Have Uber and Lyft’s Departures Doomed Austin’s Tech Future?

How Austin’s identity as a tech hub will fare in the aftermath of Prop 1, with insight from Lyft investor Mike Maples Jr. & Austin startup The Zebra

man walking on quiet street in daytime

Editorial by Alyssa Connolly, The Zebra

What’s Happening with Uber and Lyft in Austin?

On May 7, Austinites collectively voted against Prop 1, a set of measures which would require fingerprint-based background checks of all drivers for ride-sharing companies, namely Uber and Lyft. Over the past week and half, Austin has undergone a transformation, the effects of which both the city and its inhabitants and the transportation and technology industries are feeling to varying degrees of discomfort. What has people all fired up?

  • Prop 1 proponents are talking about “what went wrong”: low voter turnout, confusing (or “intentionally misleading”) messaging around what a “for” or “against” vote meant, and even lawsuits alleging an “improperly conducted vote.”
  • Prop 1 opponents are celebrating a victory against the TNCs (see definition below), who spent a combined $8.6 million campaigning for Prop 1.
  • New services such as GetMe are swooping in to try to fill the Uber and Lyft void, but are not meeting much success.
  • Former ride-share drivers (many of whom worked full time for Uber and/or Lyft) must consider whether or how they will replace that source of work and income.
  • The absence of Uber and Lyft is impacting the livelihoods and lifestyles of Austinites as they commute, seek safe rides home at night, and readjust their expectations of their own “on-demand” economy.

Austin is the 11th most populated city in the nation, and it’s a very connected city at that. Trust me, we are already feeling Uber-and-Lyft withdrawal big time.

For example, I took an Uber ride the Sunday morning after the Prop 1 vote. My driver was openly distraught and visibly sad. He said he hadn’t planned to drive that day but woke up extra early to get in as many rides as he could before he indefinitely lost Uber as his sole source of income. I asked what his thoughts on the whole campaign and voting process were and he said he would have had no problem complying with background checks and fingerprinting, and was astounded that the referendum resulted the way it did. Regardless, the next day, Uber and Lyft were gone.

Uber and Lyft apps the day after Prop 1 failed
My Uber and Lyft apps the day after Prop 1 failed.

As you can see, Uber and Lyft have called upon Austinites to complain to City Council and get this thing turned around. But will that happen? What will it take for Uber and Lyft to come back? The simple fact that we’re addressing this matter so publicly (as are The New York Times, Forbes, TechCrunch, and scores of other media), brings Uber and Lyft to an even grander stage than normal. All eyes are on their next steps (or lack thereof) to set the precedent for these scenarios which might occur in other major cities worldwide.

The Prop 1 Failure Takes a Swing at Austin’s Tech Culture

For us at The Zebra, and for many Austinites, ride-sharing is largely about smart and safe consumer behavior. Ride-sharing reduces DUIs, encourages carpooling, and offers Austinites flexibility and options to get them where they need to go.

However, the convenience and accessibility of ride-sharing has also become so much a part of our behavior patterns and of Austin culture that, well, many of us are rather dependent on it. In fact, several of our own team at The Zebra have opted to commute to our new downtown office exclusively via ride-sharing services. (This includes me, and I’m still sorting through my plan B.)

The Zebra moved to Austin from Pittsburgh several years ago to take advantage of the talent, funding, and robust startup culture which has come to define Austin. As such (and as locals), what we find particularly compelling about the post-Uber/Lyft climate are the conversations developing around how this single vote could change the identity of Austin as a major hub for tech innovation and leadership. It’s an alarming concern, but do we think there’s any legitimacy to it?

This discourse begins with the definition of Uber and Lyft as TNCs and how their business models (which are unique, but comparable for the sake of this discussion) have indisputably changed transportation on a massive and global scale.

What Is a TNC?

A transportation network company or TNC, as coined by the California Public Utilities Commission, is characterized as a service that will “provide prearranged transportation services for compensation using an online-enabled application or platform (such as smart phone apps) to connect drivers using their personal vehicles with passengers.”

Commonly understood as ride-sharing (or ride-hailing — see more on the differences here), TNCs have, to some, developed the reputation of massive tech companies that are largely monopolizing the transportation industry and flexing their muscles against governing bodies.

Well, when you say it like that…

Yeah, these big corporations have a lot of power. The question is, have Uber and Lyft been abusing that power and attempting to wield it in a way that hurts Austin? Or are they simply trying to work within an environment which has recently become hostile to their business models?

Austin Broke the TNC Business Model

The model is what’s critical here. Uber and Lyft have built their empires on a supply-and-demand model that ultimately revolves around convenience. Drivers can sign up and be working almost immediately. They can opt to drive two hours each week or 60. They can choose to drive only when surge pricing will score them big bucks, or they make it their full-time gig with a schedule and (reasonably) steady source of income. Riders, too, benefit from this on-demand, accessible supply of rides — they don’t have to plan ahead, bring cash, or ever worried they’ll be stranded somewhere without a safe (in many cases, sober) ride home. This model is proven and has come to be expected in pretty much every major city in the U.S., and indeed, even globally.

Weighing in on this concern is one of Lyft’s earliest investors (and an investor in The Zebra), Mike Maples, Jr. He wrote a response to Austin startup authority Josh Baer’s post following the Prop 1 vote:

“Here is the core problem— the ordinance that the City Council passed in December, 2015 breaks the business model of Uber and Lyft. I don’t think they ever really understood this and the unintended consequences. This is why they fought back so hard and desperately. Many (including their biggest supporters) are offended by how they fought back and the overbearing campaigns they ran. Still — it doesn’t change an inescapable fact: The ordinance passed by the City Council last December was wrong. It was wrong then. And it’s wrong now. If the City Council cannot factor this into their thinking, the TNCs will never come back…”

“People who drive only part time or some of the time very often choose not to get fingerprints because the process is too onerous and takes too long to complete end to end. By the way, the insistence on fingerprinting by the Austin City Council has never been proven to improve safety; it has only been proven to reduce the quality of service and the number of rides that can be offered. This is why it is failing in Houston. Lyft pulled out already. Uber is about to. Why would Uber pull out if they had an uncontested monopoly in a massive City like Houston when they hate Lyft with a passion? The answer is clear…the approach to fingerprinting there doesn’t work.”

So what does it mean for Austin that in our city’s attempt to “put its foot down,” we created an environment which is unyielding toward the TNCs’ business model — a model that works in countless other cities and has become an expected means of transportation nationally (and beyond?

At an Austin Chamber event last week, Maples said he and other Prop 1 proponents had “fought like crazy” to keep Lyft in Austin, but encountered resistance from the city which may haunt future investment and innovation efforts here.

“The fingerprinting wasn’t about safety,” he said. “It was about creating friction worldwide about this issue.”

And create friction, it did. In the aftermath of the vote, we’re obviously hearing more from the “losing” side, but those who voted against Prop 1 are largely sticking by their claims that the “campaigning” was actually deceptive and illegal lobbying by these massive ride-sharing companies and that Austin has proven by vote that its residents will not be bullied or harassed.

“We understand the bullying concept, the ‘we don’t want companies here that bully us,’” Maples acceded. “But basically what Austin did was say to the TNCs, ‘I dare you to leave.’ And they did. They won’t come crawling back. Put yourself in their shoes.”

According to Maples, the issues brought about by the vote are a preview of what roadblocks might meet future tech development and put new companies “on the defensive” in Austin, and urged that we come to a resolution sooner than later.  

“The debate is here and now. What’s going on in Austin is the debate.”

So Where Does That Leave Austin Now?

A recent Forbes Op-Ed titled “By Losing Uber, Austin Is No Longer A Tech Capital” notes that “though Austin has a reputation of being filled with tech-savvy millennials, it is now the largest U.S. city without ridesharing” and that “Austin City Council pushed ridesharing out by regulating in search of a problem.”

Sure, if we determine a city’s tech cred based solely on whether two TNCs could maintain operations there after a single city referendum vote, then yeah, Austin just lost its status. But for the sake of the bigger picture, let’s look at some trends that speak to Austin’s leadership in tech:

  • In 2015, 147 companies in Austin’s digital tech industry raised more than $966 million in new capital, according to Built in Austin’s analysis of 44 exits and 169 fundings, 72 percent of which were greater than $1 million.
  • As of March 2016, Austin’s unemployment rate was 3.1%.
  • Major tech muscle from the likes of Dell, Apple, IBM, Oracle and HomeAway (which Expedia scooped up for a cool $3.9 billion), among others, have chosen Austin for their headquarters or major global offices.
  • South by Southwest, widely touted as one of the most innovative global tech conferences/festivals, is held in Austin every March.

Perhaps those factors are collectively more impactful to a city’s standing as a tech hub than, say, the Prop 1 vote?

We think so. Austin is not a flaky city. We’ve got sharp minds, hard workers, and an established tech culture that will endure.

Still, we acknowledge that Austin has a reputation of innovation to uphold and a welcoming, nurturing tech environment to maintain. It’s about creating an environment in which different business models can exist and thrive, so when the next “unicorn” is magicked up in some dorm room or think tank, Austin will help it thrive. Right now, we must adapt.

“This was a wake-up call. If the tech industry wants to be involved, it has to be engaged,” Maples said. “Networks are going to sweep the world. They will connect us all, help us cure cancer, get us to Mars. But it’s going to be messy. We don’t want to engage in some abstract Oxford-level debate.”

He called for actionable, specific ideas — not platitudes or continued complaining — about how to use tech to help Austin move forward.


See what you can do now to make your voice heard (from Austin Startups):

Join the Austin Tech Facebook group where we are gathering members of the Tech community who care about local policy and want to be part of the solution. Join this group so that you know when to vote and understand the important issues that affect the Technology, Entrepreneurship & Innovation community.

Register to Vote and then exercise your right. Proposition 1 was decided by a margin of only 10,000 votes. Your vote really does count! Find the closest place to your home and work where you can vote using this (not so easy) website.

Contact your City Council representative and Mayor Adler and tell them why you want them to find a compromise that brings Uber and Lyft back to Austin as soon as possible.

Encourage Uber and Lyft to come to the table with City Council and work on a compromise. The haven’t exactly been the easiest to work with — if they had made some different choices they probably wouldn’t be pulling out of Austin tomorrow and we wouldn’t have mandatory fingerprints in Austin. The Mayor and City Council want to find a solution that keeps TNC’s operating in Austin but there can’t be any more ultimatums.

Get involved in public service! We need more people involved in the city who come from the Tech community and realize the many positive benefits that Tech brings to the entire Austin community. You can run for City Council, the Austin Independent School District Board or participate in one of the City Council Committees. The filing deadline for new candidates is August 22.

Participate in Leadership Austin programming, especially Emerge and Engage. Leadership Austin is the best way to learn about how our city works and develop your own network of leaders across every different part of the city. We need more Tech community leaders in Leadership Austin creating connective tissue with the rest of the community. Talk to Chelsea Collier,Gerardo Interiano, Mellie Price or I to learn more about Leadership Austin.

  • TrueTexan

    Great article Alyssa!

    You make a great point about people needing to get more involved in leu of voting on matters that affect local quality of life. Hopefully people will become more engaged in the local community as a result of the Prop 1 failure.