Technology

The great San Francisco scooter decision has been made. And Skip and Scoot have claimed the prize.

TheSan Francisco Municipal Transportation Agency(SFMTA) issued one-year permits to Skip and Scoot on Thursday, a decision that ends months of waiting for 12 companies that applied to operate within the city. JUMP,whichUber acquired in April, as well asLyft,Skip, Spin, Lime, Scoot, ofo, Razor, CycleHop, USSCooter and Ridecell all applied for permits in San Francisco.

The permits will allow a maximum of 625 scooters for each company in the first six months. Scoot and Skip may have the potential to increase their number of scooters in months seven to 12 to a cap of 2,500, at the SFMTAsole discretion.

&The SFMTAdecision is based on the strength of the proposals submitted by the two companies, combined with their experience of owning, operating and maintaining a shared mobility service in the public right-of-way. The agency looked for applications that prioritized the cityconcerns around safety, disabled access, equity and accountability,& the agency said.

The SFMTA noted in its decision that Skip and Scoot had the strongest applications. The agency seemed particularly interested in safety measures these companies planned to take. Scoot, which has been managing a fleet of shared electric mopeds in San Francisco since 2012, proposed mandatory instructional videos for users, helmets included in rentals and free in-person training.

Scoot also proposed using swappable batteries instead ofmanually taking the scooters off the street for regular recharging.

&This method could help the city reduce the number of vehicle miles traveled on San Francisco streets, which helps reduce traffic congestion and greenhouse gas emissions,& the SFMTA said in its decision.

Scoot said it will soon introduce an electric kick-style scooter to its line-up of electric motor scooters and electric bicycles in response to the decision.

Unsurprisingly, the companies that lost out have expressed dismay with the decision.

&Jump both submitted a strong application and has a track record of successfully working with the city on our bike pilot,&an Uber spokesperson wrote in an email. &Granting only two scooter permits unnecessarily limits mobility options in San Francisco, and we plan to follow up with the SFMTA to share our concerns,&

Bird, a scooter startup that has$2 billion valuation, said it will continue to work withSan Francisco officials, partners, community organizations and advocates in hopes of bringing Bird back to the City by the Bay, a spokeswoman said in an email.

Bird, which has a goal of operating in 50 cities globally before the end of the year, noted that residents have sent nearly 30,000 emails to city officials in support of bringing Bird to San Francisco.

The pilot program is the citysolution to handling the scooter chaos of 2018. Bird, and soon after,LimeandSpin,released their fleet of scooters into the city in March without permission. They became an instant hit among city residents seeking fast and cheap ways to get around town. They also soon became a pariah as scooters inundated sidewalks and rights of way.

The SFMTA put a temporary ban on all scooters in May and initiated a permit process as part of a 24-month pilot program that would allow up to five scooter companies to operate in the city.

Bird, Lime, Lyft and JUMP didn&t completely lose out Thursday. The city of Santa MonicaShared Mobility Device Selection Committee officially awardedBird,Lime,LyftandJUMPBikes permits to operate both electric scooters and/or bikes in the city as part of its 16-month pilot program beginning September 17.

Lyft, which remains hopeful that it willhave the chance to offer scooters in San Francisco in the future, is now focused on Santa Monica.

As a former stock analyst turned VC, I still spend time thinking about public company investment opportunities. To that end, I recently read Seth Klarman&sMargin of Safety, a hard to find, but very insightful book about value investing. The booktitle, Margin of Safety, is a term borrowed from the godfather of value investing: Benjamin Graham. Warren Buffettinvestment philosophy is very much inspired by Graham; 85 percent as much, according to Buffett himself.

A margin of safety is room for error built into the price an investor pays for an asset to lower the risk that the investor might lose money. In other words, assets are usually quite difficult to price, so you try to pay some amount well below what you think an asset is worth to minimize the impact of various issues that might impact the value of that asset. One potential issue might be in the investoranalysis of worth (i.e. the investor is wrong); another might be an unforeseeable market event, or a temporary problem specific to the company, etc.

While I was familiar with the margin of safety concept, I hadn&t thought about how it might apply to venture investing, and Klarmanbook sparked my imagination.

Can you fundamentally build a margin of safety into an early-stage venture investment Can you fundamentally be &wrong& about your investment and still turn out alright

The answer seems to be &sort of,& but itquite different than how you do it in the public markets. To figure it out, itworth considering price, market and team as the potential mechanisms.

Price

In the public markets, margin of safety is all about the price you pay for an asset. You&re looking for mispricings in the market primarily due to irrational downward assessments of other investors — usually places where emotion takes hold and logic gives way. Irrational upward assessments happen too, but those aren&t buying opportunities, and value investing is about buying, not shorting.

In the private markets, there may be the same amount of irrational upward assessment as reflected by some valuations that get ahead of themselves, but irrational downward assessment is rarer simply because such an assessment would mean the market thinks a company is not fundable and, without capital, it likely goes out of business. Therefore, itdifficult for a private company mispriced to the downside to even exist. Even in down rounds at solid companies there doesn&t seem to be anything near a margin of safety that Klarman or Buffett would expect — nor do modest valuation negotiations create such a margin of safety for top venture firms that can pull off such negotiations.

We can comfortably say that price as a mechanism for margin of safety in venture doesn&t seem to work.

Market

A bigger market is always better, so if we only invest in huge markets, thata margin of safety, right Unfortunately, no.

Bigger markets are usually better, but markets are extremely hard to predict, and iteven harder to predict which market many startups even really fit into at the early stage. If you had to predict the market for people renting air beds on other peoplefloors you probably would have missed the potential for the same platform to rent rooms and, ultimately, change the travel industry.

You might apply Klarmanidea of conservatively estimating a companycash flows and the applicable discount rate in valuing a company as part of a margin of safety, but taking a conservative view of what the market may be for a venture investment is arguably even worse than overshooting it because it will probably lead you to miss out on some great opportunities, like Airbnb above.

Market doesn&t seem to be the margin of safety in venture either.

Team

That leaves us with team.

Fundamentally, the point of a margin of safety is to recognize that things are probably not going to go as planned. In a public investment, where value is a constant reflection of supply and demand, you can protect yourself from the unforeseen via price. In a private investment, where shares are illiquid and relationships more important, you can only protect yourself from the unforeseen via the team.

A great team is resourceful, dedicated, persistent, curious and flexible. Those elements reduce the risk of a negative outcome when things don&t go as planned, because a great team adjusts and fights through it. Fighting through a difficult time. Pivoting to something else. Pressing on with a commitment to suffering. Sometimes things go too far off the rails for even a great team to recover, but better to invest in a team that can correct setbacks than an average team that crumbles under even minor deviations.

Itthis reason that all VCs say they invest in team first. They are our margin of safety.

Close

To bastardize Warren Buffett&sbridge analogyregarding the margin of safety: We want to invest in founders that can lift the weight of the world, but really only need to lift the weight of one difficult startup business. We will almost certainly be fooled both positively and negatively by prices, products and markets, but we must do our best not to be fooled by teams, because they&re the only margin of safety we have.

VNTANA CEO Ashley Crowder calls the companytechnology, &the worldfirst scalable, affordable and interactive hologram.& The startuptech has certainly wowed crowds in recent years.

In 2016, it collaborated with Microsoft on HOLLAGRAM, beaming in a live hologram of MS executives during a HOLLAGRAM for a keynote at HackSC. The companytechnology has also been embraced by Intel. The chipmaker deployed VNTANAtech during its own keynote at Computex that same year.

Crowder co-founded VNTANA in 2012, along with fellow USC grad (and current COO) Ben Conway. Before VNTANA, she worked at Gulfstream, Northrop Grumman and BP, utilizing her experience in manufacturing to help design the new companyearly offerings.

In 2013, the team sent a video of a hacked Kinect to Microsoft, demonstrating how the companypopular hands-free controller could be used for gesture tracking and control with VNTANAholographic images. It was enough to gain the startup a place in MicrosoftEarly Developer and BizSpark programs.

These days, the company is focused on augmented and mixed reality experiences, topics Crowder will discuss at TC Sessions: AR/VR on October 18 at UCLA. The one-day event combines onstage conversations about augmented and virtual reality with in-person demos and networking.

Purchase your Early Bird tickets here for just $99 and you&ll save $100 before prices go up!

Students get a special rate of just $45 when they book here.