Stefan sat down with Jason Prado from The Drivers Cooperative: a driver-owned ridehailing alternative to Uber & Lyft that is 100% worker-owned.
In the chat, we discuss:
- The history of ridesharing in the US
- The problem with Uber & Lyft
- What a worker-owned cooperative is, exactly
- How The Drivers Cooperative formed
- How owner voting works in the cooperative
- How profits are distributed among owners
- Marketplace dynamics: How they manage supply & demand
- The challenges of going up against Uber & Lyft
- The mechanics of investing in their crowdfunding campaign
This episode was originally featured in the Alts newsletter issue: The Drivers Co-Op Ridehailing App
You can listen to the podcast through Spotify or YouTube.
[Stefan Von Imhof]
All right. Hey everyone. My guest today is Jason Prado. Jason is the co-founder of the new Drivers Cooperative. It’s a new ride sharing app that is 100% worker owned. This is a fantastic alternative to to Uber. It uses a completely different forward-thinking structure, where every driver is also a member who owns one share of the company and thus gets a vote towards leadership and business decisions and all sorts of stuff. So, this structure is awesome. It creates a better deal for all parties. And as you’ll hear in this podcast, it’s definitely a better deal for drivers, but it’s also a better deal for riders as well, who actually see lower prices per ride compared to Uber. And the best part is, as an investor, you can invest in this company, you can support the cause and get real returns. So, Jason welcome to the podcast, my friend.
[Jason Prado]
Hey, thank you so much. I’m really happy to be here to talk about the co-op.
[Stefan Von Imhof]
Awesome. All right. So, let’s start by telling us a little bit about yourself and your histories. Because your story is fascinating to me. So, if I understand correctly, you used to work at Google and Facebook, where you actually organised a union while at Facebook. And then I think you left and campaigned for Bernie. Is that all, correct?
[Jason Prado]
Yeah, maybe overstating my role in it. So, I worked in big tech for about 10 or 12 years across Microsoft, Google Facebook. The longest time for about seven or eight years at Facebook and some start-ups in between those. So, I kind of a fairly normal tech background, whereas an engineer, engineering manager at these companies, working on all kinds of teams, products, infrastructure, so fairly varied experience, but definitely typical. But started to maybe want to do something else in 2015, 2016, the company Facebook had changed. I was going through some changes, learning about alternative politics that I wasn’t really exposed to before. Facebook’s role in the world became a lot more controversial and a lot less clear cut around those times. And around the 2016 election, I had a bit of an epiphany like a lot of people did, that something was wrong.
I had maybe made some wrong choices to end up in the position I was. And maybe didn’t believe in the leadership of the company the same way or like the mission of Silicon Valley the same way. I really had bought into for a super long time, basically. So, I started looking for new answers and new ideas to kind of explain maybe what I should be doing in this kind of hectic time in America. And found the labour movement. So, I’ve talked a little bit before in other places about my experience, getting to know other tech workers and realising that while we’re tech workers, we were – our relationship production as workers, we’re not owners. For the most part, most of us might have some shares in our companies, but none of us are executives. There’s very, very few people who have actual like decision making power in the tech industry. So really most of us relate to our workplaces as just atomized workers, just like any other workplace in the US or around most parts of the world. Some other tech workers and I started researching the labour movement and finding that there’s this whole history of the American labour movement that we are kind of a small part of. So, I got to know people interested in labour and union organisers and all kinds of different people through this experience learning. And I got pulled into a labour organising campaign at Facebook. And I was a very, very small part of it for sure, but contributed at as a full-time employee. So, if you walk around any tech campus in the US today, Google, Facebook, whatever, most of the people you see are not actually employees now, right.
Like majority of people who quote unquote work for Google are actually contractors or TVCs, temp spenders, and contractors as Google calls them. And that’s been a big shift right over the past several years. So, most people who work at Google on these campuses or at Facebook, like don’t have the perks you hear about in Silicon Valley all the time. They’re just working jobs that are just okay at best. And they probably don’t have healthcare. So, I jumped on this labour campaign that was organising cafeteria workers at first at Facebook, and then other service workers got involved in other unions. So, I try to do solidarity work as a full-time employee, doing things like, I can gripe to management and not really get retaliated against in a way like a cafeteria worker or other contractor can’t. And I would get to know cafeteria workers and other service workers, go to their houses, tell them about the union, tell them that as a software engineer, like I’m on their side, I think they deserve better. And like, if they push comes to shove, I have their backs. If they like walk out or have to do a strike or something, it’ll be clear to me and other full-time employees that were on their side, not the side of say, management. And this led to growing disillusionment with Silicon Valley. Like if we can’t take care of the people, literally in our backyards, then how are we possibly going to make good choices for like the information ecosystem, the planet, and other difficult problems that Silicon Valley faces. So decided to leave in 2020. Left Facebook, worked on the Bernie campaign in DC for a while. As that wound down, came home to take some time off during the lockdown and then started researching cooperatives and landed in the cooperative ecosystem.
[Stefan Von Imhof]
Wow. There’s a lot to take in there. One of the things that really interested me is what you said about the contract workers at Facebook and Google. It seems that the contactization of the workforce is not just something you see with ride sharing with Uber and stuff, but it’s also happening at Facebook and Google. That’s really fascinating. So, you’re saying that’s what kind of drove you to start getting involved and helping organise those folks into a union. Can you tell us a little bit more about that? I’m fascinated. Like, how were you able to do that while working at Facebook? There’s got to be a lot going on there.
[Jason Prado]
Right. So, I got involved by, like I said, mainly these union organisers who pulled me aside and said, there’s this underground campaign, we’re not talking about publicly until we hit majority. So, can you get involved with it on the early side? So, a lot of the work was before it went public. But when we did go public, management was actually like, not really that opposed to it. I think because this cafeteria workers are ultimately like a small part of Facebook. It’s not really about Facebook’s like impact in the world. And you look at other campaigns, like say workers organising a brown jedi at Google, which is this system that the US military, Google sells to the US military workers at Google. Or like we have a problem with Google’s core business, and we want to take power as workers and change course there. I think efforts in tech worker organising that are more around impact have been a lot more difficult and have been a lot more contentious. Like Google’s fired organisers standing up to Google’s role in the military or contracts to CBP, customs at border patrol.
So those are very, very difficult campaigns to win. And we’ve only had very few victories there as tech worker organisers. On the other hand, there’s very bread and butter issues happening on these tech campuses, where like it turns out that most of the people who serve food on a tech campus don’t have health insurance, and they can’t afford health insurance because the low wages and poor benefits they get. And that like is just so absurd on its face. That it’s a kind of an easier fight. So, I didn’t have any trouble with management at Facebook over that campaign. I have later ran into trouble talking about other issues at Facebook, for sure.
[Stefan Von Imhof]
I can imagine, man, that’s a tricky conversation.
[Jason Prado]
Yeah. And then over the three or four years, I was both involved in tech worker organising and working at Facebook day to day. The cognitive dissonance like grew and became a little bit harder to justify. So that’s what ultimately kind of led to me burning out a bit between doing my job, doing organising at the workplace and doing organising outside the workplace all at the same time.
[Stefan Von Imhof]
So you burned out a bit and then left Facebook. And then you felt the burn. You got into the – campaigning for Bernie and helping the Bernie campaign. Can you tell us a little bit about that?
[Jason Prado]
Sure, yeah. I had been volunteering for the Bernie campaign just on the ground in California. Knocking doors, coordinating other people to knock doors, just doing whatever I could in a small way locally. But when it became clear I was going to be leaving my job. I talked to some folks I knew affiliated with the campaign to see if my tech skills would be useful. And they had an opening for a data engineering consultant to come in for just about a month and a half around Super Tuesday to make sure that we were in good shape for the big primary here. They had a huge data operation and the number of people they phoned and text and knocked doors on every day was really astounding. That was kind of the power of the people’s powered campaign. But at the same time, if you’ve ever worked in like election tech or anywhere near there, you know that engineering principals are not like kind of the first concern, right. Because everyone knows this code will be thrown away in three to six months. So, it’s kind of not the best code you’ve ever seen. So, they need some engineering skills to come in and kind of clean up the code base and make sure it could continue to scale, especially if we made it past super Tuesday. So that was a cool experience. Like data’s not my background, but I worked on a few campaigns. So, I knew a little bit about how these systems work. I wouldn’t say I added a ton of value there, but it was cool to keep those systems up and running through super Tuesday and then just learn a lot about that space very quickly.
[Stefan Von Imhof]
Cool. So, it sounds like the Driver’s Cooperative was kind of after that phase of your life. This was a lockdown baby essentially.
[Jason Prado]
Yeah.
[Stefan Von Imhof]
Tell us a little bit about your team. Who came up with the idea? How did you guys first get started? I think there’s someone from Uber on your team, is that correct?
[Jason Prado]
That’s right. And like you called me a co-founder, which is not super accurate. Cause I joined like pretty late. I only joined about six months ago and the effort’s been going on a year and a half. So, I usually refer to myself as the chief technologist. What actually attracted me to the cooperative is that they didn’t have a technical co-founder. That this wasn’t a Silicon Valley guy with an idea for an app coming to solve all the workers’ problems or something. Right. You see a lot of that, like around the 2016 election, you saw a lot of that around like the tumult in the country for the past few years. Like the idea that technology is going to solve our problems feels kind of ridiculous to me. But it’s also very enticing. So, I got to know some folks in the cooperative and they had three co-founders. One who’d been driving for decades, one who had been a labour organiser for a long time. And then one who was a GM at Uber in east Africa. So, they didn’t have a technical co-founder, which is so refreshing coming from Silicon Valley. Instead, they had had organised thousands of drivers through years of organising effort to try and make gains with Uber and other companies in New York City. And these drivers were fed up and looking to solve their own problems. So this thesis I’ve been developing is that talented technologists instead of coming up with their own apps and companies and trying to force their understanding upon problems should instead go find people who are already organising themselves and trying to solve their own problems and are maybe flailing with technology and aren’t able to solve their problems because they don’t have access to technology and say software development. And then technologists should go there and help them solve those problems instead of make those problems their own problems. Instead of coming in from above kind of, it’s kind of integrating yourself into these organising efforts and using your tech skills to make them successful.
[Stefan Von Imhof]
Very cool. Yeah. I mean, I like what you said about technology, like a hammer, looking for a nail kind of like metaphor in many ways. The way you guys went about it is much different and fundamentally more pure, it’s more the right way to go about things. Like there’s a definite problem. Let’s apply technology to the problem instead of just creating technology for the sake of technology and seeing what we can extract from that. I think we should take a step back though and talk about Cooperative. So, what is a Cooperative? Like what does it mean to be a Cooperative?
[Jason Prado]
Yeah, that’s a great question. So, you’re a Cooperative if like most of the voting power and decision-making power in the organisation or company lies with the stake holder who it affects. And who do the work or participate in some kind of cooperative process. So, you might have shopped at REI and heard REI as a cooperative, as a consumer cooperative, where everyone who buys a certain amount at REI can become a member of the consumer cooperative and get like a rebate at the end of the year based on how well the company did. So, you could imagine like starting a grocery store that’s a consumer cooperative. It’s people coming together to solve their problem of needing some goods. And that cooperative fulfills those needs. That’s one kind of cooperative. But generally, when people are talking about cooperatives, we’re often talking about worker owned cooperatives. So, in a worker owned cooperative, the idea is that instead of the company being owned by absentee shareholders whose interests are quite divergent from the workers who actually perform the labour of the company and the customers who actually benefit from the company that the shareholders kind of are just there to like siphon off some of the profit. Instead of that situation, which is kind of the legacy normal capitalist business situation. And at cooperative, the workers own a majority of the shares that vote and make decisions in the company. So, there’s cooperatives of all sizes. Your local grocery store might be a worker on cooperative like mine is. And I prefer to shop there because it’s a co-op and there’s no corporation behind it, no shareholders behind it. But then there’s also a very large corporation. Like the Mondragon corporation in Spain produces all kinds of like household industrial goods and they have retail stores, and they have 55,000 employees or so working at a place like Mondragon, probably feels a lot like working at any other retail store, any other factory floor, but probably like a little bit better. And then you get to vote on like your board of directors every year or two. So, it’s not a completely radical. We make every decision by consensus kind of thing. Instead, it’s like the ultimate power, instead of lying with capital and shareholders lies with the people it affects most, which are generally the workers.
[Stefan Von Imhof]
So, I was part of a co-op back in college and it was a sandwich shop. And there was seven co-ops at UMass where I went to school. So, I was part of one of those and it was an awesome experience. Now truth be told, about three or four of those Co-ops, like the numbers really weren’t working too well. The one I was part of actually was one of them. But the experience was fascinating. A few of the co-ops were killing it, and it was really interesting to kind of see how we work together, help each other out. But the bottom line is, I learned a ton about how co-op boards work, right. Like how decisions are made, how elections are handled, how hiring and firing works. It was a great, wonderful experience. So now with Driver’s co-op, so let’s talk specific. So, each driver is by default, a member who owns one share of the company and that’s a voting share towards elections business decisions that sort of thing. Is that correct?
[Jason Prado]
That’s right. I think we have some minor minimum requirements. Like you have to actually do some rides with us and like give us some documentation and stuff, but yeah. Any driver can become an owner.
[Stefan Von Imhof]
Cool. Is that by default? Or is that like, as long as they hit those minimums, it’s you just a function of paperwork and that sort of thing.
[Jason Prado]
Yeah. It’s anyone who actually drives with us, can become a member right now. In the future, like we might change that or something, but right now it’s wide open.
[Stefan Von Imhof]
That must make it really enticing for drivers and for soliciting drivers, which will get to the marketplace dynamics in a sec. But quick question now, are you guys also a public benefit corporation? I know that’s something that a lot of people are getting interested in, following in the footsteps of REI and North face and Patagonia. Are you guys a public benefit Corp, or have you thought about becoming one?
[Jason Prado]
I think we’re still researching that and working through the qualifications for it. We wanted to launch as soon as possible, but that is something that we are definitely considering.
[Stefan Von Imhof]
Cool. Let’s shift gears and talk about ride sharing for a moment and specifically the evolution of ride sharing. Because it’s been an interesting ride, pun totally intended. It’s no secret that Uber prices are going up and like everyone is taking notice. It’s kind of a larger metaphor of the promise of the gig economy that’s like starting to fall apart. It kind of started out with this promise of flexibility and like choosing your own hours and independence. And there’s definitely some pros to all of that. But it has definitely fallen short of expectations. Workers are without benefits. Expenses are super high, gas and maintenance and other fees. And most importantly variable pay, which is a huge one. It needs improvement. But what’s fascinating to me is like how Uber has kind of controlled this market as well, right. Like they kept prices low when they first started out by subsidising the rides with VC cash. And that basically changed when they went public. Now that they’re public, Wall Street’s demanding real returns. Fares are skyrocketing again. Driver’s supply is still low. The riders are getting juiced, and the extra revenue isn’t even being funnelled down to drivers. In fact, many cases, drivers are seeing their pay fall even as fares are increasing. Many drivers are finding out they don’t meet the thresholds to qualify for the benefits. And like on top of it all, it hasn’t even moved the stock price. Like the stock is still at 40 bucks a share, exactly where it started a few years ago. Flat as a pancake overall. It’s kind of broken. And so, I think it’s definitely fair to say this model’s sort of broken and there’s a lot to fix. But my question for you is in your opinion, like what are the most, like the one or two most fundamental problems with Uber and with Ubers model? Like what is the most broken there?
[Jason Prado]
Gosh, I mean, you laid out basically all of them. And even ignoring the question like should rideshare exist? Is this something that’s filling a need that we couldn’t fill like some other way? Why aren’t there better public transit options throughout most of the US? Like, why is it going to be so hard to move to EVs for rideshare? Plenty of problems. The root, I would say of most of them is that, well, of course drivers just don’t have a say, right. They’re kind of the product here. They’re being manipulated by Uber for Uber’s benefit ultimately. And ultimately for the benefit of Uber’s shareholders. As you say, like kind of the most glaring issues are while you might pay like 5X surge right now to get from Manhattan to Brooklyn with Uber, because of this quote unquote labour shortage, or like a wage shortage. But how much of that is a driver seeing. Well, next time you take an Uber Lyft, you should actually tell your driver like FYI, this is how much I’m paying. And the driver will know after you get out, like how much they earn from it. And they’ll understand that discrepancy better. Because like you said, these surge prices are not trickling down to drivers at all. Drivers are making the same as ever, sometimes more, even sometimes less. So just the economics just seem really poor. It seems like a total race to the bottom. And there hasn’t really been a good prospect for getting out of this rut. So far it seems like Uber and Lyft is like duopoly kind of pulled all the cards. So myriad problems there also like, driving a taxi just used to be a decent middle-class job. It’s a great job for immigrants. It was a way to like start a business of your own or take some control of your own schedule and your own work environment. And with Uber kind of like driving prices down over the past decade or so, driving transit logistics, taxi’s, is much less of a good job now. So, we’re seeing this everywhere. It’s the same thing in the gig economy. It’s the same thing at tech companies transitioning everyone to contractors at Uber. You’re onboarded through an app for the most part. If you have a question about it, you will talk to a contractor. So, like you’re an Uber driver. You’re not an employee. Anyone you talk to, and support is a contractor, not an employee. Their manager is probably contractors of some kinds, not employees. So, there’s this like vanishingly small staff as the ladder is being pulled up that actually benefit from all of this. And everyone else is kind of chasing their wages as they see them fall. So, the whole thing is just pretty displeasing.
[Stefan Von Imhof]
All great points. To be fair, I think that with Cabs before Uber, there were definitely some problems for sure. I mean, there was some serious inconveniences. The medallion was a huge hurdle for people. I mean, it was what, $150-$200,000 to have the right to drive a cab. But let’s also be honest that, yeah, I mean, when all is said and done, it was a middle-class job, it was reliable. You could do it for your life. People did. I mean, when all is said and done with Uber and the dust is settled now, like a decade later, you’re basically left with like a marginally better Cab experience that you do through app. But at what cost? I mean, that’s the real question. It’s the genie should never really go back in the bottle. I don’t think as far as like app-based ride sharing. And I think it can definitely find a happy home in conjunction with public options. Absolutely. But I think the model is so severely flawed and this is why I’m so stoked that you guys doing what you do. So, let’s talk specifics. How are you better than Uber? And let’s be really specific. Like what specifically makes you guys just fundamentally better?
[Jason Prado]
Sure. So, there’s structural aspects of it. Then there’s just the really cut and dry economic aspects. Like today our board of drivers that ultimately govern our policy and our pricing structure and things very relevant to drivers, they’ve decided that the pricing structure for us as drivers get 85% of the revenue of the ride after strike fees, tolls taxes. 85% of it passes directly through to drivers. 15% goes to the cooperative
[Stefan Von Imhof]
Compared to Uber. I believe I’ve read anywhere from about 25% to 40%. Is the Uber take rate, is that correct?
[Jason Prado]
Yeah, I think in extreme cases it can be higher. And in normal cases it can be about there. So, like if you’re seeing like a 10X surge, it might be much less than that. That kind of cut. But in the normal case, like that’s sounds about right.
[Stefan Von Imhof]
Okay. So, your take rate you’re saying is about 15%. So, it’s lower.
[Jason Prado]
Yeah, exactly. It’s going to be lower. And then the real structural issue there is, well, how was that decided at Uber, is decided by – or in a ride share monopoly, it’s decided by a team of game theorists and psychologists and app developers and data scientists whose incentives are to like get the most rides out of a driver by paying them the least. And that’s just – that’s what they have to do to earn a return for their shareholders to maximise their shareholders value, to justify their massive valuations. That’s just how it’s going to go structurally. Whereas at the Driver’s Cooperative, our driver board who’s setting those policies are drivers themselves. They’re setting the policies on the economics of every ride, of the policies of, what are the expectations of our drivers, policy expectations of our riders. So, it’s ultimately under driver control. And our driver board is, like I said, made up of drivers who are volunteering or are elected from the board, even our board of directors, the people who hire me as this staff member are ultimately voted upon by our driver members.
[Stefan Von Imhof]
This is interesting. So, let’s talk about earnings. On the website it says that members of the cooperative, or basically drivers are making more per trip. So about eight to 10% more per trip than they do on Uber. In an addition, the profits are going back to the drivers as dividends. Can you talk about both of those things, especially interested on the reinvestment into dividend side?
[Jason Prado]
Sure. So, like I said, 15% goes the cooperative, the rest goes to the driver minus fees and taxes and whatnot. Then on the profit-sharing side, so in a capitalist business, you will have profit and dividends. In cooperatives you might have talked about other cooperatives before that have a similar structure where instead of profit and dividends, we have surplus and patronage. Kind of the same concept, but just like different lingo in the co cooperative space. So surplus is at the end of the year. We look at how much we brought in revenue and how much we spent on expenses. And that’s our surplus. You could call it profit if you’re going to give it to shareholders. We call it a surplus. So, we look around and say like, okay, what do we do with a surplus? In a capitalist corporation you might pay it out to shareholders as dividends. You might reinvest it in the business. You might pay a lobbyist, who knows. In our cooperative we look at the surplus and think, okay, well, some of it should go back to drivers because they earned this and they’re our shareholders. And then some of it will be reinvested in the business. So, it’s very similar in concept. Then we have a question of like, okay, how do we pay this out? How do we pay these dividends as patronage out to our drivers? Co-ops take on different systems for doing this. So, at your local grocery co-op, it might just be number of hours. That one particular worker worked, divided by number of hours all workers worked. Then that’s like your share of the surplus. And our cooperative, we have the system of patronage points.
so, you earn a point every time you take a ride, every time you perform a ride, you earn points for coming to a meeting, because that’s time you could be earning money and we need people to come to meetings to make our decisions. Then you might earn – you’ll earn three points for referring a rider, five for a driver. And we’re flushing this out as time goes on. What’s interesting is there’s like kind of an egalitarian principal at work. In your grocery cooperative. It’s one person’s hour worked is the same across everyone no matter what their role is, because we’re all human and our time is all equally valuable as this principal we’d like to uphold.
[Stefan Von Imhof]
It’s really interesting. I remember at the co-op I was a part of, so all seven co-ops basically pooled their money at the end of each quarter and then paid out a divided equally among the co-ops. It creates some interesting dynamics for the co-ops. The owners of the better – the coops that are performing better are essentially kind of getting their earnings flattened out a little bit. But we really believe that like the whole ecosystem would benefit if we were all in together. And in the end, it all worked out. I mean these entities are still around today. When you talk about like paying the dividends out, like, yeah, it’s definitely something you got to figure out the right proportional dividend to give each driver. It also makes you kind of think, like 80% of Uber’s problems could be solved if they basically just made every driver like a shareholder. That’s just not how capitalism works. And that is how you guys work a little bit. So really cool to see. Okay. So, let’s talk about marketplace dynamics. I love marketplaces and getting the chicken and the egg going is always super tricky. So, let’s talk with the supply side. So, you guys have about 3000 drivers today, is that correct?
[Jason Prado]
That’s right. Probably around 3,500 at this point.
[Stefan Von Imhof]
So how are you finding supply? Like how easy or difficult has it been to find drivers, and have you been able to draw drivers away from Uber and Lyft? And how’s that been working out?
[Jason Prado]
It’s a good question. So, on the demand side we’re doing great. People are hungry for this. We have plenty of requests coming in for rides all the time. People want an alternative; they want something that they can believe in. They want to be a part of this new movement to build a worker owned alternative. The supply side is where we’re going to live or die though. And it’s been challenging and we’re working on that with most of our efforts. So, we have these 3,500 drivers who are for the most part ready to drive. And we they’re coming largely from, I guess, like worker organising efforts over the past several years. So, most drivers in the New York area are professional. They’re doing this pretty much full time. This is their main thing. There’s very little, kind of casual driving the way you might find in San Francisco. Like somebody might drive for Lyft on the weekends, or in addition to being a student or something, just the licensure requirements and difficulty of the marketplace in New York City means most of our drivers are full time. So, they’ve been doing this for a long time. They’re very good at what they do, and they’ve made this their business and their career. So, they know lots of other drivers. They’ve been organizing for around demands to Uber and Lyft and the big ride share companies for many years. And it’s from these organising efforts, actually, the co-op was born. People saying like well we’re not getting what we want fast enough from Uber. Let’s just go out and try and build an alternative on our own. So, it’s coming through like word of mouth and people in their immigrant communities, and community organisations like talking to each other about it and hearing that there’s some people working on alternatives. And it’s early, but they could be a part of it.
[Stefan Von Imhof]
Yeah. Supply is always, I shouldn’t say always, but it’s most of the time, it’s the harder side of the equation to get. Right. Good to see that you guys are making some progress there. And in terms of the demand side. So, talk about that a little bit, if you could, and what kind of level are you at in terms of riders? I don’t know if you can speak to rides per day, but I’m really interested in the number of riders and also kind of like the ratio of riders to drivers and how you guys’ kind of think about the right ratio there.
[Jason Prado]
Yeah, so what we’re talking about publicly is we’ve done, I think over 4,000 rides now, since we launched a few months ago. So, we’re live, but like you could think of this as like an early vision of what we’re really striving to build. So, people are super stoked to be a part of it. Like I said, we’ve gotten really good press from mainstream outlets, like the New York Times, the day we launched, Alexandria Ocasio-Cortez, the Congresswoman, wrote about us on her Instagram story. And that just decimated our servers instantly. We got like a thousand requests right out the door. Could not serve most of those because like we had just basically turned on the switch, like within like hours of that post going live. So, we’ve recovered since then. And we’re improving the health of the system all the time. We are also doing like partnerships with various organisations to do like, kind of B2B deals around getting rides for all kinds of organisations. So, New York city has a ton of electoral campaigns every year, cause it’s such a big place. So, every year campaigns, like political campaigns, electoral campaigns will pay taxi cabs or Uber, something to do, like get out the vote efforts. Like go pick up our voters, take some of the polls, make sure that they’re able to vote. And this year a number of campaigns, including Alexandria Ocasio-Cortez’s campaign worked with us for our co-ops to deliver those rights. So, we’re working at the B2B space because it’s a little bit more tame and easier than the difficult on demand marketplace creation. But that is of course the big prize. And that’s like what we’re going to be focusing on in the long term.
[Stefan Von Imhof]
Very cool. Oh man. Getting AOC to mention you on the Instagram. That’s a good problem to have that’s for sure. Cool. So, let’s talk about your goals and your expansion plans. Obviously, you don’t want to divulge your whole roadmap. At a high level, what are your kind of goals for the next 12 months? And how do you think about expansion? To be you guys, you started in New York and that’s where you’re at currently, correct?
[Jason Prado]
That’s right. And our goals would definitely include rolling out to other cities in the US and around the world. Right now, the technology stack we’re built on is highly tuned to New York city, essentially. So, it’s going to take a good deal of work to move out of New York and bring this other places and work with other co-ops on the ground, in different cities around the world. Because these 3,500 drivers should be compensated for taking a risk early on and being like the first movers in this cooperative. But in the long term, we have to figure out a structure for governing the co-op when we have a hundred cities, right. And each of them will probably be a little co-op of their own. So, we’ll have this kind of Federation above or like as a client of all these other cooperatives.
And we have to govern that Federation cooperatively as well. So, we’re imagining some kind of Congress of cooperatives. So that’s the medium-term vision. Like a few years down the road when we’ve deployed to other cities. The very technical goals for the next year to like make our ride matching system very healthy, to get ridership up in New York city and then to improve our technical staff, for sure. So, I’ve been the only technologist in the co-op for the past six months working full-time. We’ve had some really awesome volunteers who have helped a ton. But like, you can only do so much with a 10 hour a week volunteer who has like a day job at Google or something. So, I was kind of working on my own, making very scrappy decisions to get us out the door, to show that this is a real thing that’s worth investing in. Now with some investment that we’ve been able to raise, we hired – we just onboarded two engineers in the past two weeks and we’re stepping back and really building the system that’s going to scale to any city around the world. Any verticals. So, like taxis in someplace rides here in other places, like we’d love to be involved in the future, helping cooperatives around food delivery or other logistics use our software as well. So that’s the big vision. But right now, it’s sitting down and improving our technology. Because we look at our driver apps say, and the Uber and Lyft driver apps are extremely tuned, right. They’ve been fighting each other for many years. So, they’re really really good at pushing the right incentive to the drivers at the right time to make sure that you’re on one app instead of the other. And we’re just this tiny thing caught in a crossfire right now. So, we need to really ramp up our investment in technology to just be able to compete on that playing field.
[Stefan Von Imhof]
Yeah, it brings up a good question. Like in terms of the strategy that you guys have, surely there must be something about how Uber and Lyft operate that you frankly like probably like admire. Like obviously you’re not going to follow the Uber playbook of going into a new city and like laws and consequences be damned and like any of that. But at this same time, like there’s probably some tactics, methods and stuff that they’ve used that you guys might think would work for you as well. Is there anything that you think like Uber and Lyft like are doing right, that you could also like borrow from?
[Jason Prado]
That’s a great question. So, we have to do things differently because our access to capital is different. So, there’s things I’m certainly jealous of about Uber and Lyft, for instance, in learning about their early history of Uber. And they had like [Inaudible 00:34:46] business a lot of really big tactical decisions early on, around like build versus by this system build versus buy that system. And every time the answer from the CEO on down was like, oh we’ll just raise more capital, hire more engineers and build exactly the thing we want. Which sounds like it’s such a great situation to be in as a chief technologist, I would love to be in the situation where we could just hire and build exactly what we need and exactly what our members want. We have to be a little bit more tactical and a similar space where we have to be a little bit smarter is around providing incentives to get drivers on the road. So, search pricing is an incentive. Lyft might push a notification to a driver’s phone saying if you take three rides in a row with us, like no cancelling, no driving with the other apps, we’ll give you like five bucks like right now. Those incentives are, like I said, very well-tuned to motivate drivers. So, we’re interested in learning how we can provide the right incentives to our drivers in a way that is effective, but also in line with our values. And also just sustainable, right. Uber, or like the other ride share companies. They get to experiment with this. And I think there was an announcement recently that they planned to spend 250 million in incentives over the next year. Something like that, just like a massive amount to jumpstart demand as like lockdowns end and whatnot. So, there is – the things that they can like take on negative unit economics for a really long time, in a way we cannot. So, we’re always looking at like what kind of incentives can we offer and how can we think of this, like to guarantee coverage and high traffic areas and high traffic times, in a way that guarantees us positive unit economics almost all the time. Because we have to spend all of the investment, we’ve received on building the platform, not just – we could spend it very fast on bad incidents. So, we’re always trying to learn how to balance those things.
[Stefan Von Imhof]
Yeah, they can definitely run negative unit economics for years. And you don’t have that luxury. However, on the plus side, I think you’ll agree. It’s good news. You don’t have to spend hundreds of millions of dollars lobbying against California props and spending money on underwriting and lawyers and all of that stuff. So that’s probably a pro, I guess.
[Jason Prado]
Yeah. And ultimately the reason for that is because success looks very different for us than it does for the big ride share monopolies. Success for us is a sustainable business that grows year over year and supports our members and does better each year. But success for Uber and Lyft looks like, monopolies status essentially. Because their valuations are so high, they’ve received so much investment, that they can only really justify that by like taking the entire market and growing at a just massive pace. So, for us, like our shareholders are our members. If our members are happy, then we are happy. Everyone wants growth, but it’s just going to happen at a different pace because cooperatives favour sustainability over, I guess like blitz scaling is the term that people are using today, right?
[Stefan Von Imhof]
So, let’s talk how people can help. And most importantly, how they can invest. We’re all about alternatives here, right. And this is absolutely one of them. You can support this company. You can support drivers by investing in the Drivers Cooperative. Let’s talk about how they can do that. So now you guys have a current we funder that’s active, and I think you’re about halfway to your goal. Is that correct?
[Jason Prado]
Yeah, we’ve raised about 1.2 million on We Funder so far in this revenue-based financing structure. So, I can talk about that a little bit. So, it’s different than equity, right. And if you’re a venture back start-up, you sell 30, 40, 60% of your company to venture capitalists who take this risky bet on you. And you have that. They get a board seat. They ultimately own, after a while probably a majority of the company after several rounds of investment. So, we want to keep our equity with our members, so that the only people voting are the members of the cooperative. And cooperatives do sell equity. I mean you’re a cooperative if 50% plus one votes belongs to the stakeholders and that’s something we might do in the future and that’s fine.
But for now, we’ve only raised debt like structures. So, on the crowdfunding campaign we’re engaging in now, we’re raising debt. So, you’re making a loan to the cooperative essentially. And it’s paid back based on our revenue. So, you might, if you invested a thousand dollars in the co-op, after a two-year grace period, we’re going to be paying back 2.5% of all of our revenue after basic fees to service that loan up to a 2.5X cap. So that means if you invest a thousand dollars, then you could see that turn into $2,500. So, it’s capped. It’s not like out of the park success, it’s not the venture capital profile, but like I said our goals are like sustainable growth and long-term viability.
[Stefan Von Imhof]
Awesome. I love revenue-based financing schemes. And so, this is an interesting one. I just want to get a little bit more specific. So, when people invest through, We Funder, they are investing in what specifically? They’re not gaining any shares of the company they’re investing in operations essentially. Is that correct?
[Jason Prado]
Yeah, that’s right. I mean it looks more like a loan than a purchase of shares.
[Stefan Von Imhof]
Okay. So, it’s essentially a loan. So what timeframe are we talking here? So, for the first year, no capital will be returned?
[Jason Prado]
That’s right. So, two-year grace period on the loan before we start making repayments on it. And then you earn 2.5% of the cooperative’s revenue for up to 10 years. So, if we recoup before 10 years, which we would be able to do in our models, if we gain like around 5% say of the ride share market in New York City, then you will see a 2.5X return on your investment.
[Stefan Von Imhof]
Okay. So, this is interesting. So, after a two-year period, the principle, and I guess you can call it a coupon, a dividend essentially. So that’s coming back and that’s paid, what is that paid annually, Monthly, quarterly?
[Jason Prado]
I should totally know that it says in the docs. But one of those. Yes.
[Stefan Von Imhof]
So, after two years, dividends begin getting paid out, there’s a 2.5X max for up to 10 years. So, is it like, if I give $10,000 to this, after two years I start to see dividend payments until what happens until my total payouts reach 25,000? Or until 10 years happens? or how does that work?
[Jason Prado]
Till either of those. Yes. So, if we hit our goals and we’re at 5% of the ride share market in two years, then you’re seeing that recoup over the next few years, well before the 10-year mark to turn into $25,000. If we do not succeed, then after 10 years, from the start of the loan, then the repayment period is closed. So that would be the failure case.
[Stefan Von Imhof]
Got it. Okay. So yeah, just so we understand the risk. So, you’re essentially making a proxy bet on the company’s success overall. And if so, you will get a fixed income stream after a two-year grace period?
[Jason Prado]
That is right. But I believe the income stream would be variable based on our revenue. So, if we do really well, you’ll get paid back much faster. And if it takes longer to hit our goals, then it’ll be paid back slower.
[Stefan Von Imhof]
Got it. Okay, cool. That’s great. So now we know how you guys expect to return capital and I like the structure. I mean, let’s be honest, it is the exact opposite of venture capital, where it’s a moon-shot and if it doesn’t 100X in the next three years, it’s considered a failure. It’s a fundamentally different type of business, which is exactly what we love to explore here at Alternative Assets. So, awesome. I guess my final question would be like, if people want to get involved, is more than – may not have the money, or maybe you want to get involved in other ways. Like how else can people help? I saw you guys have a peer donate button on the site. What’s like the best way to get involved. Like not through financing.
[Jason Prado]
I suspect your audience here is extremely talented and has a ton of talents that they could share that we need at the cooperative. So, we are hiring for software engineers. If you’re interested in joining the cooperative economy, like working as a software engineer with our basically cutting-edge stack and really talented team. We’re definitely open to that. You can check out our job stage on drivers.coop. We also do take volunteers to do anything from coding work to operations tasks, to like phone calls to drivers to update them on news about the co-op. And one thing that I’m excited about and interested in rolling out is kind of, I’m thinking of it as a fellowship program, a way to get people with top tier tech backgrounds into the cooperative economy. I’ve been working mostly on hiring for the past few months, and I’ve talked to a ton of people who are like, I really support what you do, I’d love to be a part of it. But like, it’s hard for me to leave my job at Google because I have a mortgage. Very understandable. And we’re not paying a market rate salary compared to the top tech firms. Of course. So, something that I would be interested in talking to more folks about is well, would you like to come work for the cooperative for three months and receive a stipend and while you’re there get an education in the cooperative economy and what working in this kind of impact field looks like. We have connections to anyone in the cooperative space. If this goes well, then we’ll be the largest worker and cooperative in the country and maybe eventually the world.
So, it’s a great way to get a different set of skills, while using your tech skills to build something that you want to see in the world. So, if there’s anyone out there listening who might be interested in that kind of program, I’d be happy to talk to them. We have somebody who’s taking leave from Google and starting to work with us for a few months soon. So, we’re very interested in talking to this kind of person, because like my experience in the fame companies has taught me that there really is knowledge that’s really essential to running these big, like massive scale businesses that only exist in these very small kind of islands out there. And it’s only in people’s heads and we need to bring that experience and knowledge into the cooperative economy. And we’re very interested in supporting that.
[Stefan Von Imhof]
That’s awesome, man. You know, I think one of the good things that’s come out of the coronavirus is I think it’s allowed people to kind of take a step back, revaluate their priorities and what’s important for them in life. And clearly that’s what you did. I mean, like you said, this whole thing was a lockdown baby. I think that now’s a really good time people are having a lot of second thoughts about what their career means and what their place in the world means. And I think that getting involved with you guys and with organisations like this, is just a fantastic way to really recalibrate your life in a phenomenal way. Work with an awesome team that you guys have put together and just an awesome forward-thinking type of organisation. Which there’s not enough of these days and you guys are a prime example of it. So, yeah. I guess my final question man, how can people get in touch with you if they have any questions?
[Jason Prado]
Yeah, I’d love to talk to folks. You can hit me up at [email protected] or follow me on Twitter. At Jason P Jason. I also write sporadically in sub stack newsletter which I keep meaning to get back to. It’s called venturecommune.substack.com. Kind of a play on venture capitalism.
[Stefan Von Imhof]
I see what you did there. Nice job, man. Yeah.
[Jason Prado]
Yeah. I’m always thinking like, what is the venture commune approach to this problem?
[Stefan Von Imhof]
Awesome. I also love your Twitter handle by the way, Jason P Jason. I don’t know. Just has a cool ring to it. Dude. Thank you so much. This has been a super super podcast. Thank you so much for joining and good luck.
[Jason Prado]
All right. Thank you so much. It’s great to be here.
[Stefan Von Imhof]
All right. Take care, buddy.
