A little more than a month ago as Minneapolis looked at a possible future without Lyft and Uber, around 10 alternative rideshare companies announced plans to launch in Minnesota.
Some looked to launch a completely new rideshare app, while other established apps looked to make the Twin Cities their next market. But, since these announcements were made, only two new companies – MyWeels and Wridz – have been licensed and started giving rides, at least in Minneapolis.
More companies and one co-op could still come online eventually, but what sets these early players apart from the others?
For one, both companies are quite different from each other. MyWeels is a new startup launched by a Minnesota businessman and Wridz is an already established Austin Texas-based app that operates in 22 regions across the country.
A lot can be learned from the early new players, so here’s a look at the first two:
MyWeels
One barrier of entry into this market is capital. Money is a challenge for any startup, but operating as a rideshare company in the Twin Cities metro comes with its own specific expenses, said MyWeels founder Elam Baer.
New rideshare companies entering the Twin Cities need to spend around $300,000 to get off the ground, the business owner estimated, basing his calculation off of his own expenses while launching his new business.
There are three jurisdictions companies need to attain a license from: Minneapolis, St. Paul, and the Metropolitan Airport. Combined, these three licences cost about $100,000 in total, Baer said. But there’s a larger expense many people don’t think about, he noted: insurance. Insurance can run upwards of $150,000 per year.
And these are all annual expenses.
“Every year, everybody’s going to have to pony up another quarter million dollars,” Baer said.
Baer has calculated that this means rideshare companies need to give a total of about 100,000 rides per year just to afford expenses. This means providing about 500 rides a day, a number the business owner says is attainable.
Finding the right staffing balance is also a challenge. Baer is trying to avoid having too many or too few drivers as the business scales.
“We don’t want to have too many riders and have them go out on the road and not get any rides from us,” he said. “In the same token, we don’t want to have customers downloading the app and requesting a ride and not having a car available.”
Currently, MyWeels has about 50 drivers out on the road at any given time and is planning to increase that to 100. A timeline on expansion is dependent on when St. Paul and the Metropolitan Airport approve licenses for the company. Baer says MyWeels has already started giving rides in Minneapolis.
As a longtime business owner, Baer got his starting capital from a small group of investors he is part of. The group owns a range of companies including a company that sells gigantic woodcutting saws and an egg processing plant that breaks eggs and converts them into liquid that is then shipped out in tanker loads. Baer also owns a small private equity firm, North Central Equity.
While the business of rideshare is new to Baer, he said he’s been using rideshare since Uber came to town.
“When Uber and Lyft said they were leaving, I – kind of on a personal level – just said, ‘How am I going to get around? Then very quickly it evolved into, ‘Is there a business opportunity here?’ and I jumped on it,” Baer said.
Related | Two paths: A look at Uber and Lyft’s threat to leave Minnesota
Some legislators have claimed Uber and Lyft’s threat to leave the state is a bluff. Baer says whether or not the companies stay in the state, MyWeels will continue to operate.
Notably, all of the drivers MyWeels currently has also work for Uber and/or Lyft. This is also the case for the second new rideshare company to enter the market within the last week: Wridz.
Wridz
Wridz, an already established Austin-based rideshare company, launched Tuesday in Minneapolis and has already completed multiple rides. The company is also waiting on a license in St. Paul and at the airport.
Operating in 22 markets, Wridz has thousands of drivers, said co-founder and CEO Steve Wright at a news conference Tuesday. But, unlike MyWeels, Wridz is not looking to hit a particular quota of drivers.
The reason this driver number is less of a concern to Wright comes down to his company’s business model, which is subscription-based, setting the company apart from companies like Uber and Lyft. Wridz drivers pay a $100 a month subscription fee to drive, but are able to keep 100% of their fares.
“I don’t really track that (number of drivers),” Wright said. “I know a lot of people talk about their numbers and (say), ‘well we got this many drivers this many trips.’”
Because the use of the Wridz app is up to the driver, Wright explained that numbers and density of drivers are less of a concern. For example, Wridz is in a very small market in South Dakota.
“If there are 10 drivers there and they’re actually using our app successfully and making more money, to me, that’s a success,” he said. “So we don’t get hung up on how many tens of thousands of drivers we have.”
When asked what happens if too much competition is introduced to the Twin Cities market, Wright reflected on what happened in Austin, Wridz founding city and another city Uber and Lyft threatened, and ultimately did (though only for a year), pull out of.
“When this happened in Austin in 2017 – we weren’t even in the business yet – 10 companies came into play, and they all did very well,” Wright said.
Every company had a slightly different model and pricing structure.
“I think that competition is good,” he said. “I think that gives the consumer an option to decide what they want because right now you really don’t have an option. You have brand one and brand two, which are almost identical.”
What comes next?
The state rideshare bill has not yet been passed and the Legislature is in its last week of session.
Gov. Tim Walz and many legislative leaders have been trying to reach a compromise that will raise driver wages while keeping Uber and Lyft in the state and in Minneapolis. The compromise rates agreed to between legislative negotiators and Minneapolis city council members don’t do that, assuming the two companies aren’t bluffing.
The possible departure of Uber and Lyft remains July 1, the day the Minneapolis ordinance is supposed to go into effect.
Winter Keefer
Winter Keefer is MinnPost’s Metro reporter. Follow her on Twitter or email her at wkeefer@minnpost.com.
