Non-profit ridesharing — The story of Ride Austin

11 min readAug 2, 2017

First published in LinkedIn on July 19, 2017

Are cities dependent on Uber or Lyft to enter the world of digital mobility services?

Austin, Texas is not a big city like New York or San Francisco. It is a midsize capital of nearly 1 million people living in a town which is located on the Colorado River and is regarded as unusually liberal for Texas. You can compare it pretty much with Cologne in Germany at the Rhine River. An attractive, fast growing town with industries, musicians and artists. Both cities are great places to live.

Source: www.rideaustin.com

With interest, I am following the ridesharing story in Austin for two years, noting how Uber and Lyft left the local market, leaving room for a local service like Ride Austin to emerge. I like to share this story with you, because it is a story we Europeans can learn from. Learn a lot about ridesharing, mobility as a service, public transport, regulations, marketing, two sided marketplaces and the behaviour of Silicon Valley giants.

How does Ride Austin work?

It is pretty much an Uber clone — like UberX or UberPop, which is forbidden in most of the Europeans cities. After Uber and Lyft stopped their service in May 2016 after protesting against Austin fingerprinting regulations, the City of Austin decided to take action and create a community based solution. Ride Austin is a community driven non-profit ridesharing company. It is powered by donations, with paid and volunteer hours from both the Austin tech community and the broader Austin community working together.

With an app the rider can hail a car, which takes the person from A to B. It is a taxi-like service. The car is driven by a “private person” — with additional background check as a driver, but not a professional licensed driver, as we know it from European taxis. The driver is using its private car to earn some money. Service charges are $2 and the driver keeps the entire fare including tip. Ride Austin provides 4 types of vehicles: Standard, SUV, Premium and Luxury. The passenger is able to round up the fare to the next dollar to support local charity projects.

Unfortunately Ride Austin does not yet provide pooling — which really would make sense to reduce congestion.

Source: www.rideaustin.com

With these prices the ridesharing service positions itself between public transport and taxi providers.

Example for a ride from the airport to downtown, which is a distance of about 20 km:

Source: www.rideguru.com (13.07.2017)

What happened in Austin? Fast forward….

2014:

Uber and Lyft launched their services in Austin, operating in a legal grey area.
The city council considered a temporary ordinance to allow firms like Uber and Lyft to operate in the city legally.

2015:

The service of Uber and Lyft was accepted very well. In the first year, Uber alone served more than 2.5 million rides in Austin and the surrounding area. The new ridesharing services became part of daily mobility routine for many people. Thousands of drivers were involved.
The Austin City Council wanted stricter regulation for ride-hailing companies (fingerprint-based background checks, clearly mark their cars with the ridesharing company’s logo and not pick up or drop off their passengers in certain lanes of the city’s streets).
Uber and Lyft forced a public vote, which they tried to influence with a multi-million dollar campaign and threatened to leave Austin.
Nevertheless — the Austin people voted for stricter driver regulations. The lobby work and typical playbook for conquering a new region of Uber and Lyft did not work.

2016:

Uber and Lyft left, and many people were angry: Tens of thousands riders are stranded, which already changed their mobility behaviour and anticipated Uber or Lyft as part of “public transport”. Thousands of drivers lost their source of income.
New small start-up companies offering ridesharing services launched in the city and tried to fill the vacuum — but were not able to keep up with operations and customer satisfaction.
Launch of Ride Austin (http://www.rideaustin.com) in June, which is a transparent community driven non-profit ridesharing company, with a fair income for drivers and good pricing for customers.
In the first 100 days, its drivers provided 100,000 rides. After solving the first bugs and troubleshooting operations, Ride Austin is providing 60,000 rides a week. Most customers are very happy with the service.

2017:

Ride Austin has delivered 2 Million rides in the first year of operation and they covered about 50% of the ridesharing market in Austin.
The State of Texas legislature approved a bill that eliminates local regulations such as a fingerprint check in Austin, which allows the return for Uber and Lyft.
Ride Austin and other ridesharing services can not cope with high demand during South by Southwest® (SXSW®) Conference & Festivals.
June: Uber and Lyft are returning to Austin and start business with heavy advertising on all channels, high discounts for riders and high driver bonuses.
Within one week the business of Ride Austin was cut by 50%.
Ride Austin is lowering its prices to match Uber and Lyft.
Ride Austin is giving low-income patients free rides to doctor.
…
Can Ride Austin compete against Lyft and Uber? With big interest I am following what will happen next.

Lessons learned:

+ It did not took a long time to figure out, that people in Austin became used to a service like Uber and Lyft and those services were attracting a whole new customer segment between public transport and taxi riders.

“Finally, Uber and Lyft (“The Big Two”) came to Austin and getting around town became simpler. You now could take a ride downtown and ditch the expensive parking spot. Many saved money by offloading cars (and car payments) and took an Uber or Lyft instead. Tourists could see the entire city a whole lot easier and with a consistent ridesharing experience on par with any other metropolitan city. Drunk driving incidents decreased, local jobs got created, and overall, ridesharing increased the quality of our lives.”

https://stories.funsize.co/rideaustin-and-the-human-experience-c0971f203fff

+ It shows that ridehailing is a complicated business and technology! Uber and Lyft deliver high standards, which are not easy to match. They have huge software development departments and have for sure the best app functionality for ridesharing and even pooling services. Not talking about big-data analysis and IT-infrastructure. The app of Ride Austin is just “ok”, with some bugs and no “wow” feeling. Nevertheless Ride Austin worked hard and earned 50% of the total market share (without Uber and Lyft). The service has a local feeling, drivers are paid well and the customer experience is very well perceived.

+ Still tourists and business travellers from the US and other parts of the world were surprised, when Uber or Lyft were not available. Human mobility behaviour and patterns are routine and it is difficult to convince people for a change.

+ It is possible for a community to start its own ridesharing business! But it takes some money. “The tech community contributed technology to power the app that costs millions to develop — but it also took over $7 million in cash donations and significant in-kind services donations to make RideAustin what it is today.” Currently I know not one city or public transit organisation in Germany which would be willing to invest such a sum to supplement (and disrupt) the local mobility offerings.

+ A good thing about operating your own rideshare service is that you not only own the business, but the community owns all the know-how and data. Austin is learning to develop and operate an on-demand mobility service by itself. With big implications for the future, because typically it is the first time that traffic planners have real time mobility data of their city. Local ridesharing services in China are already helping their city with data to improve traffic light cycles. Sure, Uber and Lyft can share their data as well, but I am certain, they will earn some money with it or get favours otherwise.

+ On one hand such ridesharing services do create new jobs in town, on the other hand it is important to make sure that the drivers are paid fair and no precarious jobs are generated (an Uber driver can barely live from its income, once the introduction phase with driver bonuses is history). The rider in general does not really care — he takes the best offer for his money. With that knowledge, there is a profound argument that the community leaders have some possibility to regulate income and pricing.

+ When Uber and Lyft came back, they had the power to change business very fast. Ridesharing is a commodity business and customers are taking the best bid.

Source: https://www.facebook.com/werideaustin/

And the last but not least learning:

+ In German we have a word, which is hard to translate: “Daseinsvorsorge” — this means roughly “services of general interest” (power, water, mobility, accessibility, …), which need to be secured by local legislation. A non-profit ridesharing service like Ride Austin is able to give and enhance mobility to disabled or low income people and cover medical transport. Commercial transportation network companies have no interest in this, unless you pay them somehow. But: It needs financial backing (tax money) to keep this service on a long run and provide on-demand mobility for everybody in the community.

Conclusion:

There is no need to wait for Uber and Lyft. Even smaller cities can establish a ridesharing service, which is good, fair and sustainable. It takes some guts from politicians and the public transport stakeholders. I believe Austin is currently the only town in the world, which really understands the value of data for future mobility services and is creating and building this treasure by itself. And — lots of respect — they share this data with everyone to improve transportation services in the future. In a weekly post all numbers and graphs are shared on Facebook. https://www.facebook.com/werideaustin
Ridesharing creates new jobs and can be a fair and profitable business for drivers.
It is possible to improve mobility for everyone in sync with public transit.
It takes a lot of money over a long period of time and you have to be able to make quick adjustments at all sides of the business, because margin is small.
The two sided marketplace with drivers and passengers is a very complicated business to run. It is very difficult to balance the incentives plus earnings for the driver, the costs plus discounts for the passenger in a highly competitive market. The operator has to make adjustments on a daily and hourly base! Definitely a challenge for public administrations running public transport, who rather do pricing decisions in a yearly manner.
Usability and quality of the app is key to customer satisfaction.
Watch out! Uber and Co. are pulled by the size of the future business and are unlikely to give up the race. Instead they are fighting back with lobby work, lawyers and big money. The treasure chest is too big!
It needs a professional, user friendly and state of the art app for customer retention. And because I work in this business — I know: this is very challenging and takes lots of manpower for development and operations. The service must be highly scalable. This means that servers and database needs to comply with high demand on special days like SXWS.
Sorry to write this, but one conclusion from this story as well is: The big junk of customers are not loyal and they do not care about data privacy when the service is good and cheap. People do not refrain Uber, because Uber might use your individual data for other businesses and treat its drivers badly. Data privacy, transparency and sustainability is not a purchase criteria in the end — contrary to all surveys you might have done in advance.
If a community or public transport agency think about going this way, they will lose money — and like buses or trains, the ridesharing service needs subsidization. It takes a long breath to balance costs, pricing, offer, demand, number of drivers. But for this money you get much better mobility and learnings for the future arrival of autonomous cars!
The ridesharing business is expensive and based on low margins. Therefore you have to play by size — exactly what Lyft and Uber are doing. If cities or public transit try that experiment: please do not look at the numbers until you have some thousand rides a day in your city! Profitability can only be achieved by size of the business and continuous optimization. Doing a pilot with 10 or 15 cars will never give you any decision criteria about the business.
Still, I have never seen a transport company, which is as transparent as this: (applause)

Source: https://austinstartups.com/what-we-learned-from-the-first-week-of-uber-lyft-returning-to-austin-5451a34889e7

In a lot of ways public transit should become like TNCs (transportation network companies): Customer centric, data driven, spend visible marketing budgets to attract new customer segments, based on analytics, disruptive, ready for autonomous driving, … Ride Austin is a showcase that this can be achieved!

I wish Ride Austin all the best and when I will ever make my way to Austin: I will definitely get around with your service!