Pando

Sore loser Lyft and Uber investors hint they'll pull support for Austin tech companies

By Sarah Lacy , written on May 18, 2016

From The Sharing Economy Desk

A few weeks ago, when Austin voters rejected Prop 1, a ballot measure to roll-back mandatory fingerprinting rules for Uber and Lyft drivers, we didn’t cover the news.

The daily advances and setbacks of the ridesharing industry could fill a blog with far more volume than ours. We have to pick and chose.

Embarrassing? Maybe. The first time voters hadn’t rushed to the polls to side with Uber and Lyft? Perhaps. But in the grand scheme of things, a set back in one city didn’t seem like that big of a deal, given the global challenges of Uber and the multiple ongoing class action lawsuits that threaten the foundations of the business model.

Likewise, the venture establishment of Silicon Valley wants you to know IT DOESN’T CARE EITHER. NO REALLY. IT DOESN’T CARE. AUSTIN TOTALLY DOESN’T MATTER.

Seriously, what the fuck has been going on on Twitter about Austin and ridesharing? I’ve never heard someone so loudly leave a place for so long. Bulls retreating from china shops could take lessons.

Does Austin matter that much as a market? Is it the affront that the voters were the ones to reject it this time not the “corrupt lawmakers”? Is there a serious concern this could start a wave of cities demanding fingerprinting to increase security of these services?

It may simply be that this is one of the first defeats for both Uber and Lyft, and so both groups of investors get to complain. Indeed, Lyft’s investors -- who don’t normally find themselves having to defend the nicer and smaller of the two ridesharing companies-- have been leading the charge.

Mike Maples, a Lyft investor and also a Texan, wrote a Medium post explaining just why the proposed law was such a problem. And he made a decent case for why the ridesharing companies do not want to start doing fingerprinting. From that post:

A digital marketplace like a TNC creates a link between buyers and suppliers. In the case of Lyft and Uber, they are the market makers. The buyers are the riders and the suppliers are the drivers. For such a marketplace to work, the market-maker must get supply right as the point of departure. Without solving supply in a compelling way, you can’t even begin to bring customers to the party. The business models of Lyft and Uber create flexible options for drivers that are intentional — They want to let drivers drive only a few hours a week if that is what they want. They want to let drivers drive some weeks and not others, or some seasons and not others. They want to let some people drive as a part-time job and some as a full-time job. When drivers are qualified, they want to get them on the road asap, without process-heavy regulations that do not improve safety. They try to eliminate all of the friction for all of the safe drivers who are willing to offer supply, by offering them an extraordinarily fine-grained model for participating.

His argument is that fingerprinting simply adds too much friction, and cited Uber pulling out of Houston as evidence of it. A few bits of his argument are just wrong, such as the claim that China is the only place where Uber or Lyft have been “outcompeted” and his claim that Didi has “only” won in China because of government repression of US companies. In fact, the Chinese government hasn’t thwarted Uber one jot. Didi has just out executed them. It’s an odd argument for a Lyft investor to make given Lyft and Didi’s tie up. But I get that it’s a good talking point to compare a city to “communist” China.

The broader problem with his argument is that it’s from the point of view of an investor who wants to protect the business model. Clearly, the citizens of Austin prize safety more. I said at the time of Maples post, it might be worthwhile for these companies to think about why voters for the first time have insisted on greater safety over convenience when it comes to ridesharing.

If you speak to people from Austin -- and plenty on Twitter are weighing in-- you’ll hear two things. The first is that they don’t think the companies themselves are taking safety seriously enough, given the stories every month of an assault or a person who has wriggled through existing background checks that shouldn’t have. Vague and unsubstantiated statements that these cars are safer than cabs, with little else done to reassure the public clearly isn’t enough for all markets. Not to mention, Uber’s past of claiming the assaults simply didn’t happen or shaming women for being dressed too provocatively when they got in a car. If I had a teenage daughter, I wouldn’t let her take one either. Neither company has responded to this concern well. They’ve just pretended it doesn’t exist and say “cabs are worse.” That’s caught up with them at least in one city.

The other reason is even more avoidable: These companies were incredibly smug. I don’t know why the Valley is always stunned by this but no place in the world likes it when tech companies and their investors swan in with their cash and market caps and start acting like they know better, they have all the answers, and they can solve that place’s problems. Local news story after local news story has detailed that the campaigns were simply too aggressive.

Some tried to appeal to both sides to put those feelings aside and come back fresh to the negotiating table. Instead, Uber and Lyft’s investors decided to turn things up to, say, 45. Rather than doing any soul searching at all, leaders in the Valley (pictured above) have only upped the smug and added a side of condescension and butt-hurt.

Paul Graham can’t possibly go to Austin ever again...

...because how on earth could a man this smart and this rich get around a city any other way? The simple truth is that Austin doesn’t have cabs, or rental cars, or buses. And, let’s remember, Paul Graham does not have a functioning pair of legs. It is, quite literally, a stumper.

Lyft (and Pando) investor Marc Andreessen weighed in with his withering Tweet...

…leaving millions of Austin residents to wonder how they’ll possibly survive without Andreessen’s tourist dollars. Don’t come crying to him when your SXSW ticket costs an extra dollar to cover the shortfall.

But those Tweets are just silly, condescending or insulting. They make the bias against Silicon Valley greater, but are harmless beyond that.

More troubling is the increasing drumbeat that these investors don’t consider Austin a serious startup hub because two of the thousands of companies founded every year aren’t allowed to compete there without complying with the local law.

And

And

The clear threat being, we won’t invest or visit until this changes because clearly you just don’t “get” tech.

Wait, what?

You are saying you are going to penalize entrepreneurs working in a city, because its broader electorate wants two services to be safer? That’s obviously an illogical corollary. If we assumed only tech savvy people used Uber and Lyft, neither company would be valued at its current price. These are supposed to be mass market products. What’s next? You only get a seed round if you have a Facebook profile? If you’re on Slack?

The entire reason these same VCs argue unicorn valuations are justified is because these products are so globally mainstream. So how does using them signal you are one of a handful of tech hubs?

Lest you think it isn’t a threat, consider the conversation I had with Keith Rabois about it on Twitter. When I asked whether his comment was essentially extortion, he replied this:

That’s right. To Rabois, Austin’s citizens wanting Lyft and Uber to require fingerprinting is the same thing as Southern States suppressing the rights of gay and transgender citizens. He, for one, believes VCs should boycott a city until it supports two of its companies blindly, under their own terms.

I couldn’t agree with this guy more:

To be clear, this has nothing to do with my feelings towards Uber’s management. This is about the category of ridesharing, and I use Lyft once a day on average. I think ridesharing in general has absolutely made life better. While I wouldn’t put my kids in any car service that didn’t require fingerprinting, I use Lyft as-is. But that’s no longer the issue, because of just how badly Silicon Valley has behaved in what is by all accounts a pretty minor set back. It’s beyond flipping the chessboard over.

This, Silicon Valley, is why people hate you. And it’s not just Austin. This smug idea that because it was funded here it must be better is why half of San Francisco hates you. With these Tweets, you are the guy who I heard walking down my street the other day yelling into his phone, “DON’T LET BRAD SCREW THIS UP, IT’S AN ALL CASH OFFER!”

Even if you believe all of this, my advice is to dial it back. It’s that attitude that lost the voters in the first place, and a big reason many Austin residents on Twitter are digging in their heels. The vote is done. Either it’s not a big deal for Uber and Lyft, in which case actually leave and stop acting in the same obnoxious way that lost the vote to begin with. Or be tactical and feign humility and try to work out a solution.

But no matter how much you think Austin “needs” tech, this multi-week tantrum isn’t making anyone look good.