In Austin, Texas, it’s time once again for South by Southwest—the annual film, media, and music festival/tech conference where the dreams of indie bands and startups are born. The combination of creativity, talent, and population density makes the event ripe for an entrepreneurial opportunity.
That’s the environment where we find the launch of a private bike-share company called Spin, which pronounced itself “live in Austin” this weekend. The San Francisco-based company launched a bare-bones program armed with an app and a fleet of bikes. Unlike most existing programs, Spin bikes aren’t docked at stations. On Friday, Spin CEO Derrick Ko told CityLab that his company planned to deploy 300 to 500 bikes in Austin. Ko and his co-founders, Euwyn Poon and Zaizhuang “Z” Cheng, are alumni of Lyft, Y Combinator, and Disqus as an engineer, an investor, and a software designer respectively.
Spin wants to enter the bike-share market with a bargain. With a lock-anywhere QR-code activated U-Lock commanded by a phone app, the start-up promises the deal of $1 per ride on the company’s smart-bikes. The freewheeling lock model is starting to become part of more traditional city-partnered programs, such as the partnership between Motivate and SoBi bicycles that launched in Portland last year. What makes Spin different is that it promises to be lower cost.
“We have a cost model that we think we can make work. If you look at other companies, the estimates are about $5,000 per bike.” Ko said. “When we engage cities, we say, ‘Hey, instead of spending a million dollars on a station bike share [program], how about putting in more bike racks or adding more safety lanes for bikes?’”
Buoying the team’s hopes is the news from a National Association of City Transportation Officials reportn which finds that the bike-share business, largely supported by city governments in the U.S. and Canada, has boomed, with 88 million trips taken in the U.S. since 2010 and 55 systems in place nationally by 2016.
But Spin’s experience in Austin so far suggests that getting in on the bike-share boom can be complicated, especially when it comes to coordinating with city authorities. Ko said that the city of Austin are “on the same side” with regards to encouraging cycling. However, when CityLab spoke with him on Friday, he had yet to meet officially with city government.
According to Laura Dierenfield, program manager of the Austin Transportation Department’s Active Transportation and Street Design division, she didn’t hear about the company’s intentions until this weekend. ”We have recently become aware of these dockless bike share programs,” she said on Friday. “But we were not aware before the launch. We support bike share for residents and businesses, but it’s important to do so under permits and procedures so that companies follow the city’s public right-of-way laws.” She said she’d reached out to the Spin team for a meeting.
Further complicating matters: Austin already has a city-run program called B-Cycle, which runs a 400 bike system with 50 docks. Nevertheless, Ko thinks his company’s goals align with the city’s. “I feel like we're a complement,” she says. “We want people use B-Cycle. But B-Cycle doesn't serve every single location. More people riding bikes, the less people in cars, everyone wins.”
But B-Cycle doesn’t seem to see it that way. “As far as I can tell, their business model is to flood the streets with very cheap bikes and make money off that quick investment,” Austin’s B-Cycle executive director Elliott McFadden says. “I think that is probably detrimental to presenting bikes as part of the transportation mix.”
McFadden says the expense of a bike share largely comes from building a system that’s meant to last. He points to last year’s back-and-forth over rules governing Austin’s ride-hailing companies as an example for how seriously the city approaches public space.
“We’re putting bikes on the street that are meant to last 10 or 20 years, not three months,” McFadden says. “People underestimate what it takes to run a bike share with a level of service that the public is going to find acceptable. Quality service is not cheap. A service designed for the long haul can’t be done with $35 bikes.”
McFadden says B-Cycle has 14 people on staff, half of them in operations and half on marketing, but they also work in coordination with the city as part of the transportation system.
Ko envisions a system that doesn’t rely on city government. He says his co-founder, Euwyn, drew inspiration from living in China, where many cities have bikes-for-hire programs, and he used those services on a daily basis. These lightly regulated station-less programs have generated lots of news stories about huge piles of discarded bikes littering the streets of Chinese cities; Ko says those images were overly sensationalist. “Euwyn never came across stacks of bikes in that form, whether he was in Beijing, Shanghai, Hangzhou, or Shenzhen,” Ko says. “The fact that the station-less model exploded in usage is a testament to how much more suitable it is as a last-mile transport solution.”
Ryan Rzepecki is CEO of SoBi, a smart bike company that works with cities and public bike-share programs to provide bikes that can be parked dock-free; he says he sees the potential presented by the dock-less bike market in China that Ko describes. "We've been tracking what happened in the last year in the space, primarily in China,” Rzepecki says. “The two big players, Mobike and Ofo, raised a ton of money and there's probably about 15 more companies. The total capitalization in the Chinese market is about around a billion dollars into these companies." Ofo also announced it was launching a non-docking bike sharing platform at SXSW on Twitter.
Starting up a program in a U.S. city, with or without docks, is a complex undertaking. In the U.S., companies like SoBi and Motivate go through months-long processes with city governments, submitting procurement requests and coordinating with municipalities on site-planning. Even for station-free systems, it helps to have the people and street furniture to create a system with visibility. ”When you're on the ground for a 500-bike program, you're talking about a general manager, an operations manager, a customer support manager, three to five service technicians and customer support center people," Rzepecki says.
The company also rewards people for returning their bikes to special bike racks that they install. If a bike does get locked somewhere it shouldn’t, there’s a team ready to respond. “That said, I've talked to large smart-bike providers in China and they say they are running a far more massive system with far fewer employees,” he says. “But our contracts with cities require that we provide a level of service and maintenance that is going to be more expensive than just letting a bunch of bikes out.”
For Spin, though the company scouted out drop spots and warehouses for bikes and made plans for hiring a long-term team in Austin, it looks like the company will need to work a few bugs out before it conquers the city. By late Saturday, after their meeting with transportation officials, Spin announced that its service was suspended—for the moment.
3/ And while we work together with the ATD over some details, we're temporarily pausing our service! Stay tuned. pic.twitter.com/TqogfWd8rb— Spin (@spin_pm) March 11, 2017