Iterations: A New Era in Transportation Systems

Next Story

Now In 20 Cities, Startup Grind Aims To Inspire The Next Generation Of Global Entrepreneurs

Editor’s Note: Semil Shah (@semil) is currently an EIR with Javelin Venture Partners.

There was a time in the United States when federal and local governments could initiate and orchestrate big, sweeping infrastructure projects. One of the most notable was the establishment of the interstate highway system during the Eisenhower administration, a post-war public works project to connect an enormous nation and bolster its defenses. It also helped unlock a new era of interstate commerce. Decades later, the government tried again with the creation of Amtrak, but for a host of reasons, well, that hasn’t really worked out. Instead, success came in aviation, which further accelerated economic growth, and the rise of the American (and eventually global) automotive industry, which created many jobs, ignited technological progress, and fueled the country’s renewed investment in building more roads and settling more suburban areas, all the while selling more cars as part of the new American dream.

The country’s transportation-related feats are impressive, in many regards. We can freely drive coast to coast in a few days, with relatively cheap gas along the way. Passengers can fly to virtually any part of all 50 states within a day. While rail has been either neglected or the victim of politics, it’s no matter — the nation has put a man a moon and, just this week, engineered a system to land full-fledged roving vehicle on the surface of Mars! Yet, on Earth, on American soil, the nation can no longer make basic transportation connections or improvements. It took years for the New York City metro area to figure out how to “efficiently” connect its subway system with its two airports. The region with the highest road traffic density — the Northeast Corridor, from NYC to Boston — had their plan to retrofit rail to handle high-speed cars stopped by individual land owners protecting private property rights. In the Bay Area, we simply can’t link Caltrain to BART in the city’s downtown area. The public wants cheap transportation and access for all, but either no one wants to pay for it or they don’t want to give up their property to see it happen. And, here we are…

A decade into the 21st Century, oftentimes it feels easier to get from JFK to LAX than it is to get from the upper west side to JFK itself. The transportation choices for citizens, especially on an intra-city basis, are far from optimal. Combine that with a sagging economy, a struggling domestic auto industry, rising gas prices, and dangerously attractive auto financing terms, and consumers are going to start experimenting with alternative means of getting from point A to point B. And it is here where entrepreneurs have been creating new behavioral models around transportation, leveraging social data, mobile devices, and marketplace inefficiencies to reinvent how we get around.

Car-sharing as a peer-to-peer transaction is fueling the charge. Ever since Zipcar emerged as a new model to give consumers an access to a predetermined fleet of cars, the public, especially in dense urban areas, have begun to see car ownership not only as a financial burden and logistical headache, but also as something that is harmful to their local environments. As a membership-based company, Zipcar’s success even motivated incumbent car rental companies to experiment with different rental models, as well as paving the way for an entire fleet of new companies trying to create innovative solutions in the space.

In the past few years, serious new enterprises have formed to tackle this overall problem with a variety of models. Uber, which started as Ubercab, is probably the most high-profile of the new breed of transportation-related startups, and recently expanded its offerings from providing private black town cars on demand to electric vehicles (and ice cream trucks). A few months ago, their newest product, UberX, came after a San Francisco-based Sidecar became more known to the city’s inhabitants, which offered a new kind of smartphone-enabled car service with a fleet of private citizens, vetted by the company, who would use their own vehicles as taxis. At the same time, Zimride, a ride-sharing company already serving many key corridors such as SF to LA and SF to Tahoe, launched a new product, “Lyft,” which is quite similar to Sidecar except that Lyft drivers are asked to place big, pink, furry mustaches on the grills of their cars for easy identification. (Note that Sidecar and Lyft use community-driven “donation” models for paymens, and like Uber, allow both driver and rider to rate each other.) While Zimride was launching Lyft, yet another startup – Ridejoy – was posing competition on social ridesharing routes.

We’re not done yet. So far we’ve covered services where someone else drives you around. But, what about when you want to take the wheel, sort of like Zipcar? Well, you’re in luck, because there are great new companies opening up these new markets, too. In no particular order, you have Wheelz, a marketplace for people to book or list other peoples’ cars; Getaround, similar to Wheelz, which wowed crowds last year by announcing that Berkshire Hathaway would cover driver insurance and built their own mobile app-powered remote locking system ; RelayRides, which is also similar with a slightly different revenue model; and a slew of international players in this space, such as Whipcar in the United Kingdom. And, if you want to get around with a slightly different style, there’s Local MotionScooter Networks, and while I haven’t seen them all, I’d bet there are ways to rent out your bike, skateboard, or even rollerblades.

Initially, I was skeptical of these models. But after some time, it all became clearer to me. This summer, I’ve been commuting more from downtown Palo Alto to SOMA in San Francisco via Caltrain, and then have to lumber up to the Embarcadero. I chronicled the different services I’ve used here, but all in all, in six weeks so far, I haven’t used a cab or Uber town car all summer — I just Lyft, Sidecar, or walk. I haven’t used cash for any of these, either, and most often, these rides are about 40% less than what a typical taxi would have charged, and just 2-3x what it would cost on public transit. I’ve yet to try the car-rental models like Getaround and RelayRides, but after suffering through a few traditional rental car experiences this summer, and considering the listings on these services are increasing, I’m sure I’ll be both a consumer and provider on these marketplaces. I’ve even thought of listing my car on Airbnb as a place to sleep at night, as its legal to sleep in a car in Palo Alto, as I hear real estate here is going through the roof.

Speaking of Airbnb, these fleetless car-sharing marketplaces are really similar to the big apartment and home-listing site. In the few months I’ve been a consumer and preparing myself to list my 10-year old European sedan, consumer mindset seems to have shifted slightly. It turns out that many folks are totally OK with getting a ride by a stranger in that stranger’s car, or renting out their car to someone for a few hours or a few days. In many cases, it turns out, it’s easier than hailing a taxi in San Francisco and dealing with a rental agency and their archaic rules. And, investors in these companies are actually using them, too, most notably a Getaround investor who made a few thousand per month listing his two cars and a RelayRides investor who actually bought a nice used car exclusively to list on the site, calculating he could actually make money over time after paying off the car.

The potential of these markets are huge, though getting to the promised land won’t be easy. As Uber has learned, these new models, while providing more choices (and cheaper prices) to consumers, can also stoke fears among those entrenched interests who have the most to lose. A few years ago, Airbnb had to fight off the hotel lobby in various cities who were threatened by the enormous market the young company was opening up. In a similar way, city medallion holders and car rental companies may, over time, see some of their markets threatened by companies who don’t manage fleet inventory but rather route supply to demand and take a cut of the transaction.

At the end of the day, yes, there will be roadblocks, but I’m bullish on this consumer trend, especially considering how congested many cities are becoming and governments’ overall inability to gather enough consensus (or funds) to actually build sufficient infrastructure. Just using some of these services over the past few months has impressed upon me that these aren’t just new markets, they’re actually movements. It’s strangers coming together, it’s new opportunities for work, it’s helping other people out, and it’s extracting rents from assets that would otherwise be laying dormant. Nearly every Lyft or Sidecar driver I’ve had, in addition to being genuine and courteous, was either trying to supplement income during a job transition or had just moved to the city to start their careers. They found it was a good way to pass the time, to meet people, to learn the city, and help make rent. If citizens can’t get the transportation systems they need from governments, we’ll have no choice to make new ones ourselves. That is sort of what’s happening, and as a transportation junkie, it’s just awesome to watch unfold.

Photo Credit: Creative Commons Flickr / Ansalve