Max Nesterak , Minnesota Reformer
May 1 was supposed to be a big day in Minneapolis for emerging ride-hail companies, with at least nine startups saying they would launch in the Twin Cities and claim the market share surrendered by Uber and Lyft over minimum pay rates for drivers set by the Minneapolis City Council.
But nearly two months after the City Council passed those rates — delaying enactment until May 1 and then July 1 — just two transportation network companies are licensed and operational in the city: Uber and Lyft.
Just one potential competitor — MyWeels (with no ‘h’) — has a complete application in Minneapolis awaiting final approval, pending payment of the city’s annual licensing fee of $37,145 plus $10,615 for a “wheelchair surcharge.” MyWeels is also the only ride-hail alternative to be licensed in St. Paul after paying its annual fee of $41,115.
MyWeels founder Elam Baer predicted that few companies promising to come to the Twin Cities would “get to the starting line, let alone put up a good race.”
Baer, the CEO of a Minnesota-based private equity firm, said what set him apart from the others was his access to capital — not some new proprietary technology or the allegiance of hundreds of drivers.
“I wish it was something more glamorous but the fact is that’s what makes us unique,” Baer said in an interview with the Reformer last month.
Viable competitors entering the market could be a boon for drivers and riders by putting more pressure on Uber and Lyft to compete on wages and price, although there’s surely a limit on how many apps drivers and riders are likely to use regularly.
Baer said he thought if Uber and Lyft do leave, probably only two alternatives will survive, essentially recreating the duopoly under different names.
Uber and Lyft say they’ll remain operational unless the Minneapolis rates take effect, which seems less likely after a second delay and pressure from state lawmakers to find a compromise. That will make scaling up harder for new companies, although they could still benefit from the significant public attention on the issue.
Finding investors is the main test for Uber and Lyft alternatives. In addition to operating licenses for Minneapolis, St. Paul and the airport, transportation network companies need to carry commercial insurance for their drivers with premiums running around $150,000 per year.
Joiryde CEO David Linhardt said he dropped out of the race to enter the Twin Cities because of the “excessive licensing fees and lack of clarity on insurance costs and coverage requirements.”
“We’ve encouraged the city to lower the barriers to entry if they want more competition in this space. So far, we haven’t seen evidence this has happened,” Linhardt wrote in an email.
MOOV founder Murid Amini said they are ready to go but just need to pay the fees. He said they have investor interest and expect to launch mid-May.
Hich (without the “t”) COO Mustafa Sheikh said he submitted an application to the city this week and is still working on applications for St. Paul and the airport. He said they have a tentative launch date of June 1.
Drivers Cooperative founder Erik Forman said they plan to run test trips this weekend but don’t have a tentative launch date. Forman said the delay by the council gives them more time to raise money, build up the co-op, and recruit riders. Forman said they have signed up over 2,000 drivers.
A pair of entrepreneurs planning to start a ride-hail company called Portal — using a decentralized technology similar to cryptocurrency — say the technology is being put through a “dress rehearsal” in Austin, Texas in June. The company, which will use the app Teleport, could launch soon after.
“We don’t want to overpromise and underdeliver. We’d rather launch something that can quickly scale to 12,000 drivers and hundreds of thousands of passengers in this market than to have systems that lead to dissatisfaction,” said Portal founder Niko LeMieux. “You really only get one chance to capture mind share for users.”
Empower, by far the most developed competitor to Uber and Lyft, doesn’t have the same start-up costs as other companies because it doesn’t call itself a transportation network company and therefore won’t apply for licenses or carry commercial auto insurance. The legality of its model — calling itself a booking agency like Expedia or OpenTable — is being challenged by Washington, D.C.
In an email, Empower CEO Josh Sear declined to provide a new launch date but said they are in active conversations with city and state elected officials.
Representatives for Wridz and U Got Wheelz did not respond to requests for comment.
Leaders of an India-based company called Juspay recently spoke at a news conference with Minneapolis City Council members about starting a ride-hail company called Bridge in the Twin Cities, but could not be reached.
The Minneapolis minimum rates set to take effect July 1 guarantee drivers $1.40 per mile and 51 cents per minute, which is higher than what’s needed to ensure drivers earn the city’s minimum wage of $15.57 per hour, according to a state analysis of the more than 18 million Uber and Lyft trips taken in Minnesota in 2022.
That report estimates the typical Twin Cities driver would have to be paid at least 89 cents per mile to pay for vehicle costs and their share of payroll taxes plus 49 cents per minute to earn the Minneapolis minimum wage. The researchers also calculated a higher per mile rate of $1.21, which would compensate drivers for benefits including health insurance, paid sick leave, paid family medical leave and retirement savings.
At a Minneapolis City Council committee hearing on Tuesday, the city’s research team presented new estimates of Uber and Lyft driver expenses that could either justify the state proposal or the city ordinance.
The city staff found drivers would need to be paid around the $1.21 per mile recommended in the state report if drivers purchased brand new vehicles and financed them over five years, whereas they would need to earn around the city’s $1.40 per mile if they financed the vehicles over three years. The authors of the state report assumed drivers purchased used vehicles and financed them over three years.