Regulations are holding back replacements for Uber and Lyft in the Twin Cities

As the date for Uber and Lyft’s exits from the Twin Cities approaches, competitors are waiting in the wings. And so far “waiting” is the operative word.

The Minnesota Reformer reports:

May 1 was supposed to be a big day in Minneapolis for emerging ride-hail companies, with at least nine startups saying they would launch in the Twin Cities and claim the market share surrendered by Uber and Lyft over minimum pay rates for drivers set by the Minneapolis City Council.

But nearly two months after the City Council passed those rates — delaying enactment until May 1 and then July 1 — just two transportation network companies are operational in the city: Uber and Lyft.

Just one potential competitor — MyWeels (with no ‘h’) — became licensed in Minneapolis on Wednesday after paying the city’s annual fee of $37,145 plus $10,615 for a “wheelchair surcharge.” MyWeels is also the only ride-hail alternative to be licensed in St. Paul after paying its annual fee of $41,115. Three companies — MyWeels, Moov and Twin City Taxi — have applied to operate at the Minneapolis-St. Paul International Airport, which has a licensing fee of $500.

Why the hold up? The answer is that regulations are imposing barriers to entry which few businesses — only those with access to capital — can breach:

Finding investors is the main test for Uber and Lyft alternatives. In addition to operating licenses for Minneapolis, St. Paul and the airport, transportation network companies need to carry commercial insurance for their drivers with premiums running around $150,000 per year.

Joiryde CEO David Linhardt said he dropped out of the race to enter the Twin Cities because of the “excessive licensing fees and lack of clarity on insurance costs and coverage requirements.”

“We’ve encouraged the city to lower the barriers to entry if they want more competition in this space. So far, we haven’t seen evidence this has happened,” Linhardt wrote in an email.

…

Just one potential competitor — MyWeels (with no ‘h’) — became licensed in Minneapolis on Wednesday after paying the city’s annual fee of $37,145 plus $10,615 for a “wheelchair surcharge.” MyWeels is also the only ride-hail alternative to be licensed in St. Paul after paying its annual fee of $41,115. Three companies — MyWeels, Moov and Twin City Taxi — have applied to operate at the Minneapolis-St. Paul International Airport, which has a licensing fee of $500.

MyWeels founder Elam Baer predicted that few companies promising to come to the Twin Cities would “get to the starting line, let alone put up a good race.”

Baer, the CEO of a Minnesota-based private equity firm, said what set him apart from the others was his access to capital — not some new proprietary technology or the allegiance of hundreds of drivers.

“I wish it was something more glamorous but the fact is that’s what makes us unique,” Baer said in an interview with the Reformer last month.

This provides a good example of why it is that regulatory burdens favor big companies. There is a cost to complying with regulations which bigger companies, like Uber and Lyft, are able to spread over a wider base. Small businesses cannot compete. This is one reason big businesses are so often found among those clamoring for more regulation.