Rollercoaster on a Bike: Zagster CEO Tim Ericson (Part 2)

Sramana Mitra: What was the team? Who was the coder? You are not a coder, right?

Tim Ericson: I’m not a coder. We have a couple of friends from college who were coders working in regular companies. They were moonlighting it and they were doing it for equity. 

Sramana Mitra: How much did the University of Chicago pay you for this project?

Tim Ericson: It’s been over 10 years. I think it was around $15,000 to $20,000 to start. The relationship was that they got a perpetual free license to the software, and we’d own the IP so that we could make money by selling it to additional universities.

In addition to that contract, over time they wanted features like credit card processing, better tracking of the bikes, waivers, and other projects that they ended up funding for us. 

Sramana Mitra: After the University of Chicago, what was the next university that bought your product and how did you find them?

Tim Ericson: Drexel University was the next one. What we found in the process of going from the University of Chicago to other universities is that to get universities to buy our software to manage bike fleets, we needed to help them figure out which bikes to buy, how to put them together, where to put them, how to automate the program, and how to maintain the bikes. We were doing a lot of work outside of the software just to be able to sell our software.

By 2011, we realized that what customers wanted was a low-cost turnkey bike-share program. We had an apartment complex in Philadelphia that had called us. They saw our software, but they just wanted to buy the entire thing and have it completely run at their property with no work on their end.

Being entrepreneurs, we found bikes and locking technology and we put together a system with mechanics to service it. We sold it as a SaaS product. We charged a flat fee per bike per year. It included everything – the capital cost of the bike, ongoing maintenance, and the software. That was the evolution of how we got from the first product, which was software, to doing a full service. 

Sramana Mitra: What was the pricing for that?

Tim Ericson: We charged about $100 per bike per month. We increased that to about $2,000 per bike per year. 

Sramana Mitra: In this case, how many units did they buy?

Tim Ericson: They bought 10 bikes.

Sramana Mitra: They’re relatively small programs.

Tim Ericson: Very small programs, yes. But it was our first program. We were able to test out the technology in an isolated place before we started to go after cities. Our real estate division where we provide these very small programs to apartment complexes and corporate campuses around the country ended up representing about a third of our business.

While each individual location was small, the parent companies who own the buildings have thousands of locations throughout the world. 

This segment is part 2 in the series : Rollercoaster on a Bike: Zagster CEO Tim Ericson
1 2 3 4 5 6