Sunday, July 22, 2012

Some business ideas are so disruptive that it takes a few years for them for them to truly upset an industry. Robin Chase knows this all too well. She’s the co-founder and former CEO of Zipcar, the world’s largest car-sharing company which went public last year.  A year before that she moved to Paris to found her latest venture, Buzzcar, which takes the car-sharing idea to the next level. While Zipcar members rented from the company’s fleet of thousands vehicles, Buzzcar allowed its members to rent cars to each other, using a website and mobile app as a platform to network, rather like an AirBNB for drivers.

 June 2012 marked a year since Chase had started the company, which now has more than a thousand cars on offer and 6,000 members across France. Along the way she’s learned some valuable lessons about establishing a disruptive company:
1) Sometimes you’ve got to move countries.
Chase moved to France because, from building subway systems to making airplanes, to the Tour de France, the French have had a love affair with transportation for years. They’re also progressive on transport, boasting some the oldest and most prevalent bike sharing programs in the world, with a million and a half people already ride-sharing. “Where we need to be as people living in cities, Paris and France are closer to that end-game,” said Chase, who said the French were also more likely to “give a second thought to the status quo.”

Chase speaks French already, thanks to her dad being a diplomat and her attendance of French schools. But setting up in France was tough. It took her four and a half months to get a bank account, and almost as long to obtain a cell phone, internet and an apartment. On the other hand, while it took Chase four years to insure her fleet of Zipcars in the United States, it took just a year and a half to sew up insurance deals in France that would cover the cars being shared through Buzzcar.

2.) Let the users grow with you.
“When I launched Zipcar, I thought in in my naive mind that I’ll hire engineers, and then we’ll be done,” said Chase. “What I learned then, and what I know now, is it’s an endless, continuous process of improvement, and the users grow with you.”

Chase realized that when she launched companies like Zipcar and Buzzcar, they couldn’t offer their full set of features straight out of the gate. Both businesses were constantly evolving and highly complex, involving insurance liabilities, a web and mobile platform and reputation management. Chase needed them to look as simple as possible to users, while simultaneously getting them involved in building the network and brand.

Buzzcar for instance provides marketing kits for its users, such as posters to advertise their cars and an option to upload a video. The idea is to make them feel good about providing a service to friends and neighbors that keeps money local.

3) Time is meaningless if your primary concern is profit.

Buzzcar is not yet profitable, and it could be a few years yet before it really starts earning. But Chase was fine with this. She said the same issues had beset other disruptive companies in the so-called collaboration economy inhabited by the likes of AirBNB, Etsy and eBay where online reputation has become a kind of currency. Recently she asked an executive about the profitability of his company Car2Go, a one-way car-rental firm similar to Zipcar that was expanding. He answered that profits wouldn’t come for another three years. “Three years is a time frame that is meaningless,” Chase said. “It’s not now.”

Buzzcar instead is focusing on growing with its users while covering hefty costs: Insurance companies take 25% of rental revenues and 65% goes to owners, leaving Chase’s company with a 15% cut. “It costs us much more than 15% to bring the service,” she conceded. “When you put price points on a platform you’ve got to get the right price.”

In the meantime, Zipcar’s own Nasdaq-listed shares are down by $1.81, or 13.5%, in the year to date. These ideas are disruptive, but it’s a long slog. Only when Chase’s peer-to-peer business models become more mainstream, when “sharing is the norm,” will that become less of a problem.