How The Drivers Cooperative is creating an alternative to exploitive ridesharing models
In this interview, Elias Crim of Ownership Matters talks with Erik Forman, cofounder of The Drivers Cooperative, the first driver-owned rideshare platform cooperative in the United States, which successfully launched in May 2020 in New York City. The Drivers Co-op is now the largest worker co-op in the country, with about 4,000 drivers and hopes of continued growth.
Below is an edited version of the interview, which was originally published in the January 11, 2022 issue of Ownership Matters.
Elias Crim: Erik, you come to cooperative work from a pretty unique background. Tell us about your journey.
Erik Forman: My background is in the labor movement. I spent 15 years trying to unionize different workplaces—particularly fast food — and getting fired a lot in the process. I learned a ton from doing that. And I would say we certainly made some gains. But I had to be honest with myself that we hadn’t gotten as far as I’d hoped.
I took a bit of a break and traveled around, doing a lot of organizer trainings for unions in other countries. Then I came back to New York, became a teacher, and was involved in that union. Reflecting on my experience as a labor organizer, one of the things I kept thinking about was how workers were generally supportive of a union, but a lot of people were also saying, “I want to start my own restaurant” or “I want to open my own school.” What I realized was that many working people want to own the place that they spend most of their waking lives. I really started to think that maybe we can change the world not just by fighting employers, but by creating better ones.
Many working people want to own the place that they spend most of their waking lives. . . . I started thinking about worker ownership as a different strategy for worker empowerment.
I got involved in the labor movement originally from the anti-war movement, because I was interested in broad and deep social change, which the labor movement has not really been at the forefront of in the United States. It’s been boxed in by employers to bargaining over a very narrow scope of bread-and-butter issues.
So I started thinking about worker ownership as a different strategy for worker empowerment. I think that’s something a bit unique about The Drivers Cooperative: it’s a very worker-centric organization, as you would expect from a co‑op. And it has to be in order to do what we’re trying to do.
Tell us a little more about how that focus on workers plays out.
Sure. For example, we involve drivers in every single major decision in the company. Personally, I don’t even have a share because I don’t make my living driving for hire. In a normal startup, the founders hoard ownership. We decided to distribute equity to as many drivers as possible. Staff don’t own shares, but we are incorporated in the co‑op’s profit-sharing plan and have representation on the Board of Directors.
We’ve put a lot of thought into developing a structure. I don’t know if we got it right, but we built in flexibility so it can change over time. We have a multi-stakeholder board of directors on which drivers, staff, and outside advisors who provide a third-party perspective are all represented. No one group has an absolute majority so they have to compromise.
With a marketplace business like this, you have different stakeholders that all need to be satisfied in order for the business to function. If you orient your business only around what riders want, you end up with something which looks like Uber, which is extremely exploitative of drivers. And with Uber, it’s not even oriented to what riders want: it’s oriented to what outside investors want.
So I think that as time goes on, we’re probably going to diverge more and more from the Uber business model. Because, at our core, we’re based around a different set of interests.
In a normal startup, the founders hoard ownership. We decided to distribute equity to as many drivers as possible.
How do you deal with drivers’ issues that might come up day to day?
We have a second board, a “Driver Board,” which is entirely elected by drivers, which deals with exactly that. So if a driver gets in trouble with a customer complaint, that gets adjudicated by a board that is essentially an elected jury of their peers. Which is really different from Uber, which deactivates people by algorithm.
Were you able to draw on existing models to build this structure?
We drew on a couple of things. I was involved in starting another cooperative, a coffee catering company, which is still operating. And we had kind of a template from that, although it wasn’t a multi-stakeholder one.
The other example we looked at was New York City’s black car bases [i.e., pre-arranged transportation contract companies]. The ones that were unionized had driver boards that dealt with customer complaints. We adopted that structure and tweaked it to make it more democratic. What tends to happen in these cases is that a group of drivers in these positions become like a set of bosses. So our board positions have term limits; they rotate.
New York City is a big market. Yet I was reading that you might scale the platform nationally.
Yeah, so the tool that we’re using to scale is federation. As soon as we launched, we started getting inquiries from drivers all over the world asking, when are you coming to my city? We’re still figuring out that model.
But, when you think of Uber and Lyft, the platform economy takes a colonial approach to growth, where these companies go in and disrupt an industry by destroying local businesses, including the few local taxi cooperatives that exist.
So we’ve been reaching out to the taxi cooperatives to see if we can find a way to work together. Interestingly, it wasn’t a taxi co‑op in the U.S. that reached out to us first, but one in Italy.
So we formed our first strategic partnership with a co‑op called Cotabo, which is in Bologna. When their riders come to New York, if they’re using the Cotabo app, they get a link to download our app. When our riders go to Bologna, we encourage them to use Cotabo. So we’re planning to basically expand that into a worldwide web of local cooperatives, providing transportation.
I think we have a pathway to creating a real global driver-owned alternative to Uber and Lyft. If we can, it will be quite amazing.
Have you been able to raise the capital you need?
It was an extreme struggle to raise the capital to get this thing started. It took literally a year from when we incorporated and began pitching funders to the point where we actually started getting investment. That was the biggest speed bump for us.
But we’re very grateful to the partners that invested in us early on. Shared Capital Cooperative has been our biggest investor, and we’re very grateful for their support. They gave us a term loan, which is not typically how startups are capitalized. But we made it work. To start a business like this, you need millions of dollars, and that kind of capital isn’t really available in the co‑op space.
But we’re hoping it will be eventually and that our success will bring a lot of resources into this ecosystem. And we’ll use them to help start more co‑ops.
We were able to raise enough money to launch through a combination of grants, co‑op loan funds, and investments from Leaf, Start.coop, and the Lower East Side People’s Federal Credit Union. It was all a big, very big help.
So once you were launched, you had something to prove in a hurry.
Yeah, after the launch in May 2020 we were under a lot of pressure to break even immediately. We got incredible momentum from our launch — something like 40,000 riders downloaded the app, we grew from 2,500 drivers to nearly 4,000. We actually stopped onboarding drivers in order to build up our systems to be able to absorb that many members. We’re about to restart our membership drive now.
We saw we couldn’t use traditional venture capital, because what they want is ownership, and we’re a cooperative, so drivers need to own it. You could get loan funds, but loans are not very patient capital as they are traditionally structured.
So instead, we created a royalty-based financing instrument and combined that with regulation crowdfunding. So we basically leveraged the momentum we had from the launch in order to fundraise our next round.
We crowdfunded over a million dollars, which is mind boggling, meeting our goal. I think it shows you the hunger that people have for change and for new ways of organizing our economy. So we’re putting that capital to work right now to build up our operations.
It’s difficult to compete with Uber at scale in their largest market. We’re kind of taking it in stages. Right now, we’re emphasizing our pre-scheduled business — which Uber also does as a kind of a sideline, but it’s not their main offering. So we’re going to be doing things like medical transportation and providing trips in the Access-a-Ride program.
And I read that you partnered up with a credit union.
Yes, that’s one of the things I’m happiest about. One of the problems drivers have is that their income is determined not just by what’s left over after Uber and Lyft take their cut, but what’s left over after they pay all their expenses.
The industry is structured around an owner-operator model where drivers have responsibility for their own vehicles. So, 91 percent of drivers in New York City are immigrants who don’t often have a long credit history. You hear horror stories about drivers being duped into really bad deals. They get long repayment terms at very high interest rates, an APR of 20 percent for a car loan. It’s typical that a driver will spend $75,000 on a $25,000 Toyota Camry.
We were able to partner with the Lower East Side People’s Federal Credit Union. Our members can join the credit union and avoid predatory lending. We have a member driver who went from paying $1,900 a month to paying $500 a month for his vehicle. It meant that he was able to go back to his home country and get married. It was life-changing.
We also have a whole purchasing co‑op side that we’re planning to build up to help drivers reduce their expenses and also to invest in things like electric vehicles which we expect will be coming in the New Year.
Give us a sense of where you are today in terms of some numbers you might share with us.
Well, 40,000 riders, 3,800 drivers, thousands of trips. I’d say it’s been difficult for us to fill the on-demand trips, mainly because, although 3,800 sounds like a lot, in New York City we need more. Our fulfillment rates so far have been lower than we wanted. But we’re continuing to move the needle on that.
What’s really amazing to me is that you’ve got a conventional business, and you have to succeed in that. It’s also a platform business. So you’ve got to get the technology right. And thirdly, you’re sort of inventing a new business model — is that correct to say?
Yeah, it’s a lot of plates in the air! And the other thing we’re doing is engaging members and forming a policy agenda for the industry. So, we’re going to have a whole advocacy side, which might seem unusual. But if you think about it, this is exactly what Uber and Lyft do. I mean, they’re spending enormous amounts of money on trying to get laws changed. We need to be active in that arena as well.
Ridesharing is a predatory industry, very cutthroat, and it needs systemic change. I think co‑ops can raise the ceiling, we can be the best company that can exist within the given structures, but we need some form of organizing advocacy or unionization and regulation to raise the floor.
Elias Crim is an editor, writer, translator and publisher who founded the national blog Solidarity Hall in 2013 and the podcast “Dorothy’s Place” (with co-host Pete Davis) in 2017. He has written for the American Scholar, Shareable, Arion, Front Porch Republic, America, Diogenes (UNESCO), and other publications.