Uber, Lyft Return to Austin With Tech Edge, But Upstarts Grew Roots

Austin—[Updated 5/25/17, 4:42 p.m. See below.] A year after Uber and Lyft had a bad breakup with Austin, the software companies are returning to town Monday. That’s thanks to Texas state law makers who last week approved legislation that wiped out the city-imposed restrictions that caused Uber and Lyft to leave in the first place. Like it or not, the ridesharing giants plan to return Monday, when multiple reports say Texas Gov. Greg Abbott is expected to sign the legislation into law.

For the seven other transportation services that filled the void left by Uber and Lyft, everything depends on how much lingering affection Austinites have for the two biggest companies in the industry. RideAustin, Boston-based Fasten, and five other transportation network companies (TNC) have been transporting riders since Uber and Lyft departed in May 2016, when voters decided to keep in place city mandates that required companies fingerprint their drivers and pay a per-ride fee.

Both Fasten and RideAustin believe they can continue attracting customers despite the billions of dollars that Uber and Lyft have at their disposal. For RideAustin, its status as a nonprofit and the option riders have to donate to charity make it attractive, says chief operating officer Marisa Goldenberg. Fasten believes users will still turn to it because the company charges drivers 99 cents or less per ride, which is lower than the 20 percent (or more) that Uber and Lyft typically take from each fare, says Fasten CEO Kirill Evdakov. Happy drivers means happy riders, he says.

One thing that won’t be a key differentiator, however: technology, at least for RideAustin, a nonprofit started by Austin tech entrepreneurs within a month of Uber and Lyft’s departure.

“Our app is never going to be as great as Uber and Lyft’s app,” says Goldenberg, RideAustin’s COO. The nonprofit employs about 25 people, compared to Uber’s reported 6,700 (these numbers exclude drivers). Even Fasten, which launched in Boston in 2015, and opened its only other branch in Austin as soon as the larger competitors left, only has about 135 employees globally.

Still, RideAustin is working to make technological improvements to its app, albeit with a small staff. In October, the organization added an option that allows female riders to select a female driver, and is soon launching a feature that reroutes a ride to a new driver if the previous driver cancels on a passenger, Goldenberg says. Technology aside, last week RideAustin provided a few charities with more than $200,000, based on donations made by riders, and the company is also planning a crowdfunding campaign to raise $1 million so that it might be able to hire drivers who are full-time employees with benefits, Goldenberg says.

“We have a model that seems to work and resonate with the Austin community,” she says. (It’s worth noting that Uber and Lyft have contributed money to at least one local nonprofit, The Texas Tribune, an online media company.)

But the RideAustin app, which was developed to look aesthetically similar to Uber’s, still doesn’t operate as seamlessly as Uber or Lyft’s. For example, its surge pricing is implemented manually, Goldenberg says. RideAustin engineers monitor data in an administrative tool about ride requests, and then manually flip on the surge in pricing, she says. The group wants to make it automated, like Uber or Lyft, but that’s not so easy with a barebones team.

“Those organizations have teams of PhDs and data scientists that are refining an algorithm,” Goldenberg says. “Is there room for RideAustin? We do believe so. I don’t know that there’s room for other TNCs that aren’t as differentiated and tied to the local community as we are.”

Evdakov, Fasten’s CEO, might disagree. He says riders will be attracted to Fasten because it gives more money per ride to drivers than Uber and Lyft and it operates a profitable business. Drivers can either pay Fasten 99 cents per ride, $15 per day, or a weekly fee that decreases as they complete more rides. RideAustin doesn’t charge any fee to drivers of standard cars, and is lowering its fee to 10 percent from 20 percent for drivers of larger vehicles, like SUVs.

Fasten is slightly cheaper than RideAustin, potentially earning it more ride requests; a $15.44 RideAustin estimated fare comes up at about $1 cheaper on Fasten. RideAustin’s Goldenberg notes that standard drivers who use the nonprofit’s app typically take home more pay than Fasten, including under surge pricing circumstances, during which RideAustin’s fees stay at $3 and Fasten’s increase. [Updated with additional comment from RideAustin.]

Fasten does have more experience in the transportation business. Though the U.S. operation was incorporated in 2014 by Evdakov and chairman Evgeny Lvov, the concept for Fasten actually stems back to a business Lvov operated in Russia.

Called Saturn, the business started as a transportation network for people who wanted to work as independent drivers, … Next Page »

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David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at [email protected] Follow @xconholley

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