New York City is engaged in another battle with ride-sharing companies—but this time, Uber isn't among them. On January 30, Juno and Lyft each filed lawsuits against NYC, hoping to change a law that's set to go into effect February 1. Originally passed in December, the law aims to enforce a minimum wage of $17.22 (after expenses) for drivers on all ride-sharing services, but according to Lyft and Juno, the bill is unfairly advantageous to Uber.
The companies' arguments hinge on the formula the city uses to calculate how much a driver is owed. It uses something called a utilization rate, which calculates what percentage of a driver's time is spent transporting customers—and therefore earning money—versus how much time they spend waiting for a request.
The issue, according to the lawsuits, lies in the size of Uber's user base. Because of Uber's massive market share, its drivers receive a higher volume of requests, resulting in a better utilization rate. Lyft and Juno both claim this will lead to a death spiral—putting them in a position where they have to pay more out of pocket to keep drivers on the road than their main competitor does. That could lead to increased fares, greater user attrition, and worsening utilization rates, exacerbating their problem even further.
New York politicians, however, have shown no sign of backing down. Mayor Bill de Blasio has promised to fight the suit “every step of the way.”
Whether or not courts decide the lawsuits have merit, the fight shines a light on the complexity of trying to regulate ride-sharing platforms, and on Uber's advantage in the market. Given Uber's history of head-to-head fights with city councils and taxi unions, it's surprising to see a bill passed by the New York City Council—which also aimed to empower the city's Taxi and Limousine Commission—end up benefiting the company, but that is just the reality of their strong market position.
As the ride-sharing wars intensify and expand (Uber and Lyft are both invested in other transportation businesses like bike-sharing), it will be interesting to see if regulators can—and more importantly, if they want to—insert themselves further. The outcome of Lyft and Juno's lawsuit may be a good indicator of how the government feels about its role.
Why you should join a regulated startup
For years, investors have shared a standard piece of advice for founders looking to build in regulated markets: Don't. Don't take on the regulatory risk; don't put your startup at the mercy of political whims; don't try to grow fast in a market where regulators will require you move slowly.
Now that attitude is starting to change.
In a recent talk at Columbia University, entrepreneur Steve Blank, along with Bradley Tusk, Uber's first head of policy, and Evan Burfield, author of Regulatory Hacking, discussed how some of the most exciting unicorns of the last 10 years have been launched in heavily regulated markets—and why they think that trend will only accelerate.
"We've come through 20 years of the internet exploding in the economy, where you were able to pick off lightly-regulated slices of the economy, like media and retail," Burfield says. "(But) you keep going if you're an entrepreneur. You keep looking for the next puzzle to solve. And then you're getting into healthcare, transportation, energy, defense."
How this Maker made his side projects profitable in one year
Last March, Andrey Azimov quit his job and gave himself one year to get to profitability as an Indie Maker. Since then, Azimov's "Hardcore Year" has been about shipping products like Encrypt My Photos, Progress Bar OSX, MacBook Alarm, Dark Mode List, and Preview Hunt—as well as getting to $1,000 per month in recurring revenue.
"I was always passionate about making products and creating something that people would use," Azimov says. "Luckily I met Pieter Levels in December 2016, and he helped me to build my first app. The following year I launched three more apps. I did it all: the idea, the development, the marketing, and sales. For me, that was more fun than working on just marketing for one product."