RidePal and the Private Bus Wars: Q&A with Founder Nathalie Criou

12/18/13Follow @wroush

Aside from rent increases, few effects of the economic boom lifting up the San Francisco Bay Area (or afflicting it, depending on your point of view) have drawn more ire and resentment lately than the private buses.

These big, faceless, Wi-Fi-equipped vehicles crawl the streets and highways of San Francisco and the peninsula, shuttling tech workers to their jobs at Google, Apple, Yahoo, Facebook, Genentech, and other tech giants of the region. The most common complaint: the buses add to congestion on city streets and block public bus stops when they pause to ingest or disgorge their lucky riders.

Tensions boiled over in San Francisco’s Mission district one morning last week, as protesters surrounded a Google bus and blocked it from leaving for about half an hour. The protesters waved signs saying “Public $$$$, Private Gains” and “Warning, Illegal Use of Public Infrastructure.”

And it’s not just street activists who have been taking a closer look at the private buses and their impact. In February, local author Rebecca Solnit penned a column for the London Review of Books that portrayed the buses as signs of growing inequality and the callousness of the city’s new rich; Longform.org picked her essay as one of the Web’s five best long-form sci/tech articles of 2013.

And this fall, Stamen Design, a San Francisco design firm, published dramatic data visualizations based on crowdsourced observations on the routes and schedules of the private bus lines. “It’s not news that these shuttles, and the big digital tech companies that run them, are changing fabric of San Francisco as we’ve known it,” Stamen founder Eric Rodenbeck wrote for Wired’s opinion site in September. “It’s clear that we’re looking at a reversal of the historical norm: The workers that used to live in residential suburbs while commuting to work in the city are now living in the city, while the largest technology companies are based in the suburbs and increasingly draw their labor supply from dense urban neighborhoods.”

RidePalAs long as Silicon Valley remains the center of gravity for the big tech firms—and as long as these firms want to hire hip young employees who prefer to live in San Francisco—the imbalance Rodenbeck described will worsen. What hasn’t begun yet is a coherent political discussion about the alternatives to the private buses.

Clearly, the competition among tech companies to provide the cushiest ride to work (and make no mistake, the buses are a big perk and recruiting tool in a hyper-competitive industry) is a net plus for other commuters. If all those Googlers and Facebookers suddenly decided to drive to work in their own cars, it would induce something like an infarction on 101 and 280, the peninsula’s already sclerotic arterial highways. But so far, city governments up and down the peninsula have only begun to examine the question of how to regulate the buses, and where they should be allowed to stop.

Into this hazardous fray steps RidePal. The San Francisco startup, a 2012 graduate of the Greenstart accelerator and venture fund, has jokingly called itself “the Google bus for the rest of us.” The company acts as a middleman, contracting with private transportation companies to provide bus transportation for the employees of corporations that don’t want the hassle of administering their own bus fleets, or aren’t big enough to afford them.

RidePal founder and CEO Nathalie Criou knows a thing or two about the commute to Silicon Valley; she lives in San Francisco (where, these days, she bikes to work) but spent years working as a product manager for Valley companies like Google, Admob, and Meebo. That experience, plus her background in technology and business—she’s got an MBA from the famed French business school INSEAD—gives her a pragmatic perspective on the private-bus question.

The way Criou sees things, it isn’t possible to stop people from living where they want to live, or to stop companies from building their headquarters wherever they see fit. Nor can cities or regional transportation authorities build new roads or rail connections fast enough to keep up with shifting population patterns. Under those conditions, Criou believes, buses are an ideal way to transport commuters: they can go anywhere, and fleets can grow or shrink on demand.

“If you want to change the roads, it takes a long time,” says Criou (pictured above right). “In the meantime, the new hip area will have moved somewhere else. So there will always be a mismatch between the resources available for these people, and where they choose to go. That’s why I like buses as a transportation initiative—because it makes use of an existing resource, which is roads, and it is much more likely to stay relevant as time goes by. It will be wherever it needs to run.”

Criou says she understands perceptions that private buses are the domain of a privileged elite. But she says the whole mission of RidePal is to scale up bus transportation to the point where it’s a practical and affordable option for a much larger cross-section of companies and workers.

“The whole idea behind RidePal, the vision, is that every single person who has to go to work should have a better alternative than driving alone,” she says. But “it’s very common that any new industry will start with the people who have a higher willingness to pay, because they have a need that’s tenfold that of the average population. Then you can start refining the product and scale up.”

In addition to easing freeway congestion, Criou points out, buses reduce the environmental impact of commuting. “If you take one person away from their car and put them on a bus, you reduce their carbon footprint by about 40 percent, on average,” she says.

RidePal, founded in early 2011, now works with more than 30 Bay Area companies. Criou says thousands of riders use the buses every month. The startup has raised $3.7 million in seed and Series A funding from Greenstart, 500 Startups, Amicus Capital, Claremont Creek Ventures, and Volvo Group Venture Capital, and has plans to hire more staff, improve its route planning and notification software, and investigate expansion to other regions in 2014.

I interviewed Criou over breakfast in San Francisco’s Dogpatch neighborhood last month—we both showed up on our bikes. Below is an edited version of our conversation.

Xconomy: Would you say that the hypothesis you started out with a couple of years ago is proving to be true? In other words, that there is a demand for bus transportation below the level of an Apple or a Google or a Genentech?

Nathalie Criou: It is probably even becoming more true than I thought two years ago. What was very obvious two years ago was the need on the consumer side. Most of our riders were driving alone. We poll our riders regularly, and they all said they were either living too far away from public transit, or they were not able to afford the train. At least 90 percent of our ridership was just driving to work.

X: So those are people you have effectively taken off the highways.

NC: Exactly. So I think for these people—and a lot of the hypothesis actually came from those people—driving alone is not a good thing. The waste of time is the thing that people are very acutely aware of.

Then on the corporate side, I think we are seeing a lot more interest than we had anticipated initially, and particularly from larger organizations. A lot of these larger corporations have a lot of cash. They have options. They could definitely afford to do this themselves. But the logistics associated with running this sort of service are pretty big. And a lot of these companies don’t want to take that on.

X: You don’t own any buses, right? You are contracting for the buses from logistics and transportation companies.

NC: From bus operators, exactly. These operators have the expertise to hire drivers, maintain buses, make sure they will be cleaned properly. They have a lot of expertise that we don’t have, and I don’t see why we would want to duplicate.

X: To really deal with traffic and the health effects of commuting and have a serious impact on energy use, you would need to get hundreds of thousands of people out of their cars and onto buses. Do you see signs that there is a larger movement here? It would require awareness by consumers, and more convenience and access. Maybe some regulatory changes on the part of the cities you are moving through. And of course, demand on the part of corporate customers. What signs do you see that this is happening?

NC: On the consumer side, all the signs point in this direction. I think there is a general shift in how people see the car. It’s much more of a utility. So if other tools are available that provide the same utility, that they find more convenient or less stressful or less wasteful, people are much more open. We have several users who have told us they chose not to buy a car after they moved here. For a long time people have hated to commute in traffic, but they were not thinking that there could be an alternative. So we definitely see no problem with people adopting this if it is available.

We are having a lot of conversations with cities, and cities seem to have a different problem. They tend to have two major constituents: they have residents, who also happen to be voters, and then they have businesses, who are the economic engines of the city. And both are equally important. The problem is, there tends to be a tension between the two, because residents want less traffic and businesses tend to need more traffic if they want to keep on hiring and growing.

So cities are exploring ways they can allow businesses to grow and basically conduct more business, and remain competitive, without increasing the negative aspects or the impact on their residents. So it’s an interesting problem. There is no formal program, but there is definitely a lot of conversations. And not just in the Bay Area. We have had cities from other parts of California or other states who have made inquiries. So this is an interesting area.

X: What kinds of cooperation from cities would make a difference for a company like yours? Do you need special permission, for example, to set up a bus stop, or just to send the buses down city streets?

NC: This is happening already, in every case. We always reach out to the cities or the public transportation authorities in each city, because we want to make sure we are not actually making things worse when we want to make them better. Usually it just takes conversation and understanding the areas of concern on both sides. So far, we haven’t really run into a lot of problems.

San Francisco is taking a very aggressive approach. They are bringing everyone to the table. Everyone recognizes that there is limited availability of curb space, which is a rare resource. So we need to work together to determine how we can make the best use of it to better serve the public.

X: I’m sure you saw the study that Stamen Design did. To me, what was striking about the maps they produced is that there is this parallel world of commuting evolving right alongside everyone else who is still driving. If you are lucky enough to work for a big company like Apple, Google, Facebook, or Yahoo, you have this alternative available to you. It’s almost like this ghost transportation infrastructure is arising, but it’s not available to a lot of people. I’m wondering what messages or thoughts you come away with when you look at the Stamen map. Is this being managed in a way that, on the whole, is going to improve urban life, or make it even more unequal?

NC: I think there are different aspects to this. What is striking about this map is the sheer volume of services. For companies that have the means to do it—which tend to be newer Internet companies with a lot of cash reserves that they can put to use for this—it’s a very, very used perquisite. It’s very highly valued [by employees]. They are doing this because it’s working.

X: Well, in many cases, it’s the only way that their employees can live in they place where they want and work at the company they want to work for.

NC: Exactly. If anything, it’s an illustration of need. Initially you don’t have an alternative, so they have to do it themselves and it’s a very inefficient and expensive way to do it. But they have no choice because there is nothing else. And then I think this is a trigger. People say, oh, look at that, something is happening.

It’s hard to stop the direction these companies are going. I think the best we can do is follow that evolution in a direction that is going to be sustainable, that is going to be socially responsible.

X: But the openness of the system is a concern. Your system is obviously more open than the Google bus—anybody who wants to take it can get on. But you still need to be able to pay. And you need to know where the bus is going to show up. You need to be able to go online and see the routes. So, if this is going to be a solution that really contributes in a long-term way to sustainability and lowering emissions and all of that, is there a way to scale it up and make it more accessible? Is that something you think about very much?

NC: That’s the whole reason we founded the company! Commuting is just one use case. It’s a very powerful one because it is the number one cause of emissions. We’re talking about millions and millions of people around the globe, every single day. When people commute, they go to a job. And if a solution like RidePal or public transit wasn’t available, they would still have to find a way to pay to get to their job.

So I think it’s not so much about payment, it’s about how much do you charge. And whenever you have scale and you have volume, your ability to charge less and less increases, while still making a very comfortable profit. So it’s very common that any new industry will start with the most acute need, with people who have a higher willingness to pay, because they have a need that’s tenfold that of the average population. Then you can start refining the product and scale.

The whole idea behind RidePal is that every single person who has to go to work should have a better alternative than driving alone. This is what we are working toward.

Deploying buses like this is probably one of the cheapest, most cost effective ways to transport people, on a per-person basis. It’s using the existing infrastructure, so you don’t have to build tracks or stations. It’s a very fluid thing. If it needs to morphs it just morphs. There is nothing fixed. So it’s very, very flexible. The size of the buses can vary with demand. So it’s still, overall, a much cheaper way to travel, no matter what. Much cheaper than cars.

X: Is that also true in terms of pounds of carbon dioxide emitted per passenger per year?

NC: It is. If you take one person away from their car and put them on a bus, assuming that the bus transports more than one person, obviously, you reduce their carbon footprint by about 40 percent, on average. There is definitely a strong environmental gain. It is just a very flexible, cost effective way of transporting people. Doing it in a more egalitarian way should be very achievable.

X: The other thing that’s striking to me about the Stamen Design maps is that there are so many people who work in Silicon Valley but absolutely refuse to live in Silicon Valley. It’s kind of silly that we have this dumbbell pattern, where all of the employers are down at the other end of 101, and yet there are so many people who have decided that the cool place to live is San Francisco. And for obvious reasons that I totally agree with—but it’s a completely inefficient distribution.

NC: It might be. But the truth is, when we are looking at our customer base, it’s not just Silicon Valley and San Francisco. There are actually employers all over the place. Silicon Valley is definitely the core of what this area is known for. But there are a lot of people who work elsewhere. So if you look at congestion patterns, it’s not just along 101. I think there is a lot of misperception in the general public about where people live and where people work.

Things do change. Until recently, very few young people wanted to live in San Francisco, and that has changed. The average job lasts about five years, and the average person stays in their home for about seven years, so at some point you are not going to live next to where you work. It will always be like that. Cities will not have either resources or the physical infrastructure [to keep up with shifting populations]. If you want to change roads, it takes a long time. In the meantime, the new hip area will have moved somewhere else. So there will always be a mismatch between the resources available for these people and where they choose to go.

X: OK, and you’re saying buses are a flexible solution for that.

NC: Yes, and it’s true for companies too. When property becomes too expensive, companies will go somewhere else, and they will do everything they can to make that location seem like the next big thing, because that is how they compete to attract talent. So it’s all a moving target, all the time. And all of these people would make their decisions individually, limited not just by economic factors. Which is why I like buses as a transportation initiative, because it makes use of an existing resource, which is roads, and it is much more likely to stay relevant as time goes by because it will be wherever it needs to run.

X: How do people use their time on the buses? From what I’ve heard about the Apple bus or the Google bus, once you get on, that is almost the beginning of your work day. Everybody has a laptop and is doing e-mail all the way down the peninsula. It’s almost seen as your chance to get on top of your e-mail.

NC: There seem to be different kinds of people. There are some people who are definitely making very heavy use [of the on-board Wi-Fi network]. And there are some people who use these trips for reading, catching up on some sleep.

We have not done a formal study, we don’t have hard data, but it looks like morning and evening behaviors are different. More people work in the evening on laptops. In the morning there are people who work. They do things they would otherwise do at work when they get there, so it’s definitely time-saving. And other people may read or sleep, which is also a productivity gain. They don’t have to be tired at work. And when we formally talk with these people, they usually say it allows them to have a longer work day. Or they can leave work earlier and still spend time with their family.

One of the things people tell us they like is that on the buses there is no social expectation of having to talk to someone else if you don’t want to. People feel quite free to do whatever they like, which is valued. There is definitely a lot of social connection that can happen.

X: How do you see RidePal expanding over the next five years? Do you feel like you have a lot of work left to do to conquer the Bay Area before you start looking at other regions or cities? Are there specific types of regions that would be a good fit for you? What challenges do you feel like you still have to figure out here before you scale up to other cities?

NC: The easiest question to start with is, are there other markets that would work? The answer is yes, there are a lot of them. Most urban areas in the U.S. and around the world tend to have a congestion problem.

One reason is that a lot of cities, especially older cities, have a rail system, which was planned and built based on dynamics that existed 100 years ago, or 50 years ago, or that are not relevant today. So you have needs that are at odds with the fixed infrastructure. So these cities actually suffer. And public transportation has many different responsibilities. It has to work at times when people are going to work, and it has to work at times when no one else wants to travel.

So it’s very unfair to expect a transit system to try to optimize itself around the needs of commuters. In fact if you look at Caltrain, they are at capacity during rush hour. But if they were to increase capacity, then the increased cost would prevent them from serving the public at other times.

So the volume of commuters, obviously, is one area we look at as we grow the company. The other factor we look at is going to be the kinds of corporations, the kinds of verticals that might be in these markets. Because initially the corporations that will be more able to offer something like this, even if it’s much more cost effective than doing it themselves, tend to be businesses that already have resources devoted to managing their human capital, and that are constantly looking out for better solutions for their employees.

X: One of the cities that comes to mind is Detroit. It’s a city where we have a bureau, and the downtown is undergoing something of a resurgence. There are some big high-tech companies downtown like Quicken Loans and Compuserve. So this is a hub-and-spoke problem, getting people into the city. And there is a terrible public bus system, so there is no way to get into work on the city buses, and there is no rail system. Obviously, Detroit was built around highways.

NC: Which is great for buses.

X: Right. It’s great for buses. So I don’t know if there’s a huge congestion problem in Detroit but there is definitely a people problem, just getting people downtown. So it may be a market for this kind of thing.

NC: It may be. I think we will be looking and starting to talk about which markets will make sense to expand, and I think Detroit is probably on the list. Wherever there are problems moving people it is probably on the list and then we have to figure out, is this something we want to do now or something we want to do later?

So I don’t have an answer. We are not yet projecting where exactly we will expand. But the need is well beyond the Bay Area. If we were to be true to our vision, it would be difficult to stay in the Bay Area and still cover a huge percentage of the world population. [Laughs]

Right now we are really in the starting phase. Once we start scaling all of these barriers can go way down because you have all sorts of economies of scale, and the ticket to entry for a lot of these corporations will be much lower.

X: All that said, do you feel there is room to grow still here in the Bay Area?

NC: Absolutely. We are seeing huge acceleration in the Bay Area. We have a lot more room to grow. I think for a long time, companies thought they had no other options. They were saying “Oh, we don’t have the cash reserves of Google, or we’re not as big,” so for a long time people were not even thinking it could be possible. Now we have people more and more realizing this could be in reach, this may be an option.

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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