June 2, 2010: Zipcar goes public

>> Rooney: 10 YEARS

AFTER IT WAS LAUNCHED,

ZIPCAR IS GOING PUBLIC.

THE CAMBRIDGE-BASED

CAR-SHARING PROGRAM ALLOWS

MEMBERS TO RENT CARS BY

THE HOUR OR DAY AT

CONVENIENT LOCATIONS

AROUND THE CITY AND

COLLEGE CAMPUSES.

ZIPCAR BOASTS MORE THAN

400,000 MEMBERS.

AND WHILE ITS REVENUES

OVER THE PAST FIVE YEARS

HAVE INCREASED BY 90%,

ZIPCAR HAS YET TO TURN A

PROFIT.

JOINING ME NOW IS BOSTON

HERALD BUSINESS EDITOR,

FRANK IARATELLO, AND

STEVEN FEINSTEIN.

THE MORE I READ, THE LESS

I FELT SORRY FOR THEM.

THEY'RE GETTING BIGGER AND

BIGGER.

SO IT IS JUST A MATTER OF

TIME BEFORE THEY TURN A

PROFIT.

>> ONE WOULD HOPE SO.

THEY'RE GROWN DRAMATICALLY

THROUGH ACQUISITION, AND

YOU'VE GOT ENDLESSLY THAT

THE MARKET FOR CAR SHARING

WOULD GROW EXPEDENTIALLY.

THEY HAVE A LOT OF ROOM TO

GROW IF YOU BUY INTO THEIR

BUSINESS PLAN.

>> Rooney: AND

NATIONWIDE, TOO.

I ASSUME THERE IS A TON OF

THESE OUTFITS AROUND THE

COUNTRY?

>> THERE ARE COMPETITORS,

AND YOU HAVE THE STANDARD

CAR RENTAL COMPANIES THAT

MAY POSE SOME OF THE

TOUGHEST COMPETITION

THEY'LL FACE, IN FACT.

>> Rooney: STEVEN, I

DON'T KNOW ANYTHING ABOUT

THIS BUSINESS, BUT I

THOUGHT, WOW, THEY MUST

HAVE ENORMOUS OVERHEAD.

PEOPLE THAT ARE RECKLESS

WITH THE CARS.

THEY GET INTO ACCIDENTS

AND DON'T REPORT THEM.

STOLEN VEHICLES, PEOPLE

NOT RETURNING THE CARS ON

TIME.

PEOPLE ABANDONING THEM IN

PLACES WHERE IT IS

INCONVENIENT TO PICK THEM

UP.

I LEFT IT HERE, AND I

THOUGHT I WAS SUPPOSED TO

LEAVE IT THERE.

WHAT A NIGHTMARE BUSINESS.

THAT'S GOT TO BE A PART OF

IT, DON'T YOU THINK?

>> NOT REALLY.

FOR THE MOST PART, THEY

BEAR THE COSTS OF OWNING

CARS JUST AS INDIVIDUAL

OWNERS WOULD.

BUT THEY SPREAD IT ACROSS

40 MEMBERS.

THEY'VE GOT 40 PEOPLE

SHARING EACH CAR.

WHEREAS WHEN YOU OWN A

CAR --

>> Rooney: BUT I'M A

LITTLE CAREFUL THE WAY I

PULL IT INTO MY GARAGE.

>> A LITTLE MORE CAREFUL

WITH YOUR OWN CAR.

BUT THEY HAVE A

PROFESSIONAL FLEET

MAINTENANCE.

SO THEY HAVE A NUMBER OF

ADVANTAGES THE THE

INDIVIDUAL OWNER DOESN'T

HAVE.

BUT THEY'VE SOLVED THE

COORDINATION PROBLEM OF

GETTING 40 PEOPLE TO SHARE

ONE CAR.

THERE IS HUGE VALUE IN

THAT.

AND THAT'S WHERE THE VALUE

IN THE COMPANY COMES FROM.

>> AND THEY HAVE

PROPRIETARY THINGS THAT

KEEPS PEOPLE FROM STEALING

THE CARS.

THEY HAVE LOW JACK.

THEY'VE SHUT THEM OFF AND

TRACKED THEM DOWN AND

BROUGHT THEM BACK TO WHERE

THEY SHOULD BE.

>> Rooney: IF OVERHEAD

IS NOT THE PROBLEM, WHY

ARE THEY $63.3 MILLION IN

DEBT?

>> WELL, MOST OF THE DEBT

WAS INCURRED OVER THE LAST

COUPLE OF YEARS.

AND THAT'S WHY THIS

I.P.O. IS TO DO, TO REDUCE

THAT DEBT.

IF THEY GET THAT DEBT,

THEY'RE EXPECTING TO PAY

OVER $40 MILLION OF THAT

DEBT.

THEY'LL WIPE OUT INTEREST

WHICH IS RESPONSIBLE FOR

MOST OF THEIR DEBT.

LAST YEAR'S LOSS IS ABOUT

A THIRD OF THE LOSS FROM

THE YEAR BEFORE.

AFTER THEY DO THIS I.P.O.,

IF THEY GET THEIR BUSINESS

EXPENSES DOWN, IT WILL BE

HALF OF THAT.

>> Rooney: THEY HOPE TO

GET ABOUT $$75 MILLION OFF

OF THE INITIAL OFFERING.

DOES IT BECOME A PUBLICLY

TRADED COMPANY?

>> IT IS.

IT IS A PUBLICLY TRADED

COMPANY.

THAT'S WHY AN I.P.O. IS.

THAT KICKS IT OFF.

THE EARLY INVESTOR, THE

VENTURE CAPITALISTS CAN

CASH OUT, AND THAT'S WHAT

A LOT OF VENTURE

CAPITALISTS DO.

AND THEN PEOPLE LIKE YOU

AND I, IF WE THINK THE

COMPANY IS GOING TO GROW,

WE BUY A PIECE OF IT AND

BECOME OWNERS, LIKE ANYONE

ON THE STOCK MARKET.

>> Rooney: THEN WHY NOT

DO THIS EARLIER?

WHY DID THEY WAIT 10 YEARS

TO DO THIS?

>> PART OF THE REASON IS

THAT THE ECONOMY HAS BEEN

REALLY BAD FOR THE LAST

COUPLE OF YEARS.

IDEALLY THEY WOULD HAVE

DONE IT A COUPLE OF YEARS

AGO.

AND PART OF THE REASON IS

THEY WANT TO BEEF UP THE

COMPANY AND GET IT

GROWING.

EVEN IF YOU'RE NOT TURNING

A PROFIT, YOU CAN SELL

THAT STORY.

I THINK THEY WERE WAITING

FOR A GOOD TIME, AND THEY

THINK NOW IS GETTING

CLOSER TO A GOOD TIME.

>> AND THE NUMBERS FOR

LAST YEAR, EVEN THOUGH IT

WAS A LOSS, WERE

SURPRISING GOOD.

>> Rooney: I KEEP

WONDERING HOW THIS WORKS,

IF YOU'RE BETTER OFF

RENTING A CAR FOR A DAY OR

IF YOU SHOULD DO A ZIPCAR?

>> I DON'T REALLY SEE

THEIR BIGGEST COMPETITION

AS BEING THE CAR RENTAL

AGENCIES.

I SEE THEIR BIGGEST

COMPETITION AS BEING A

FAMILY WITH TWO DRIVERS,

DECIDING BETWEEN HAVING

TWO CARS OR ONE CAR AND A

ZIPCAR MEMBERSHIP.

WHEN YOU SEE IT THAT WAY,

YOU CAN SEE ALL OF THE

HUGE ADVANTAGES FOR THE

BUSINESS MODEL FOR THE

FAMILY.

THEY DON'T HAVE THAT BIG

UPFRONT EXPENSE OF BUYING

A CAR.

>> Rooney: ESPECIALLY

FOR PEOPLE IN URBAN

ENVIRONMENTS.

>> THAT'S THEIR BIGGEST

FOCUS.

THE ZIPCAR MEMBERS CALLED

THEMSELVES ZIPSTERS, AND

MOST ARE VERY HAPPY WITH

THE SERVICE.

IT IS A YOUNGER, ONLINE

SET, THAT CAN GO ONLINE OR

USE THEIR PHONE AND BOOK A

CAR.

GO ON A TRIP, THEY COME

BACK AND PUT THEIR CAR

BACK, AND THEIR WORRIES

ARE GONE.

>> Rooney: HAVE EITHER

OF YOU LOOKED AT THE

ECONOMICS OF THIS?

HOW MUCH MONEY WOULD THE

AVERAGE USER SPEND?

WHAT DOES IT COST TO JOIN

THE CLUB?

>> $50 TO JOIN, AND THERE

IS AN ANNUAL MEMBERSHIP,

AND THERE IS A PER HOUR

RATE.

>> SO WHAT YOU DO IS PAY

AN APPLICATION FEE, WHICH

MIGHT BE $25.

AND AN ANNUAL MEMBERSHIP

FEE, AND EACH TIME YOU

WANT TO BOOK THE CAR, YOU

CAN BOOK IT ON AN HOURLY

BASIS OR A DAILY BASIS.

THEY'RE A LITTLE MORE

EXPENSIVE ON THE WEEKENDS.

>> THE STORY THEY'RE GOING

TO HAVE TO TELL TO SELL

THE STOCK, IT IS NOT

REALLY A CAR COMPANY.

IT IS A TECHNOLOGY

COMPANY.

AN INFORMATION COMPANY.

A SOFTER COMPANY.

THEY DEVISED THE SOLUTION

THAT ENABLES 40 PEOPLE TO

SHARE ONE CAR.

IF YOU THINK IN AMERICA WE

CONSUME TOO MUCH, WE OWN

TOO MUCH, THIS IS A

SOLUTION THAT IS STARTING

TO GAIN TRACTION.

PEOPLE SHOULD FIND

INFORMATION AND

COORDINATION SOLUTIONS SO

WE CAN GET BY WITH LESS

STUFF.

>> AND IT IS A GREEN

COMPANY.

THAT IS REALLY PART OF THE

STORY THEY'RE GOING TO

SELL --

>> Rooney: BECAUSE THEY

USE SMALL CARS --

>> THEY USE SMALLER CARS

AND THERE ARE FEWER CARS.

>> I UNDERSTAND THEY'RE

RENTING B.M.W.s, BUT

THERE ARE LESS CARS.

>> Rooney: BUT THE

PEOPLE WHO DIDN'T HAVE THE

TWO CARS HAVE THIS OPTION.

AND THE DROPS ARE ALL OVER

THE PLACE.

>> BUT IF PEOPLE DON'T

MAKE THAT PURCHASE OF THE

CAR, IF THEY'RE ZIPCAR

MEMBERS, THE TIME THEY

WOULDN'T USE A ZIPCAR,

THEY'LL USE PUBLIC

TRANSPORTATION OR THEY'LL

WALK.

WITHOUT HAVING OWNED CARS

THEMSELVES, THEY'RE LESS

LIKELY TO USE CARS.

>> AND FOR ANYONE THAT

OWNS A CAR KNOWS THAT MOST

OF THE TIME, THE CAR IS

SITTING IN A PARKING

SPACE.

WITH A ZIPCAR, YOU GET THE

CAR ON THE ROAD MORE

OFTEN, IT'S BEING USED

MORE OFTEN BY MORE PEOPLE.

MORE PEOPLE CAN USE FEWER

CARS.

IF YOU THINK YOU'RE SAVING

THE PLANET BY RECYCLING

CANS, THINK HOW MUCH

BETTER YOU'RE DOING BY NOT

BUYING A WHOLE CAR.

WHEN PEOPLE SEE THAT AS

PART OF THE GREEN

EQUATION, THEY'LL SEE

WHERE THE GREEN PART OF

THE COMPANY COMES FROM.

IT IS NOT REALLY FROM

SAVING FUEL AND CARBON

EMISSIONS, BECAUSE THE

DRIVING, IF THE PROGRAM

WORKS, WILL BE JUST AS

MUCH.

BUT FROM FEWER CARS BEING

MANUFACTURED.

>> Rooney: I HOPE IT

WORKS.

STEPHEN AND FRANK, THANK

YOU SO MUCH FOR COMING.

>> THANK YOU FOR HAVING

US.

>> Rooney: WHEN WE

CONTINUE, A DRAMATIC

COMEBACK FOR A LANDMARK

BOSTON THEATER.