viaCycle

Selling smart bicycles: A delicate dance, Part 2

Intelligent bikes! Get yer intelligent bikes here!

In a previous post, we covered some general aspects of trying to make a first sale as a startup.  That advice applies fairly universally, but over time we’ve learned a few things about the bike sharing market that we think are worth, well, sharing.

Public biking is expanding rapidly around the world.  A quick trip over to the bicycle sharing world map is enough to confirm that the trend is spreading far and wide.  Major city programs have increased from approximately 92 in 2008, to 160 in 2009, to 238 by the end of 2010.  Even though North America is still looking a bit sparse compared to our European brethren, we’re catching on quickly: viaCycle estimates that the North American market has increased over ten-fold in the last several years.  Programs are sprouting up in cities such as Denver and D.C., with Boston, NYC, and San Francisco on the way.  All of this is good evidence that public bikes are a real transportation alternative, and not just a fad.

So what makes building these systems so hard?  If everybody and their grandma wants one, viaCycle should have IPO’ed already and we founders should be sipping margaritas on an island somewhere, right?  Well, truth is, we really like what we do, so we probably wouldn’t trade it for an island unless it had cool bikes.  But it’s also not quite that simple.

Bike sharing systems have a few issues that have prevented adoption in a lot of places.  They’re all important in various contexts, so in no particular order, we’ll discuss each issue and some ways to solve them.

1. 1. Program costs

At the moment, biking systems geared towards large cities and lots of use cost approximately $3000 to $5000 per bicycle.  This is a lot of money, and is often a difficult case to make to transportation chiefs or city planners.  Why, they ask, would we install public bicycles when we could purchase scooters, heck, even golf carts, for that price?  We’ve been asked by numerous people why we don’t just buy $100 Wal-Mart bikes and leave them scattered around whatever area we’re trying to serve.  This has been tried in the past: see Amsterdam’s White Bikes in the 1960′s and similar experiments in Portland and other places.

Unfortunately, with free bike systems, you get what you pay for.  Sure, a city can toss out cheap bikes or golf carts or anything they want, but with no accountability, users will treat them accordingly.  The White Bike program failed miserably due to theft and vandalism, as did every other “free” bike program in recent history.  Every once in a while, a university or smaller town will try something similar, but the majority last for a few years at most before sputtering out.

Here’s what some don’t realize: when installing a modern, fully automated bike sharing system, the extra expense goes towards building a sustainable, repeatable infrastructure. By creating a platform that keeps track of bikes and users, operators can provide better service and recoup their costs over time.  Continued revenue streams are a key focus for viaCycle and many other companies in the public biking space.  As with any transportation system, an investment is required up front, but the costs are made up quickly.  In comparison to other modes of public transit, bike sharing is incredibly inexpensive, and can get to profitability much faster.

Finally, viaCycle is working to remove the perceived cost barrier.  Now that most of us have cell phones sitting in our pockets, there’s no reason not to leverage this technology to create a low cost, easy to use system.  By transferring infrastructure from heavy racks and kiosks to the bikes themselves, we’re helping to bring system costs down and bring biking to more places.  We’d like to cover the economics of bike sharing in more detail soon, so keep your eyes out for a future post on the topic.

1. 2. Operations and maintenance

Operations and maintenance for public biking programs is proving to be a tough nut to crack.  Public transit like buses and trains are centrally controlled – their schedules and routes are decided and enforced by a single entity.  Bicycle sharing, however, is an example of shared consumption – schedules, routes, and overall demand are decided by individual users.  This allows for incredible flexibility, but also makes system logistics much harder to manage.  It’s hard to predict where bicycles will be at any given time, and even when general traffic patterns are known, they are sometimes difficult to counterbalance.  The predominant solution is to transport bicycles en mass from stations with too many bikes to stations with too few, usually with trucks or vans.

Redistribution using vehicles can work, and has its place in many programs.  However, there are other possibilities for balancing a large system.  One emerging solution involves dynamic pricing based on real-time supply and demand.  The system monitors the number of bikes at every station throughout the system.  If a station is almost full, the system can raise the price of taking a bike to that station.  Alternatively, if a station is almost empty, the system can reduce the cost for users headed there, make trips to that station completely free, or even give users a credit.  This all happens instantaneously, depending on movement of bicycles throughout the system.  Some bike sharing programs are testing versions of this idea, such as the V+ scheme in Paris’s Vélib.

ViaCycle enables such real-time monitoring and adjustment on an entirely different scale.  Because each of our bikes knows its location and is communicating with our servers at all times, we can anticipate supply and demand immediately, rather than simply reacting once bikes arrive at a station.  We also envision ways to use our data to make bike sharing more socially connected – perhaps a viaCycle user needs a bike far from any designated location, and could offer other users a bounty to deliver one to them.  Our team has all sorts of ideas on how to utilize our platform to provide a better experience.  How would you use extensive travel and route data to optimize bike sharing, or other types of transportation?

1. 3. Culture and Adoption

Finally, despite recent changes, bike sharing still faces an uphill cultural battle in some parts of the world, particularly in the U.S.  Many perceive bikes as children’s toys, or something to be used as a hobby but never as serious transportation. Here in Atlanta we’re very excited about how many people “get” viaCycle, but we occasionally talk to those who serve up blank stares when we try to explain how bikes can be extremely effective for getting around.  Sometimes this just means we need to work on our message , but there are still a lot of people for whom “not driving” just doesn’t compute.  Changing such views takes time, ample evidence, and patience.

Even in cities with established programs, many systems have yet to prove their utility and financial bottom line.  Most forms of public transit are subsidized in some way (as is most private transit, but that’s a story for another day), but bike sharing programs need to show that they can at least provide comparable service levels.  In some places this is happening. Capital Bikeshare is experiencing some growing pains, but has been a resounding success so far.  DecoBike, the first large privately owned system in the U.S., has taken off rapidly. In other places, people are still holding their breath.  Simply letting the market grow organically and collecting more data will help us and fellow advocates make the case for public bike systems.

The bike sharing market is a fascinating place to be right now.  The viaCycle team is constantly challenging ourselves to solve existing problems and bring public biking to a wider audience.  Our technology is one tool at our disposal (we’re pretty proud of it), but there are lots of other ways to improve bike sharing and urban mobility in general.  If you could change how we moved ourselves from place to place, what would you do?