If Uber, Lyft leave Minneapolis, nearly a dozen competing rideshare firms ready to fill the void

Elam Baer is one of thousands of people who rely on Uber to get to work or appointments in the Twin Cities every day.

So when Baer heard Uber was pulling out of the region May 1 after the Minneapolis City Council passed a law setting a minimum wage for rideshare drivers, he wasn't happy. Lyft, the other rideshare giant, says it will stop serving Minneapolis at the same time.

Baer, who is chief executive of Eden Prairie-based North Central Equity, decided to do something about it. He quickly found some partners and started MyWeels. The startup leased an office last week in St. Paul, has signed and vetted 50 Uber drivers, tested its app and expects to start picking up Twin Cities passengers next week.

Baer, who has epilepsy, hands his brochure to each of the Uber drivers he uses and thinks MyWeels can gain up to a quarter of the Uber and Lyft marketshare locally once it is up and running and marketing spreads the word.

MyWeels will have a lot of competition, if all the companies that have reached out to drivers set up camp in the Twin Cities. So far, at least 10 have set up campaigns locally, and four have filled out license applications in Minneapolis. MyWeels expects to be one of the first of the new batch to pay thousands in fees in Minneapolis, St. Paul and at Minneapolis-St. Paul International Airport.

The Minneapolis City Council is set to talk again about its highly controversial driver-pay minimum of $1.40 per mile and 51 cents a minute. Yet there's no indication if there will be any movement to reconsider the decision. Uber and Lyft say they can't make money at that rate.

Meanwhile, state and city officials are trying to figure out if there's another solution for an industry that serves nearly 1 million riders annually.

Baer believes new rideshare companies need to be giving rides — or be on the verge of active operation — by April 15 to gain market share.

"A lot of people would like to fill the void," Baer said. "But I think the barriers to entry to this are much higher than people think. We spent $300,000 without counting any staff. That is just the raw, out-of-pocket expense. We are out $300,000 and next week will be our first ride. We have a financial commitment of $1 million to put into this. That is a big enough number to preclude some people from getting in."

Establishing a market

As May 1 approaches, another Minnesota startup called Moov joins MyWeels and Texas-based Wridz, Virginia-based Empower and North Carolina-based Joiryde. They have already signed up hundreds of Minnesota drivers, gotten commercial insurance quotes or applied for the required rideshare licenses.

Separately, the New York-based Co-op Ride is helping local Minnesota drivers form their own rideshare company.

Northside Uber driver Shardae Robinson is raising funds to launch Drively so she can transport fellow parents with kids to and from work and school. Other players, including startups PickApp and Hich MN, plus Miami-based Revo Rideshare, also hope to gobble up Uber's gap here, provided they can raise the initial $100,000 needed for city licenses, not to mention the $150,000 premium needed annually for a commercial auto insurance policy.

Drively and Moov both started GoFundMe campaigns last week in the hopes of raising capital. Others are further along. Wisconsin-based Carepool said its Mobility4All app will start serving Twin Cities customers this week.

A MyWeels test drive showed its app software works well linking passengers and drivers, Baer said.

"I have no criticism of Uber or Lyft whatsoever. I just know that it would hurt a lot of people if they left without a replacement company behind them," Baer said. "I have lived in Minneapolis my whole adult life. And this being a Minneapolis problem, I have a keen interest in it."

Since March 7, Baer and five partners have invested $300,000. The group can invest another $700,000, Baer said, and doesn't expect to turn a profit for three years.

John Budd, professor of work and organizations at the University of Minnesota's Carlson School of Management, said the landscape come May 1 will be messy with so many players jumping into the market and is likely to be confusing to customers.

"Ramping up all these new apps is not going to be instantaneous," said Budd, who participated in Gov. Tim Walz's 2023 state task force to solve various complaints by drivers, including low pay.

Passengers may need to download five or so apps until they figure out which companies are timely and reliable, Budd said.

"In the long run, competition can work these things out. But in the short run, it's not a magic solution because there will be startup issues," Budd said.

The uphill challenges are not deterring Mustafa Sheikh, who came to the U.S. from Somalia as a 14-year-old.

Inspired by the protests and lobbying efforts of hundreds of struggling Minneapolis drivers, Sheikh said he moved to Minnesota from California four months ago and founded HichMinnesota with five investors.

He'll copy the model of Hich in Canada and Ethiopia, and charge Minnesota drivers a $199 monthly and $9.99 daily subscription fee to use the Hitch MN platform. Drivers will keep 70% of all fares.

So far, Hich has signed 500 drivers and plans to finish the application Tuesday for its Minneapolis license.

"It's not cheap. But we can operate comfortably for two years," Sheikh said.

Moov founder and former McKinsey consultant Murid Amini, 36, said he has spent tens of thousands of dollars launching his own rideshare firm, but is turning to crowdfunding to get the remaining funds needed to cross the finish line.

"Regardless of whether Uber and Lyft pull out of the Twin Cities on May 1, we will be there to pay better wages to drivers and bring innovation to improve the rider experience," Amini said.

The city of Minneapolis last Wednesday told him Moov's license application is nearly approved, meaning Amini must soon pay that city's $37,000 licensing bill and a $10,000 wheelchair accessibility fee. After that, he'll have to pay St. Paul's $41,000 license application fee and MSP Airport's $10,000 security deposit.

Amini said Minneapolis drivers struggled to earn enough driving for Uber and Lyft, because the companies often took 35% to 65% of passenger fares — after fees and charges — leaving too little after car repairs, gas and living expenses. (Lyft and Uber both changed policies recently to say they will pay drivers at least 70% of all fares after charges and fees.)

Moov said it will let drivers keep 80% of passenger fares. So far, 600 drivers have signed on. Amini wants 1,000 to 2,000.

"The competition does not make me concerned at all," said Amini, who came to the United States from Afghanistan at 4 years old. "I hope that there are many players in the market. Then the market will be forced to do whatever is right for the passengers and drivers."

National players entering market

That's the same attitude as Steve Wright, CEO of Austin, Texas-based Wridz.

"No one company has the bandwidth to come in here and just replace [Uber and Lyft] with 14,000 drivers," Wright said.

Wridz already operates in 20 cities including Dallas, Phoenix, Chicago and Cincinnati. It has invested $300,000 into its expansion and signed up 2,000 drivers — putting the Twin Cities ahead of Tampa and Houston.

"It's a big investment," Wright said. "It's not for the faint of checkbook."

Minneapolis is close to approving Wridz's application, as are St. Paul and the MSP airport, Wright said.

Wridz will charge its drivers a $100 monthly subscription to use its platform. Drivers keep 100% of passenger fares after airport and insurance fees. The goal is that "Wridz makes no money from the trip," but only from subscriptions, Wright said.

Empower, a rideshare platform in Washington, D.C., announced last month that it will also enter the Twin Cities market and charge drivers here a monthly subscription fee to access its app.

Empower has signed 1,000 Twin Cities drivers, said CEO Joshua Sear in an email.

Empower — which has given 5 million rides in D.C. in three years— could have a fight on its hands before operations here begin because it does not plan to apply for a license in Minneapolis or St. Paul. It considers itself a software company like Expedia or OpenTable, not a transportation company, officials said.

City officials have said Empower will need a license.