The Untold Story of Ridesharing — Part III: The Birth of Sidecar and Ridesharing

Continued from Part II

One of my ongoing frustrations of this era was lack of great software developers to work with on my ideas. I felt the need to iterate with real products, but didn’t have a real software team to partner with. Then I ran across a small company based in Ann Arbor that seemed to have a similar vision of the future.

Jahan Khanna and his partner Adrian Fortino had built an Android based system to predict bus arrivals at the University of Michigan. I flew up to Ann Arbor twice to share my vision of a world where private cars are replaced by smartphone apps. “Let’s join forces,” I pitched to them. I would become CEO, and we would convert Jahan’s company, Shepherd Intelligent Systems, into the new company. By late fall, Jahan was living in San Francisco and had brought several of his fellow UMich developer friends with him.

We committed to trying ideas quickly. Our vision of the future was a shared ride service using smartphones that would route dynamically based on demand. The challenge was the same as all companies with big vision — How do we start and get traction now? Our first idea was to start with a fixed route that required use of a smartphone to order and pay. We called it “38 Air” because it mirrored the popular and overcrowded 38 Express bus that stopped outside our office. We spent a month on it before our lawyers told us it was 100% illegal. (Interestingly, this idea was launched years later by Chariot and other startups. Two things changed in the subsequent years. First, because of the new corporate commuter buses, San Francisco created a system that allowed private buses to pay to access public bus stops. Second, because of Sidecar, Lyft, and Uber, regulators became more open to innovation in transportation.)

Our first idea was inspired by the 38 Geary line.

38Air lasted only weeks. Next we tried a dynamic routed shuttle that a group of friends could coordinate. We envisioned friends going out on the town would use this service to split the cost of a limo. Jahan mocked up simple software and we tried it out with me as the driver in that same Highlander Hybrid. I picked up friends all over the city in route to Chambers, a bar in the Tenderloin. It sort of worked, but it was complicated. Too complicated. Next, we tried coordinating passengers to ride and split the cost of an Uber black car or taxi. That was even more complicated.

By now it was late in 2011 and our seed money was running low. Our first three ideas failed. One of the ideas we had been kicking around was to just allow any person to give rides without a commercial license. Uber required drivers to have licenses (known in California by its acronym, TCP) and that meant only black cars and limos. I’m rich and I thought they were pricey. For the 20 somethings I worked with who had just moved to San Francisco, the Uber price point was impossible. It was reserved for dates and desperate situations. Meanwhile we knew peer-to-peer carsharing was possible. Could something similar be done for rides?

A friend told me about an interesting service, Homobiles. It was car service started by a local queer leader for the LGBTQ community. It operated with no TCP licenses. Instead, volunteers drove their own cars with their own personal insurance. Patrons had to make a request via phone or text and could donate money but it was not required. I took homobiles to the airport for a trip to New York. It cost me $20 for a trip that normally cost $50 in a taxi. Wow. This system was cheaper than taxis, nevermind Uber. Homobiles had been in the press yet hadn’t been shut down. It seemed to be operating in a grey area of regulation by taking donations. We wondered, “Can we create a scalable, technology-enabled version of homobiles that could allow us to then create our shared ride vision?”

There were big challenges. Homobiles operated with no insurance coverage. Taxi and limos were covered for $750,000 to $1 million. They didn’t vet their drivers beyond personal references. And they operated like taxis, with orders coming in over the phone. There was no app, no turn-by-turn directions for drivers, no cash-less transactions, etc.

We thought, what if you could create a system that combined the convenience of Uber with the affordability of Homobiles, and the environmental benefits of carpooling and transit? That is what we set out to do with the first version of Sidecar. We also had to figure out how to operate in a grey area of the law. If we were clearly illegal, we’d get shut down immediately with no defense argument. I was not interested in slogging out a fight with regulators and lawmakers like I did with peer-to-peer carsharing.

So we designed our system with legal constraints in mind. Our payment system was donation based, like carpooling and Homobiles. There was a suggested amount to pay, but riders could dial it up or down. We defined “not making a profit” in the same way as I had for peer-to-peer carsharing — on an annual basis, not mileage. We used the new capabilities of doing electronic background checks on drivers, so they were as secure as San Francisco taxi drivers. We also told drivers we’d cover liability that wasn’t covered by their personal insurance up to $1 million, an arrangement similar to what I’d designed for peer-to-peer carsharing. And, of course, we had electronic payment through credit cards, GPS, and a rating system for drivers. Unlike Uber and taxis, our drivers were not professionals, so we gave them turn by turn directions to navigate the city.

Despite all the preparation, I was nervous that consumers wouldn’t be willing to get into a stranger’s car. On New Year’s Eve Jahan was out at 2am trying to get a ride home. Taxis were nowhere to be seen. Uber’s black car service was ridiculously priced. Desperate to get home, he waved down a guy doing pizza deliveries and convinced him to give him a ride home. It turned out he was delivering close to Jahan’s home anyway. Jahan tipped him $20. He called me the next morning practically yelling, “This is so going to work!”

The original version of Sidecar launched in February of 2012. Not very pretty but it did the job!

We introduced Sidecar in February 2012 and it was an instant hit. Everyone who tried it loved it. The hesitation of getting into a strange car turned out to be just momentary and people took comfort in all the precautions we took, like background checks. captured that our website was live on Feb. 7, but I have to admit I don’t remember the exact date. We were so busy, we didn’t capture it ourselves!

The Sidecar vision was to become a multi-passenger, multi-stop ride service driven by everyday people — what eventually became Sidecar Shared Rides, Uberpool, and Lyft Line. In the spirit of getting to a minimum viable product (MVP), however, we stripped out the complexity of multiple passengers and stops. It would take years before we got to the original vision.

I called our invention, “Ridesharing.” It was like carsharing, but for rides, so “Ridesharing.” I liked the name because it was descriptive and aligned with the vision to one day allow strangers to share rides. It was also evocative of the sharing economy, a category that was gaining currency. The naming choice would get the attention of others who were doing carpooling, which was also called “ridesharing.” One carpooling company, Zimride, caught wind of it and quickly copied what we created. They called their version “Lyft.”

About a month later, one of our team overheard two people who he surmised were the founders of Zimride at The Creamery, a cafe in the SOMA neighborhood of San Francisco. It was blocks from Zimride offices. “I can’t believe how much traction Sidecar has,” said one. “I don’t know how we’ll ever catch up with them,” the other one replied. It was one of our first hints that Zimride was planning to compete with us. The very first hint, however, was that within the first weeks of Sidecar’s launch, we saw that Zimride founders and board members were using Sidecar. Curious, I called one of them and got a stammering response to the question, “You guys aren’t thinking of doing this are you?”

Five years after launching, ridesharing has taken over transportation even in small towns like Sonoma, California. I shot this parking space notice in February 2017.

The remaining part of the story has been told many times. Lyft launched with a big fuzzy hot pink mustache on the front of every one of their cars. They captured awareness and soon were growing faster than we were. UberX copied ridesharing, too. They both raised even more money to build on their existing funding advantage. And the rest, as they say, is history. Which is to say, we were history. We tried to make the category less capital intense through innovations and set a blistering pace of innovation that continued to beat Uber and Lyft, but were unable to overcome their money advantages to recruit drivers and riders. Today ridesharing famously remains one of the most capital hungry private investment categories.

Part IV: Silicon Valley’s Attitude Toward Patents