The “mega trend” that swallowed Silicon Valley
By Jennifer Alsever, contributor
FORTUNE — It’s 8 a.m. on a Thursday, and a message pops up on Nancy Tcheou’s iPhone. It shows a map of downtown San Francisco with the exact location of a guy she’s never met named Zach Lagod. Her red Honda Civic is easy to spot with a furry pink mustache covering the bumper. She pulls up, greets Lagod by name, and the two do a fist-bump “hello.” Lagod jumps in the front seat, and they’re off to the train station 15 minutes away. The two make small talk, as Lagod flips through songs on the radio.
Tcheou is not Lagod’s friend, and she is not a professional taxi driver. She’s an unemployed 25-year-old who happens to have time on her hands and a car filled with gas. So she signed up to give strangers a ride in her car using a new mobile ridesharing service called Lyft.
It’s one of a flood of new startups that aim to create online and mobile social networks that let people share in the real world. There are apps that find and borrow power tools from your neighbors, that let you rent a nearby stranger’s car or hire someone close by to pick up dog food. You can go online to rent your parking spot when you’re not using it or you can find a home for your dog when you travel.
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Call it the new share economy or as its known in the industry: the collaborative consumption movement. Airbnb led the way. The site, which lets people rent their homes to travelers, has booked more than 10 million nights in 192 countries since its start in 1998, and last year it generated an estimated $58 million.
Now people are taking a look at any under-used assets they may have, whether it’s an empty seat in their car and time on their hands, or a bike sitting in the garage, a vacant parking space in their driveway, an empty cubicle at their office or a power saw seldom used. And they’re sharing, borrowing or renting them. “People are looking around and saying, ‘Hey, I can rent out my car. I can share my skills. I don’t need to own a designer dress, I can rent one,’” says Rachel Botsman, author of What’s Mine is Yours: The Rise of Collaborative Consumption. “There is a big shift underway from the ‘me’ of hyper-consumption to the ‘we’ culture of collaborative consumption.”
The Internet and mobile technology are driving that shift. Some 78% of people say they’re far more inclined to share with strangers in the offline world because of social networking. Smart phones add a new layer, giving you instant access and location data about who is nearby. Add in people’s environmental consciousness and thriftiness in the economic recession, and demand grows even more.
Security remains a big issue for many of these peer-to-peer startups following disaster stories of people whose homes got trashed after using Airbnb. At Lyft, drivers must be 23 or older, have a driver’s license for more than three years and pass background check and DMV record checks, says Lyft’s co-founder John Zimmer. People’s cars must be clean, newer and checked for safety, and both drivers and passengers must have credit cards, Facebook (FB) accounts and GPS capabilities on their phone for security. Ratings are key too. If your average rating is low, then your account is closed.
Zimmer says he worked for more than three months to develop an insurance policy that gives drivers $1 million in extra liability while they’re driving. “It is this real peace of mind for our users,” he says. The strategy is working: Zimmer’s other startup, ZimRide, has facilitated more than 50,000 rideshares and carpools since 2008. Just three months after its start, the spinoff Lyft has 150 drivers who have given tens of thousands of rides in San Francisco.
Collaborative consumption has been dubbed a “mega trend” by prominent Silicon Valley investors who have poured $500 million into such startups. A number of big brands also jumped into the game. BMW invested in ParkAtMyHouse.com, a UK startup that lets people rent their driveway, garage or parking space to a stranger for about $10 a day. Ford aligned with carsharing veteran Zipcar, and Microsoft (MSFT) is making a bet on LiquidSpace, which lets mobile workers find workspace and meeting rooms on demand and rent it by the hour or day. The Redmond, Wash., giant recently incorporated the online service into its Office 2013 software, allowing users to find available meeting space on the fly.
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Google Ventures (GOOG) invested more than $2 million in RelayRides.com, a national peer-to-peer carsharing service. The startup also inked a deal this summer with General Motors (GM) that allows 15 million GM car owners to easily make their vehicles available to renters on the site. Using the carmaker’s OnStar system, renters can instantly unlock the car through RelayRides’ mobile app or text messaging.
Even Wal-Mart (WMT) vice president Andy Ruben left his job last spring to create a new sharing startup called yerdle—which sets out to be the antithesis of what his former employer is about. The iPhone app will integrate with Facebook to let you borrow or loan everything from kids’ clothes to unused pasta makers from friends before buying those items new. The idea hit Ruben after watching so many parents buy new shin guards every soccer season despite the fact that many of their friends probably already had them sitting unused. He teamed up with former Sierra Club president Adam Werbach to start the company, which will launch in time for Black Friday in November.
“It’s amazing how many things we have in our closets and our garages that our friends are about to buy,” Ruben says. “Why shop when you can share?”