Uber and Lyft just got locked out of one of the most important new businesses by San Francisco officials

electric scooter san francisco limebike

San Francisco has selected two companies — Scoot and Skip — to launch its dockless scooter-sharing pilot program.
The startups will begin rolling out a total of 1,250 scooters in October.
The decision from the San Francisco Municipal Transportation Agency was seen as a blow to Uber and Lyft, which also applied for permits to operate dockless scooters.

In San Francisco, the dockless scooters that once covered the city's streets and sidewalks like bees on a hot dog stand are finally returning.

The San Francisco Municipal Transportation Agency (SFMTA), which had banned the shared electric scooters a few months ago, announced the details of a one-year scooter pilot program on Thursday.

But while numerous startups and tech giants, including Uber and Lyft, were vying for the coveted permits to bring their two-wheelers back to San Francisco, only two scooter companies are getting the greenlight: Scoot and Spin.

Starting in October, those startups will roll out a total of 1,250 electric scooters that San Franciscans can unlock with their smartphones and hop on to zip around the city. The companies may increase the number of scooters to 2,500 each after the first seven months of the pilot program, during which time the city will be watching closely to decide policies on the future of scooter-share.

The SFMTA's decision comes as a major blow to Uber and Lyft, which both applied for permits to operate scooters in San Francisco, as well as Bird, the white-hot scooter startup that's raised funding at a whopping $2 billion valuation. Its investors often credit the Los Angeles-based Bird with inventing the scooter-share phenomenon last year.

The transit authority reviewed 12 applications and more than 800 pages of proposals before reaching a decision. According to a statement, the SFMTA prioritized concerns around safety, access for disabled and low-income residents, and accountability.

When the City of San Francisco finally determines which outfits can operate scooters, a green plume of smoke from the ashes of venture money will waft from the rafters of Town Hall to notify citizens that an announcement is imminent.
— Semil (@semil) August 30, 2018

That Uber and Lyft were passed over for permits isn't totally surprising, given the contentious history between them and the city. About six years ago, the car ride-hailing companies launched on the city's streets and sidewalks without clearance from local authorities — setting a precedent for scooter startups to do the same.

In March, three companies — Bird, Lime, and Spin — unloaded hundreds of scooters across San Francisco before permits for operating were available to them. According to the SFMTA, residents placed nearly 1,900 calls to the city's customer service center between April 11 and May 23, to complain about scooters blocking sidewalk access and users riding in the public's right-of-way.

the winners of SFMTA's Scooter permits: Skip and Scoot.

the losers: Uber, Bird, Lime, Lyft.

lesson: the "ask forgiveness, not permission" school of Uber operations isn't always going to work.
— ಠ_ಠ (@MikeIsaac) August 30, 2018

To address these issues, the city started impounding scooters, before the Board of Supervisors unanimously passed a new law requiring that any scooter startup have a permit from the SFMTA to operate.

It was not immediately clear on Thursday if the agency will issue more permits to companies like Uber, Lyft, and Bird, before the one-year scooter pilot program is up.

The decision is a blow to Uber, whose CEO recently touted its nascent shared scooter and bike services as key to the company's future.

"During rush hour, it is very inefficient for a one-tonne hulk of metal to take one person 10 blocks," CEO Dara Khosrowshahi told the Financial Times this month. "We're able to shape behaviour in a way that's a win for the user. It's a win for the city."

"Short-term financially, maybe it's not a win for us, but strategically long term we think that is exactly where we want to head," he said.

The other unsuccessful applicants include Hopr, Jump (which is owned by Uber), Lime, Ofo, Razor, Ridecell, Spin, and Uscooters.

Skip was an underdog going into the permitting process. The startup launched its first scooters in Washington, DC, after working closely with lawmakers to craft regulation that would allow it to operate.

😏 gonna be hard to explain to other cities why your e-scooters were banned from the tech capital of the US, but should be permitted in their cities... 🛴⁦

Meanwhile, @SkipScooters⁩ working with cities FTW 🚀 https://t.co/Cfd1a1gnHb
— Alexis Ohanian Sr. 🚀 (@alexisohanian) August 30, 2018

According to the company, Skip was the first startup in the country with a shared, dockless scooter permit. Its careful launch paid off.

Sanjay Dastoor, Skip's CEO, told Business Insider in May that he prefers working with cities, rather than asking for forgiveness.

"We're the only company without a cease and desist order," Dastoor said, after the SFMTA gave scooters the boot in May. "So if you're trying to decide who to work with and you look at whose scooters are the right fit for the city and who is taking the right approach to working with regulators on it, I would say we're the best choice."

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