In San Mateo, we meet CEO & co-founder of Local Motion, John Stanfield. John shares his story how he co-founded this startup and how the current business model works, as well as what the current plans for near future, and some advice for young entrepreneurs.

The transcript of the interview is included below.

INTRODUCTION

Martin: Hi, today we are in San Mateo in the Local Motion office. John, who are you and what do you do?

John: I’m John Stanfield and I’m the CEO and co-founder of Local Motion, and we build technology for the car sharing industry.

Martin: What did you do before you started this company?

John: It’s a great question. My first career was, I spent 12 years as a wild and forest fire fighter. So, after I finished my physics degree I didn’t want to build bombs for the navy, so I continued doing what I did to put myself through school, and that turned into career. I exited that, came to the Bay Area, started a couple of companies, learned a lot about entrepreneurship, found myself at graduate school at Stanford, and that’s where the idea for this company started out of my masters work in the mechanical engineering group and design group. I met my co-founder there and we started the company in 2010.

Martin: And can you tell us a little bit more about the process, how you did come up with this idea?

John: Sure. So, originally we were looking at local mobility and how a third to half of all trips made by Americans are for less than 5 miles. And generally speaking, we do them in single occupancy, two to three thousand pound automobiles, and so my idea was to build a small, very efficient electric four-wheel vehicle, that was built from the ground up to be sharable, to occupy a lot of these local needs, and so we build a vehicle while I was at Stanford, got some attention, won a summer grant from Lightspeed ventures, studied the market, realized there was a big gaping hole in mobility that needed to be innovated in, and disrupted. And so I launched the company after meeting Clément Gires in 2010. We then raised some seed money, and we build a vehicle, and the idea was to sell it to places and not people, and be sharable from the ground up in its entirety of ethos of this vehicle would be a sharable asset. And what we learned in the process was that we could do much greater good and have much greater impact if we separate our ideas and became vehicle agnostic and stop trying to build cars because, I don’t know if you’re aware of this, but it takes a lot of money to start a car company. So, we separated the hardware and software that we needed to become vehicle agnostic, and that’s what we have today, we install hardware in every vehicle that we deal with, we focus on large groups of assets and fleets, across the government agencies from federal to state and local, to university campuses and corporate campuses.

Martin: Ok, great. And how did you get in touch with the first investors?

John: Let’s see. The first investors were visionary, angel investors, I would say. We’re in the kind of the heart of entrepreneurship here in Silicon Valley. Through my Stanford network, I was put in touch with a great deal of entrepreneurs who had had success and are now angel investors, and the Lightspeed venture grant helped the great deal, so that expanded our network in Silicon Valley, and specifically on Sand Hill road. And so a few, as I call them, visionaries, believed in us and wrote us small checks, that allowed us to get started and really push our ideas forward. And without those visionaries, we wouldn’t be here today.

BUSINESS MODEL

Martin: John, let’s talk about the business model. Can you briefly explain what your solution does and how it works technically, and then talk about the other components like what customers are you targeting, where are you using these technologies?

John: Sure. So, I strongly believe that shared mobility can never succeed on a large-scale unless the experience from the user’s perspective at the door of the car, when they’re accessing that shared mobility. If that experience is better than owning a vehicle, than shared mobility will succeed, and until that day it won’t expand in the dramatic way. And so the entirety of my company focuses on making that experience superior. And so what we do is we install hardware in every vehicle that shows visually the status of that vehicle to the user. So now, when the user walks out to the group of vehicles, they can see, through an LED light, if the vehicle is available or not, and they just walk up with their corporate ID badge that lets them in the buildings or with their smart phone, touch on that reader, the doors unlocked, they get in and they drive away. It’s that simple. So, you don’t have to book your personal car. It’s yours. So why would you need to book your shared car? So we give that on demand, real-time access to every vehicle. You can also step back and say ok, I’m a planner, which about 3% of our current fleet rides are actually planned ahead of time, only about 3-5%, and you can go on our mobile app or on our web system, our web-based platform and book a ride ahead of time. And what we do is we take all that information and we analyze it in our own analytics engines and we give that information back to the fleet manager, so that they can make real decision based on data. On how the ride size distributes, cut cost and increase utilization. And we just charge per vehicle that our system is installed in, right now basically we take the fleet size, we charge per vehicle and usually a 12 month subscription fee, and we don’t charge for the hardware upfront. We actually maintain ownership of hardware, that way if we need to replace it we can.

Martin: So, from my understanding, in Germany and Europe in general we have some kind of companies like BMW and Mercedes who are doing this kind of individual cars that you can rent via mobile platform etc. You are currently tied in fleets, like Sixt or something like that, and having them to manage the fleet more efficiently, so that don’t you have to that much contact between their sales organization and their end customer. Can you tell us a little bit more about how it technically works, the product? And when does it get installed, who does it, how long does it take?

John: So, let’s just start with the market segment that you hit on. There are roughly 8 million vehicles in the US that are in fleets and that is a market that is very, very undeveloped for sharing. All these vehicles are intended to be shared across user groups, but the way they share them, still have a metal box on the wall with keys in it, or a few individuals that have the keys at their desk and they have a piece of paper when they sign these vehicles out. And so because of the barriers of using keys and having no real organization around the sharing of the assets, they don’t get shared and they have far too many vehicles on their lots. We can walk in the door and from day 1 we can offer 20-30% savings across their fleet, just by helping them share and taking the keys out of the equation. So now, instead of the user having to go and find a set of car keys, they just walk to car and the access is at the door. So, really streamlining the use case is essential here.

And then what we do technically is we plugin to the car’s diagnostics port. That allows us to do two things: get power for a device and pull information from the car itself. When our device is powered up, we force the user to interact with it at the door so we know who it is. We are tracking all movement, so we know how they use the car. We know if they’re abusing the vehicles, we know if they’re driving, how they’re driving, we know where they’re going. So all the information is very important to the fleet manager, so that they can get a snapshot, a real, data driven snapshot of how the vehicles are being used and then make decisions based on that information, so they can, for example, if they see a portion of their fleet that never goes more than 40 miles, why wouldn’t they replace that with electric vehicles. That is an efficiency gain, an utilization gain, and then through sharing it proper, proper scheduling, we can help push rides together into certain vehicles that are always going to the same place at the same time with the same people. So, really optimizing the entire operational process.

Martin: So, would you say that your plan based on this kind of big data is also to provide other services like you said before, analyze on how the fleet is going, and maybe even optimizing insurance contracts based on user groups or car models, something like that?

John: Exactly. So, what we do is right now we focus on our core model and then we will, as we grow, offer premium packages to people, so we can help them analyze fleets and slice it in whatever they want with the data that we have. And we will offer those as premium products, yes.

Martin: How did you acquire and convince the first customer? Because I can imagine going to big fleet companies who have 500-1000 cars or so, and you are young startup. How did you convince them?

John: Couple of things. One is, we were selling cars originally, when we were doing that, couple of the big Silicon Valley companies, such as Google and Apple, they were very interested in that local kind of show piece for mobility. So, Google was our very first customer, they wanted to buy cars. We were talking to them for long enough that when we went through our strong pivot, and removed the hardware and software to become vehicle agnostic, they saw the intelligence in that decision and they already have a fleet of 300-400 vehicles on their campus, and they said “Great, let’s just start using your devices in our cars”. And so that started to progress, that was a great example for us, they’re a tremendous customers because they have a truly multi-model fleet, all the way from human-powered bicycles all the way to highway shuttles, big 60 passengers busses, and everything in between. Model S Teslas, Nissan Leaves, electric bikes, normal internal combustion vans. So we’re working across the subset of that fleet now and we hope to expand more. And what that did was give us something to point to and show how it’s working and data that we could pull and analyze and just show the benefit of our platform. At one point, they were having trouble getting people to plug-in small electric vehicles on their campus, so we just communicated with the users and said “Hey, could you please plug the car in when you’re done?”, and amazingly we went from 30% plugin rate to 90% plugin rate, just in a few weeks. So, proving to the Google that you can change user behavior in few weeks is magical, and taking that to the general population is very powerful.

Martin: Currently, fleet management companies are having all the cares stored basically in one location, I assume because there is some kind of person who needs to check in the people and serve the cars, etc. With your technology, would you say that they can more distribute their cars over the city, because you, they don’t need to have this kind of human interaction with the final customer?

John: So, it’s an interesting conversation because right now the fleets are very distributed. There are a lot of use cases where there are one or maybe 2 users per vehicle, and then you have a piece of the fleet that is very centralized, and they call that the motor pool. And so, what we’re trying to actually do is to take the entirety of the fleet, regardless of where it’s located, and put it in a centralized motor pool. So that no matter where you are, on the grounds in the city of San Francisco, for example, you as a user could access the vehicles that you have the right to access, with just your badge. And so, looking at it from kind of a geographically agnostic perspective, saying you have access to a centralized motor pool, regardless of where it is, is very powerful. And giving the managers the ability to restrict usage, because you don’t want me driving in dump truck, right, I don’t have the license or the ability. And so the people who can and are able to drive those high value assets they require licensing control, the manager can very easily manage that from his laptop or mobile phone. And so, the general population can have access to the general population of motor pool vehicles, you can do restrictions, etc, etc, and that is a centralized motor pool, but it may be distributed over a city or more, for a state or even a federal government.

Martin: And the registration or validation of identity and all the properties of some of you final customers, how is it then done?

John: So, in the states it’s all done around driving licenses. The beauty of working with fleets is that all that information checking is already done, because the company or the organization takes care of that, so we don’t have to. What we do is, we come in and connect the dots between the services they’re already using. For example, most centralized fleets or fleet operators have service providers for maintenance or cleaning, that they already use. And what we do is we come in with our platform and we connect with those dots more efficiently. So, instead of having to fill out a piece of paper that says I need service on this vehicle at this day, and then someone having to go and find the keys, and taking it out of service for a week or two or three, so that they can schedule this maintenance, we give them the ability to push a button on their web interface that turns the light on the vehicle red, takes that vehicle out of service, sends the information and the geolocation of the vehicle to the service provider who can go straight to the car, with their service badge, unlock the doors, drive it to the shop fix and then put it back in service, and then the light turns back to green. So, really what we do is streamline all those operations, using the existing infrastructure that they already have and just connecting the dots very efficiently.

CORPORATE STRATEGY

Martin: John, let’s talk about corporate strategy. What do you perceive the competitive advantage of your company?

John: So, right now, to date, there haven’t been any of the connected car companies that had focused on the user side. So, we obsess about the user side, because, as I said, I really feel that in order to make this sharing economy work in the enterprise, you have to have a good user experience at the door. And so, for example, when you tap your badge on our device, it takes less than 2 seconds for the doors to unlock. That’s essential. Because if you’re standing at the door for 2 minutes even, as a user, it feels like days, and people then don’t trust the system, they refuse to use it, and go back to system where you might as well just be sharing keys. So, we obsess about that experience at the door. And then really the scheduling and the utilization increase is what we are pushing today, and like I said we take the auxiliary systems that they’re already using and connect them more efficiently. So, for us, we don’t want to get down the road too deeply on the telematic side, so, for example DOT compliance, or long hold trucking optimization for fuel, stuff like that that’s been done many, many times and it’s very crowded marketplace. We’re focused really on the user experience and centralized motor pools for now, that’s our core model. We’re only 35 people so we have to pick an area that’s right for disruption and that’s it.

Martin: Can you explain your go-to market strategy and your product strategy going forward?

John: Sure. So, our go-to market strategy has always been focused on what we’re good at, and again, to reiterate is the user side. So, going forward we will just continually expend our product offering, looking at new technologies, looking at more interesting and simplified ways for users to gain access, through different sensor technology, through different near field communications, technology whether it NFC (Near field communication), Bluetooth, or RFID. We’re just going to leverage what are users had already in their pocket. So we don’t want to force them to use something new. And going forward we will start expanding more and more across other geographic areas, for example, we have an office in Paris, right now with 5 employees and we’re focused on European fleet market as well, so I feel that in a lot of ways, the European market is already primed and ready for the sharing economy, because there’s a lot more use of mass transit, there’s a lot more sense for sharing across large groups of high dollar assets. The car economy there is, the way that corporate executives have their own assigned cars is starting to change, people want to have more cash upfront but still options for mobility down the road, so that’s screaming out for centralized motor pools. So, we’re very excited about the expansion across the Europe as well. And that’s how we’ll expand in the next 12 months.

Martin: Can you explain your reasoning why you are internationalizing within the same business segment while not adding for other business segments, like individual cars, etc.?

John: I feel it’s really essential to have a strong toehold on the user side and centralized motor pool and then expand out from there. My co-founder is French, and so we had a very strong connection to talent in France, and we, like I said, we see the European market as very ripe, as well, so we wanted to get it toehold as soon as possible, and so we just took our exact same business model and expanded it into European market.

MARKET DEVELOPMENT

Martin: So, let’s talk about the market development. I mean, you’ve learned a lot in the case of mobility. Can you give us some kind of trends that you identified, without talking about sharing economy, because you have shared some knowledge of that already?

John: Sure, so, if I was speaking straight to, and I do very frequently, speaks straight to OEMs, and lot of the innovation experts here in Silicon Valley come to us and say “What do we do to be competitive in the future?” and I just look straight at them and say “Sell mobility and stop selling so many cars”. And that’s a very tough thing to understand, from the perspective of someone selling cars, but really that’s kind of the just of it. I feel that, in the near future, the companies that make mobility valuable are the ones that will win and that innovative process will stand out as you make each ride or each minute in the car more valuable than having a car sitting on your driveway 85-90% of the time unused. So, really, sharing is the core of that and selling mobility is the way that this economy will expand on forward.

Martin: Do you see that the American car share is changing somehow? Because when you are driving 101 or 85, almost every car is occupied by only 1 person, everybody has a super large car and there’s some kind of, let’s say, the streets are full of cars.

John: Absolutely. But, there are also great trends right now for young people who are waiting longer and longer to get their driving license. So, for example, in my era, you went out on your 16th birthday, you get your driving permit and on 16 and a half you are in line to get your driving license, on the day you can get it. Now, kids are waiting until they’re 17, 18 to get their driving license, because they are treating mobility as they treat applications in mobile devices. They want everything on demand, right now at their fingertips. They don’t want to have to deal with the responsibility and the cost of owning a vehicle, it’s painful these days. And so I think the models are shifting, right now the infrastructure isn’t built, and so the Bay Area is a great example. We have the Caltrain, which in America is amazing, but if you go to any other country in the world, 40, I guess it’s a 30 year old train is kind of laughed at. So, it’s great because we have it here, but it’s also very limiting because that’s all we have here. So, trends are happening now, which are changing that and of course it happens slowly, but we’re doing what we can now. And that’s why we’re not waiting for the OEMs to put the hardware in the cars, we’re making it ourselves. If they would give us access through API to the hardware that existed in the cars it would simplify and speed this up, but that’s not going to happen for 5-10 years, so we’re doing it ourselves.

ADVICE TO ENTREPRENEURS

Martin: Over the last years, what have been your major learnings that you can share with other first time entrepreneurs?

John: I think one of the biggest learnings that we had in early days is first of all, don’t be too attracted to your first business model, because it’s going to change. And second, find your product market fit, and go out and get customers.

So, I think one of the mistakes that entrepreneurs make, and I was very close to making this mistake, which is a fatal mistake for your company, is getting to wrapped up around what your first idea is. In my mind, the definition of a startup is an entity that can pivot their business model until they find something that sticks. Something that’s needed in the market right now, something that you can sell to customers regardless of your size. And we were able to find that and sell that and gain revenue with our early prototypes, and we’ve done that now for three years. We’ve been able to gain revenue and push our vehicle ideas and our entrepreneurial ideas into the marketplace while gaining revenue and testing our devices. And now we have a product that’s scalable and ready to go and we just started hiring sales people. So, we focused on products, we focused on product market fit, we’ve been around since 2010 and we’ve just started hiring sales people three months ago. So, we obsessed about the product, we obsessed about how to make that product work in the marketplace, and found our niche and landed and now we’re expanding. So, really finding that product market fit and knowing that people want it and are willing to pay for it is essential.

Martin: And what advice can you give somebody who is thinking about a product based company and then is thinking about how should he develop his product? Is there any kind of recipe that you can provide?

John: I think simplification is the key. We’re great example. I’m mechanical engineer and can build a car, but that doesn’t mean you should. Really take the idea and strip it down and try to understand fundamentally why you’re doing what you’re doing. Having a vision for solving problems in mobility and jumping to what you’re good at is a way to get great ideas. But again, being fluid with how those ideas flow around the problem and finding the area of least resistance for your product to get into the market is the key.

Martin: Great. John, thank you very much for your time.

John: You’re welcome.

Martin: And the next time you are starting your company focus on the simplicity of your product, and not make it over complex. Thank you very much.

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