Drexel pair's business model runs on pedal power

Zagster users get a passcode to unlock the lockboxon the back of each bicycle.
Zagster users get a passcode to unlock the lockboxon the back of each bicycle. (AKIRA SUWA / Staff Photographer)
Posted: July 01, 2013

Outside the front entrance of the Hyatt Regency Philadelphia at Penn's Landing, Timothy Ericson was surrounded by options for getting around.

To his right, cars and trucks rushed and rumbled along that irritating, if not hair-raising, ribbon of asphalt, dented guardrails, and seemingly perpetual construction politely known as I-95.

To his left flowed the tranquil traffic of cargo ships, tugboats, and sightseeing vessels on the Delaware River. In the skies above, planes made their way to and from Philadelphia International Airport.

But Ericson's transportation focus this day sat parked at his feet: four bicycles. The 2009 Drexel University grad hopes they will help his company, Zagster, become a nationwide bike-sharing provider to the private sector.

Zagster's market is not the general public, unlike typical city bike-sharing initiatives - such as the one Mayor Nutter has vowed will be ready to roll next year in Philadelphia.

Zagster is more niche-oriented - it wants to put hotel guests, apartment dwellers, college staff and students, and office-park workers behind the handlebars of its two-wheel cruisers, managed through a high-tech reservation-and-security system.

Oddly enough, Zagster's inspiration is a car-sharing program.

"We want to be the brand Zipcar built - for bikes," said Ericson, who cofounded the company in Philadelphia in 2007 with fellow Drexel chum Jason Meinzer, 30, a Hershey native. (Back then, their company was a consulting business called CityRyde.)

Some of the $1.5 million Zagster has raised came from an early Zipcar backer, Jean Hammond, a Boston-area angel investor. Zipcar sites influence where-to-live decisions by twentysomethings who don't own cars, said the car-less Ericson, 27.

"We want to be part of that decision-making process," he said. "We want to be the brand where people make decisions on where they live, work based on where the bikes are."

Zagster was accepted into a top incubator program in Boston, prompting Ericson and Meinzer to relocate there with the company at the end of 2011. Now based in Cambridge, Mass., with 10 employees, two in Philadelphia, Zagster has more than 500 bikes in deployment through arrangements with five residential real estate companies, one hotel chain, a university, and a corporate campus.

It's also testing the concept at an Amtrak station in Portland, Maine. Ericson anticipates putting 100 additional bikes a month into service.

Zagster's "bike fleet in a box" comes with racks, bicycles, and the technology to allow users to reserve online or text a number and, in return, get a passcode to unlock a wirelessly enabled lockbox on the back of each bike.

Through a partnership announced in May, Advanced Sports International, a 15-year-old bicycle distributor in Northeast Philadelphia, is supplying Zagster with Breezer brand bikes, an urban-style cruiser with a step-through frame and tires thick enough to handle cobblestone streets. It also is providing Zagster space in the warehouse to add its electronic system and other touches to the bikes.

"It makes great sense," ASI's chief executive officer, Patrick Cunnane, said of Zagster's business model. "It's an amenity people like."

That's the early indication at Yale University, which in April became Zagster's first higher-education client. It signed on for a six-month pilot program that offers users free access to a total of 50 bikes from 10 campus locations.

The program costs $110 per bike per month, plus a small setup fee per location, said Holly Parker, director of Yale's sustainable-transportation systems. She said city programs, requiring pricier infrastructure, cost $5,000 to $6,000 per bike.

In just over two months, 192 people at Yale have become Zagster members (for $20 a year, refundable for anyone who takes a bike-safety course), and bikes were used 818 times, Parker said.

Given that the campus essentially emptied out two weeks after the program was launched, "I'm a little concerned we're not going to have enough bikes" in the fall, she said.

Whether Zagster's corporate or institutional clients charge for use of the bikes is up to them. At the Hyatt on Penn's Landing, which started offering the Zagster program in April, a guest can reserve a bike for a full day for $20, a half-day for $10, said Mike Costello, the property's general manager.

"I think that the timing is perfect," Costello said, noting that international guests in the past have rented bikes to get around the city and that airline crews regularly leave bicycles at the hotel to use when they're in town.

Zagster's first client in Philadelphia was Bozzuto Group's 1500 Locust apartments, which introduced the bike-share program soon after David Back moved there in April 2012.

Back, 35, a project manager for Comcast, said he believed it was an amenity apartment residents would increasingly expect. His Zagster membership costs $40 a year, and he plans to keep it even though he has since bought a higher-performance bike.

Unlike his, the Zagster cycle has a basket on it, "which is nice if you make a run to the liquor store, I mean, the grocery store," Back said, chuckling.


>Inquirer.com

Drexel grad Timothy Ericson talks about Zagster, the bicycle-rental firm he cofounded that is catering to hotel guests, apartment dwellers, and other niche pedalers. Go to www.inquirer.com/zagster


Contact Diane Mastrull

at 215-854-2466 or dmastrull@phillynews.com, or follow on Twitter @mastrud.

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