The regulators have had their revenge in San Francisco.
On Aug. 30, the city selected home-grown startups Scoot and Skip to operate rentals of 625 stand-up electric scooters each, beginning in October. A dozen companies had competed for up to five permits in the yearlong scooter pilot program, including better-known competitors Bird, Lime, Lyft, and Uber-owned Jump. In the end, the San Francisco Municipal Transportation Agency awarded only two.
The selections didn’t sit well with rejected companies. Lime called it “disappointing” and derided Scoot and Skip as “inexperienced scooter operators that plan to learn on the job.” Whether Scoot and Skip are less experienced is debatable, but they have certainly moved slower than many of their competitors. “We are the only operator that hasn’t been issued a cease-and-desist order, let alone ignored one,” Skip CEO Sanjay Dastoor told the Financial Times. This decidedly un-Silicon Valley attitude seemed to endear it to San Francisco regulators.
“Move fast and break things” has long been the tech way, but it no longer appears to be working. Theranos, the blood-testing company that defrauded doctors, patients, and investors, this week shared plans to formally dissolve and pay its remaining cash to unsecured creditors. Tesla is under investigation from the US Securities and Exchange Commission after controversial tweets from chief executive Elon Musk, who is also in the midst of a public meltdown. Uber moved so fast and broke so many things that its co-founder was forced out, its workplace mired in sexual harassment allegations, and its business targeted by at least six federal investigations. Facebook, the godfather of the move-fast-and-break-things mantra, now finds itself on defense before the US Congress.
In San Francisco, the transportation authority’s decision signals an end to Uber-style tactics of not asking permission and only—maybe—begging forgiveness. Uber paved the way for ride-hailing in the US by launching in city after city with zero regard for local rules. That playbook, championed by co-founder and former CEO Travis Kalanick, made enemies down the road. It also helped Uber build legions of loyal users, who would rally to its defense when politicians and regulators later tried to crack down.
Bird, founded by former Uber and Lyft employee Travis VanderZanden, explicitly tried to replicate this strategy. It found regulators had wised up. “I myself am concerned that companies here have asked for forgiveness instead of permission,” Malcolm Heinicke, vice chairman of the board for the SFMTA, said at a May 1 meeting. “And while I’m willing, personally, to give some forgiveness, I’m also not necessarily willing to reward past behavior.” The final scorecard (pdf) for scooter permits dinged Bird and Lime for their disregard for regulators, and Lyft and Uber for previous bad behavior in ride-hailing.
For some companies, the shift to lawfulness came too late. Josephine wanted to be the Uber of home cooks but ran into early trouble with health regulators in California. Instead of flouting the rules, it opted to suspend operations in the state and work to reform the system through traditional channels. In February, Josephine shut down, having exhausted time, resources, and the patience of backers in pushing for legislative change. Last week, California lawmakers unanimously passed the bill that would have saved it, creating a permit system for people to sell meals made in their homes.
The startups that moved fast and broke things have been egged on by return-hungry venture capitalists and their companion motto, “growth at any cost.” These investors poured money into some of the Valley’s most tarnished companies, including Theranos, Uber, and human-resources startup Zenefits, which devised software to help employees cheat on state compliance tests. Venture capitalists have also spent years looking the other way on tech’s egregious lack of diversity and a culture of sexual harassment that hurt and disempowered women. Today, as funding rounds that exceed $100 million—so-called “mega-rounds”—have become the new norm, startups remain under pressure from investors to raise as much money and grow as quickly as possible.
Systemic change will require buy in from companies and the wealthy individuals and firms who fund them. Whether that happens will depend, for example, on how much Congress scares big tech, how much the federal probes spook Uber, and how much the fate of Theranos investors—who will get nothing from the dissolution, losing nearly $1 billion—makes other investors rethink their bets on greatly hyped but largely unproven technologies.
Yes, move fast and break things is broken. That doesn’t mean it’s over.