance benefits, is downright quaint by comparison. That relative generosity is why Alto’s average cost per ride is much higher than Uber and Lyft. But it gives Alto a lot more control over who drives its cars and what happens behind the wheel.

Alto drivers go through fingerprint and background checks as well as multiple interviews, including with director of driver strategy Elizabeth Eshelman, who likes to see a “big, beautiful smile.” Once hired, they undergo three days of safety training. Inside each vehicle, a camera mounted near the rearview mirror monitors the ride. The company uses telematics and GPS to track speed, acceleration, braking, cornering, and other metrics of driver performance. All Alto execs go through the same training as the drivers, and each takes a monthly shift behind the wheel. 

If the surveillance feels Orwellian, Alto’s executives would like you to contrast it with a system in which passengers get into a stranger’s car without such protection and tell the driver where they live, work, and play. In its first-ever safety report, Uber stated in December that it received reports of nearly 6,000 sexual assaults in 2017 and 2018, while 8 passengers were killed as a result of physical assaults and at least 23 died in crashes. (The company notes that these incidents represent a small percentage of all rides.) But Alto’s leaders believe they can do much better—and that plenty of customers will pay for enhanced safety as well as better service.

Halbardier says the emphasis on safety is what persuaded her to join the company. “I’m not some delicate flower who didn’t have the [Uber and Lyft] apps on her phone,” she says. “I traveled every week, and I had multiple very uncomfortable experiences. I was a heavy user, and I hated it.” 

 
Other start-ups have challenged the duopoly of Uber and Lyft, and Texas has been home to a few of them. Competitors emerged shortly after the Austin City Council passed an ordinance in 2015 regulating the ride-hailing industry—most significantly, requiring drivers to undergo fingerprinting. Rather than comply with the new rules, Uber and Lyft sank more than $10 million into a ballot referendum to overturn them. After 56 percent of city voters rejected the Uber-Lyft referendum, the companies pulled out of Austin. Uber and Lyft dramatically increased their spending on lobbyists, and in 2017 the Texas Legislature passed a law that overturned Austin’s ordinance and prevented other cities from regulating the industry. The ride-hailing giants returned to the capital shortly thereafter. 

During the year without Uber and Lyft, apps for a slew of ride-hailing services willing to comply with Austin’s regulations found their way onto locals’ phones. Most of them vanished after Uber and Lyft came back, but the nonprofit RideAustin, funded largely by local tech billionaire Joe Liemandt, still limps along.

The saga of RideAustin is instructive in assessing Alto’s prospects. During the year when Uber and Lyft left Austin, riders showed they were still willing to pay for ride hailing, even though prices weren’t kept artificially low by heaps of VC cash. RideAustin, while never profitable, was able to shrink its losses every quarter. “RideAustin was a great idea. Passengers were happy. Drivers were happy. People had rides,” says Sergio Avedian, a veteran Uber and Lyft driver in Los Angeles who writes for the industry blog The Rideshare Guy. “But when Uber and Lyft returned with their fantasyland money, they undercut RideAustin to the point that RideAustin’s trip count collapsed.”

There’s growing evidence that Uber and Lyft have already started to increase their rates. Economist James Parrott told the New York Times in January that fare prices in New York began to climb last May, which coincided with a similar decline in usage in the city.

That same month, Lyft CFO Brian Roberts acknowledged that seeking to expand market share by pricing rides below their cost is no longer viable. “Our strategy is to win on experience, not price,” he told investors, without specifying exactly what that looked like. Since their IPOs, the stock price of Lyft has fallen by 40 percent, while Uber’s shares dropped by 30 percent.

Alto is counting on Uber and Lyft to continue to raise their prices. The company will never be able to offer rides as cheap as Uber or Lyft at the peak of their VC-funded price war, but if the same is true of those companies, then Alto has the chance to distinguish itself. Coleman and Halbardier plan to succeed by offering each customer comfy leather seats, a driver who has her hands at 10 and 2, and a curated playlist, in a shiny SUV that cruises down the tollway at precisely the speed limit. 

According to Coleman, Alto currently makes enough per ride to cover the cost of getting each passenger around Dallas. That’s a good start, given that Dallas is far less densely populated than, say, San Francisco or New York City, with a smaller number of affluent riders. If you can succeed in Dallas, you’ve got a good shot at making it in Houston, Phoenix, or San Diego, which is what Alto needs to convince investors it can do.

To grow in Dallas, Alto will need to be patient and persistent. There are still places within the city limits (mostly the less wealthy, less white areas south of downtown) that the company doesn’t serve. While the number of Alto cars on the road has shot from 20 to 85, Coleman thinks the region can support around 350, which he expects to deploy in about eighteen months.

In the early days of Uber, the company wooed drivers in an attempt to quickly get hundreds of them serving Uber customers in every city where it launched. It encouraged drivers to sign up by giving out free iPhones, and initial enlistment rates were high. The result is the ubiquitous product that users have come to rely on. Coleman claims that in Dallas, if you call an ambulance and an Uber at the same time, the Uber will get there five minutes faster, on average.

With Alto, riders have to be more patient when they want a ride. They have to deal with restrictions on the hours a car is available. (Service currently runs until 2 a.m. on Friday and Saturday nights and until midnight the rest of the week.) And they have to spend more for each ride than they do, for now, on Uber or Lyft.

Uber and Lyft’s unsustainable business model has produced a paradox: On one hand, they’ve transformed the way many of us expect to get around. On the other, they’ve conditioned us to think about transit in an unsustainable way. Ride hailing, it seems, is more of a luxury product than an everyman service. “Public transportation has been subsidized by governments for hundreds of years, and there’s a reason for that,” Coleman says. “It just costs more to move somebody than a couple bucks. What [VC funding] has done is come in and say, ‘Well, I can put you in a private car for the same price as a bus.’ And that just doesn’t work.”

Self-driving cars, long imagined as the savior of the ride-hailing industry, aren’t coming anytime soon. Uber has cut staff from its self-driving car unit in several rounds of layoffs over the past year. Most experts agree that the point at which ride-hailing companies can get rid of their biggest expense—the driver—is at least a decade off. Which means that the transportation model of on-demand chauffeured rides is likely to be a piece of the overall transit puzzle, at least in the short term, but not a transformative, one- size-fits-all technology.

If Alto and its founders keep that in mind, they’ll probably succeed—as long as their definition of success comes with managed expectations, according to Avedian. “They’ll have to steal a slice of the pie from Uber and Lyft—and I think they will,” Avedian says. “Will they be a $20 billion company? Probably not. But I think they’re on the right track to create a decent company for themselves.” 

In contrast to the revolution Uber and Lyft once promised but couldn’t deliver, Alto’s founders see their place in a transit market that is far more complex and interesting than just a fleet of shiny Buick Enclaves zipping across big cities. “I think there will be things that we can’t picture yet,” Halbardier says of options for budget-minded users who currently enjoy a cheap Uber ride, “like autonomous mini scooters or fixed-route shuttles for more sophisticated pooling, something that fills that price tier. But it isn’t going to be a private driver, point-to-point, to exactly where you want to go. The landscape has to change.”

In retrospect, it seems silly to have imagined that the primary mode of transportation in the twenty-first century would be an updated version of Henry Ford’s innovation. The future of the industry is unwritten, and Coleman and Halbardier are hoping that Alto is a part of it.

This article originally appeared in the February 2020 issue of Texas Monthly. Subscribe today.