What investors should know about policy and the share economy

1Executive Summary

The directory of share economy companies at meshing.it now boasts a whopping 342 pages of listings with more than 20 startups per page. The reality, however, is that the directory likely throws in companies that don’t fit the strictest definition of the share economy — business models that allow consumers to choose access over ownership. Still, it’s incredible how quickly the share economy has blossomed.

It’s possible now to share everything from bicycles and car rides to power tools and toys. This is due to the ease with which sharing platforms can be built, the ubiquity of connected devices, and, in many cases, the ease with which smartphones can help us find precisely what we want. This on-the-go, find-it-now mentality is partially a driver in showing people that convenience and access are values that are paramount. And if anything, sometimes physically owning something is starting to be viewed as carrying certain burdens, like storage and maintenance, particularly in a world where mass urbanization is occurring.

In developing business models that attempt to leverage the available stock of assets for new purposes, feathers get ruffled. In terms of car sharing, it’s clear that Zipcar reduces car ownership. You combine this fact with larger cultural shifts showing millennials drive less and are obtaining drivers’ licenses at lower rates, and the automakers have a challenge on their hands. Trying to outlaw car sharing is neither possible nor probably a helpful course of action. Sometimes there’s not much the existing industry can do.

But in other models like ride sharing, for example, the new businesses are much more directly disruptive. Many cities have existing regulations governing taxi services and who can get licensed to provide rides for cash. Such a business model allows drivers to use the available resource out there — the cars people already own — to provide rides. And while the business may increase the number of people paying for rides, it also gives consumers an alternative to the existing regulated infrastructure that provides taxi services.

In the end, mobile devices and mass connectivity allow consumers to access whole new stocks of supply, whether it’s a ride or a ladder. And for this reason, many share economy business models are and have been on a collision course with regulators and lobbies representing industries that are getting disrupted. In this vein, I’ll take a look at Airbnb, the most successful share economy company to date and a share economy company that is fighting multiple city-by-city tax and regulatory battles.

Thumbnail image courtesy of Thinkstock

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Adam Lesser

Cleantech Curator Gigaom Research

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