The Saga of RideAustin
How Austin’s city government dictated the rise and subsequent fall of RideAustin.
RideAustin, the capital’s homegrown nonprofit, announced earlier this month that it’s lowering prices to compete with the two ridesharing giants. The departure of Uber and Lyft last year spurred RideAustin’s creation, but now the dynamic duo is back. The ridesharing services started operating on Memorial Day, the same day Governor Greg Abbott signed into law a bill overriding the city’s ordinance with a statewide regulatory framework. RideAustin has seen a steep drop in business since then, reporting “dramatic decreases in demand” in a recent Facebook post. The ridesharing service said it gave 62 percent fewer rides the first week of June than it did the week before Uber and Lyft returned.
Most Austinites are familiar with the backstory of the city’s ongoing ridesharing saga. In a political battle that made national headlines, Uber and Lyft spent $8.2 million—the most expensive campaign in Austin history—to persuade voters to back Proposition 1, an ordinance that would have repealed the city’s ridesharing rules, which included a fingerprint requirement for drivers, among other regulations. Austinites rejected Prop 1 in a referendum vote last May. Uber and Lyft, having warned that they would not operate under the city’s rules, promptly closed up shop.
In a post on Medium written one week after Uber and Lyft came back, RideAustin’s CEO Andy Tryba and COO Marisa Goldenberg speculated that “super-price sensitive folks” accounted for the sudden drop . Up until its announcement that it would cut rates, RideAustin was charging a few more cents per minute than the cheaper apps, including Uber and Lyft. Now, its 99 cents a mile and 20 cents a minute rate is the lowest in Austin by a narrow margin (Uber and Lyft both charge $1 a mile and 20 cents a minute). But it’s not clear that lower rates attract more customers in the ridesharing market. One academic study of Uber’s surge pricing found users would be willing to pay significantly more for rides, a phenomena that’s also been observed locally, suggesting that tech reliability and consistency are more important to most riders than prices.
Behind much of the turmoil in Austin’s ridesharing market has been a decidedly non-market force: city government. After all, it was the city council’s insistence that no compromise with Uber and Lyft was possible on the fingerprinting issue that prompted the companies to push for a referendum vote in the first place. To his credit, Mayor Adler tried to broker an agreement between city Council and the ridesharing giants that would have made fingerprinting voluntary but also encouraged drivers to do it anyway. But city Council balked, defeating the compromise measure in an 8-2 vote last February. That failure triggered the Prop 1 vote, which was, perhaps, not instructive about what most ridesharing users want. A mere 48,673 Austinites voted against it—enough to defeat the measure but not nearly enough to gauge the market. Although Uber and Lyft’s Prop 1 campaign may have been misguided and heavy-handed, the narrative pushed by the city—that Austin residents deeply cared about fingerprint background checks—has been undermined by the number of riders who seem to have returned to still fingerprint-less Uber and Lyft in recent weeks.
Throughout this ordeal, the city’s political players became entwined in the ridesharing market—not just as regulators, but also as players. The same day Uber and Lyft went dark last May, Mayor Steve Adler’s office outlined seven things the city was doing to address transportation in their absence. The list included things like, “working to help TNCs [ridesharing companies] that operate in Austin to be successful,” and “exploring a local nonprofit TNC with Austin entrepreneurs,” a reference to what would become RideAustin.
The most ambitious idea was the mayor’s so-called Thumbs Up program, a kind of municipal tech startup to create what Adler called a “third-party, cross-platform badge validator,” based on various safety measures like fingerprinting and background checks. The idea was to allow any peer-to-peer vendor, from Uber to Airbnb, to display the badge on its app to show that a driver or homeowner had passed a given safety test. Adler told the American-Statesman it was, “potentially a real value addition to that sharing economy.” It was this sort of program the mayor had in mind when he told City Lab last May that Austin was “innovating too quickly for Uber and Lyft.”
Nothing really came of the idea, though city council passed a Thumbs Up ordinance last January and assigned a task force of city hall staffers and volunteers to work on it. Today, there’s a dormant web page with sparse promotional materials and some documents explaining how Thumbs Up is “best understood as a voluntary, non-regulatory layer that can sit on top of any ordinance that is passed.” If Thumbs Up was a kind of public startup, Mayor Adler was its hapless founder.
The Thumbs Up program’s failure to launch underscored how the entire ridesharing free-for-all was a solution in search of a problem. The city claimed fingerprinting was necessary for safety; it was the only way to ensure that drivers could be trusted. But given Austinites’ willingness to embrace Uber and Lyft once more, it doesn’t seem as if they are fearful of ridesharing sans fingerprinting. The question is, then, what problem did Austin political leaders think they were solving by forcing ridesharing firms to fingerprint their drivers?
Although the city might not have solved a problem, it did create one. When Uber and Lyft departed, some 10,000 drivers were suddenly out of work. The city was soon inundated with requests for fingerprint background checks from drivers registering with a dozen or so local ridesharing companies that sprang up to meet demand. At the request of the new firms, which were struggling to comply with the city’s new regulations, the transportation department hosted a job fare for drivers that offered discounted fingerprinting.
RideAustin was by far the most ambitious of these dozens of new ridesharing apps. The company was launched two weeks after the Prop 1 election by local tech leaders Joe Liemandt, founder of the software company Trilogy, and Tryba, CEO of a tech job placement company called Crossover. Throughout the run-up to the Prop 1 vote, the pair had been consulting with the city about how to keep Uber and Lyft in town. Tryba says they were trying to get the city to understand why the two big ridesharing apps were so opposed to fingerprinting. “We were advocating for Uber and Lyft, pushing really hard to keep them here,” he says. “The entire tech community recognized that, as a city, we need ridesharing, and we fought hard to keep them here.”
When they left, Tryba and Liemandt decided to create RideAustin. As a nonprofit venture, it was focused on transportation not as a commodity but as a public service. From the outset, Tryba and Liemandt make it clear they had no ambition to expand to other cities or increase their profit margin like their for-profit competitors. In a sense, RideAustin was designed to be the anti-Uber and Lyft, branding itself on social media under the hashtag, #ridelocal, and touting its more equitable pricing scheme. Unlike Uber and Lyft, which take about 20 percent of each fare, RideAustin drivers keep more of their fare, and surge pricing is optional for riders. For the past year, the company had been averaging about 60,000 rides a week and had captured about 50 percent of the market—until Uber and Lyft came back to town.
But there’s the rub. RideAustin’s business model is now cratering because it was predicated on city hall. Not only did city government create the conditions for RideAustin to form and thrive in the first place, but the nonprofit has been awkwardly close to the city from the beginning. In addition to RideAustin’s founders advising city officials ahead of the Prop 1 referendum, the nonprofit’s director of community engagement was Joe Deshotel, the former communications director of the Travis County Democratic Party. It seemed that Mayor Adler and city council had something like RideAustin in mind after the defeat of Prop 1, and its success over the past year has opened up new vistas of collaboration with the city, like Cap Metro reportedly working with RideAustin on a paratransit solution for the city’s disabled community.
There’s also the unusual circumstance of RideAustin operating as a nonprofit. Although the firm claims its 501(c)(3) status has been approved by the IRS, RideAustin isn’t a typical nonprofit because it competes with for-profit firms. That could endanger its tax-exempt status because of something called the “commerciality doctrine,” which the courts use to determine whether a nonprofit organization is operating exclusively for tax-exempt purposes. Besides competing against commercial firms, another factor is whether a nonprofit uses paid professional staff, a description that certainly fits the ridesharing firm but also fits Crossover, a company owned by Tryba that’s done some heavy tech lifting for RideAustin. The firm has yet to post its 990 form, which all nonprofits are required to file with their taxes, so it’s still unclear how the company has spent the reported $7 million ginned up in an initial round of fundraising.
As part of its application the IRS for nonprofit status, RideAustin touted its donation program, an in-app feature that allows riders to round up their fare to the nearest dollar and designate it for a local charity. But of course, facilitating donations isn’t unique to nonprofits. H.E.B. and a host of other for-profit businesses have similar programs (Lyft recently introduced a round up donation feature awfully similar to RideAustin’s). So far, the donation program has collected about $250,000 for local charities, according to RideAustin’s website, but that too hasn’t been free of controversy. In May, Deshotel resigned in protest, citing a policy that requires charities to promote RideAustin and file reports on their promotion efforts in order to receive donated funds. In one email sent out to local charities, RideAustin urged them to participate in its “Driver Adopt-A-Charity” program: “You will need to provide a 1-pager of talking points that you’d like the driver to discuss and allocate $500 of your Round-Up for t-shirts with your logo on them.” In a statement, Deshotel said he made the decision to leave RideAustin “rather than seek resources from our community partners.”
Several charities I spoke with that have received donations from RideAustin deny that they are required to do anything to participate in the program, but Tryba explained to me that there are some basic requirements that charities must at least inform their constituencies that they are in the app so they can receive donations. Since the program launched, hundreds of Austin charities have asked to be included, but the app can only support about 60 charities. “So we ask the charities to promote it and tell us how they’re promoting it,” says Tryba, adding that RideAustin doesn’t take any money from the organizations.
Whatever the details about the donation program or RideAustin’s nonprofit status, the most damning charge against the organization is one for which its founders are not responsible. After all, Tryba and Liemandt tried to keep Uber and Lyft in Austin. Now that the ridesharing giants are back and attracting the lion’s share of riders, what is the purpose of RideAustin? Does the city really need a nonprofit ridesharing service?
Tryba says it does, if only to help push the industry in a different direction. He’d like to see Uber and Lyft pay their drivers more, for one thing. But he’d also like them to be more open with their data. In Tryba’s view, ridesharing companies are going to have to share data and collaborate, much like the software industry learned to do with open source software, if they want to realize risesharing’s enormous potential. “If you want to get to autonomous vehicles and all the other things that we want to do with transportation, we’re going to need to collaborate,” he says.
For now, data-sharing and collaboration don’t appear to be on Uber and Lyft’s agenda, at least not in Austin. As they reclaim market share, it’s no wonder RideAustin can’t compete: it was designed not to. The city’s political establishment never wanted RideAustin or any of the local firms to have to compete in a truly open market—especially one that, despite their best efforts, they couldn’t control.