PROPOSITION ONE

Austin tech industry debates next moves after Prop 1 vote

Could vote have long-term impact on Austin's reputation as a tech industry leader?

Posted May 9th, 2016

The Proposition 1 vote on ride-hailing regulations was emotionally charged and divisive for the Austin tech community, with some contending that a vote against it put Austin's reputation as an innovation hub at risk. 

Now that Austin voters have officially rejected the ballot proposition, and Uber and Lyft have kept their promise and left the city, many tech investors and entrepreneurs are surveying the damage - if any - to Austin's status as a technology center. 

Joshua Baer, founder of Capital Factory, the downtown technology incubator, has been a critic of the proposed regulations. He said he believes the vote sent signals that Austin is hostile to startups. 

"Losing Uber and Lyft is a major setback to our reputation as an innovative city and technology hub that is already impacting decisions made by venture capitalists and Fortune 500 executives," Baer said Monday. "It's critical that the tech community and City Council come together... before our reputation is damaged further."

But others scoffed at the notion that the Prop 1 vote could do any long-term damage to Austin's entrepreneurial reputation. Austin economist Brian Kelsey said the vote is unlikely to have negative ripple effects on startups.

"Prop. 1 may be a setback in how the outside world views our seriousness in local policy making, but branding Austin as 'anti-innovation" is ludicrous,' " Kelsey said. " If the existence of two ride-sharing companies locally has an impact on your business model, then I'd say Prop. 1 should probably be the least of your concerns."

Saturday's vote, with 56 percent voting against Proposition 1, means the Austin City Council-approved ride-hailing regulations are in effect. These rules, opposed by Uber and Lyft, require fingerprint-based background checks and vehicles to have an identifying "trade dress," among other regulations. 

Though Uber and Lyft have until April 2017 to fully comply, both made the decision to leave the Austin market entirely, effective Monday morning.  

More money, more problems?

RALPH BARRERA/AMERICAN-STATESMANMark Littlefield, a political consultant, speaks at a press conference for Our City, Our Safety, Our Choice.

Initially, many tech workers and entrepreneurs said they thought the vote would get industry support because of general opposition to more regulation of emerging technology business models. 

But they now say Uber and Lyft's aggressive marketing tactics derailed the discussion.

"I think it backfired in the tech community," said Austin entrepreneur Richard Bagdonas, who supported the proposition. "I have talked to many people who said 'I'm pro-Uber and pro-Lyft, but the number of flyers, calls and texts I received pushed me over the edge.' "

Political consultant Mark Littlefield, who advised the anti-Prop 1 group "Our City, Our Safety, Our Choice," said the amount of money pumped into this race - more than $9 million - from Uber and Lyft had a backlash effect. 

"The narrative started to change" by the end of April, said Littlefield, who was doing polling throughout the campaign. "It became less and less about the policy and more and more about the personalities.  

Getting out the vote

Some tech leaders, worried about whether the tech community would vote at all, mobilized to try and get out the vote. Baer, for example, participated in a news conference last month to encourage participation in the process.

"I must admit, I don't think this is a slam dunk," he said at the event with former Mayor Lee Leffingwell. "I'm worried about it. I think it's going to be hard to get the tech community to realize it and vote. They're quick to like things on Facebook or tweet about things. But it's hard to get people out at the polls."

Baer's hunch was correct.

Turnout for Prop 1 was dominated by "traditional" voters who reliably show up to vote in state and local elections, Littlefield said.  Early voting data showed that 70 percent of the Prop 1 voters were these traditional voters, he said. 

“I’ve seen it time and time again,” he said. “There are people who will vote in May elections and there are people that no matter how vitally important the results of the May election are to their own personal interests, they simply do not vote." 

DEBORAH CANNON/AMERICAN-STATESMANCapital Factory's Josh Baer talks with Defense Secretary Ash Carter. 

Political experts said Uber and Lyft underestimated whether support for their service translated into votes. 

Take David Goss. He's a 40-year-old systems engineer for EMC Corp. in Austin. He regularly uses Uber when he's going downtown for drinks and needs a sober ride home. On paper, Goss sounds like he would be for Prop 1. 

But Goss said he voted against the measure. "I do love Uber, I use it all the time," Goss said. But he said he wasn't in favor with just letting Uber and Lyft write their own regulations. 

"I definitely felt that there was some middle ground, we needed to find a way to ensure the rides were safe and make sure the employees were treated fairly," he said. 

Austin marketing veteran and entrepreneur Josh Jones-Dilworth, who opposed the proposition, said he watched as the discussion -- and tech workers' opinions -- morphed.

"It started as a safety issue, and then it became an innovation issue, and then evolved into a corporate bullying issue," Jones-Dilworth said. "It's a complex issue, and there was never a consensus. I know a lot of people who changed their mind. And I know a lot of people who stayed on the sidelines because they thought this was a no-win situation."

David Broockman, a business professor at Stanford University and an Austin native, said startups like Uber and Lyft view themselves as the underdog taking on an established industry: taxis. 

"In Silicon Valley there is a tendency to view startups as David against Goliath," he said, but that doesn't always translate outside the Bay area, he said, where they are viewed instead as the Goliaths.  

Damage to Austin's reputation

Bagdonas, the entrepreneur, agreed with Baer that Austin's rejection sent a message to the tech industry outside of Texas.

"We have now created an environment that scares investors. New companies are probably going to have a tougher time raising money in Austin if they're doing something that the City Council can get their hands on," he said.

Stephen Spillman /FOR AMERICAN-STATESMANA vehicle displays both Uber and Lyft on 4th Street Friday, May 6, 2016. 

Rather than a set back, Jones-Dilworth said he believes the discussion and vote got a productive conversation going.

"I don't think that one hyper-political issue with no clear mandate is going to set us back much at all," he said. 

Chip Rosenthal, an engineer and former chair of civic hacking group Open Austin, also said he believes Austin will come out ahead in the ride-hailing debates by developing an innovative compromise that will be emulated in other cities. 

City leaders might already be working on one. 

Mayor Steve Adler's office put out a statement Monday detailing the steps he and the rest of the Austin City Council will take to ensure Austinites will be able to continue using ride-hailing services.

Some of his next steps include "talking with Uber and Lyft," though a spokesman for the mayor's office wouldn't confirm whether talks are ongoing. It also mentions the possibility of creating a TNC nonprofit. 

Adler's statement also said he is creating an ad hoc committee made up of members of the tech community, including Baer, Jones-Dilworth and Eugene Sepulveda, CEO of the Entrepreneurs Foundation.

"I hope the speed at which the mayor, this council and community leaders address issues impacting riders and drivers signals to the rest of the world that Austin is absolutely open for business, that we value innovation and entrepreneurship, and that these things don't have to be in conflict with local control," Sepulveda said.



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