About three months ago, America Online Inc. co-founder Steve Case became a user of Flexcar, the car-sharing program, and now is so sold on the concept that the multimillionaire is investing heavily in the company.
Case, best known for building AOL into an Internet powerhouse and presiding over its disastrous merger with Time Warner Inc., believes millions of Americans yearn to be emancipated from traffic, car payments, steep gas prices and the frustrating quest for city parking -- and that they will join car co-ops to minimize their headaches.
"It's super-convenient" and cheaper than the rental car system, said Case, who with several smaller partners is investing an undisclosed amount to own more than half of the company. Case said he thinks it is realistic to expect Flexcar to grow from 30,000 members today to 1 million in five years.
"I think car sharing is at that inflection point," he said. It's catching on because it makes sense, he said. "Sometimes the best ideas are the simple ones."
For an annual membership fee and a flat hourly rental rate that includes gas and insurance, Mobility Inc., the company that operates Flexcar, allows occasional drivers to share cars with other members -- a business model similar to other car-sharing programs such as Zipcar Inc. and San Francisco's City CarShare. Cars can be reserved online, and are kept near mass transit stations, grocery stores or other high-traffic areas where the company has reserved parking spots.
Case said he still drives his own car to work, but occasionally uses Flexcar.
With the new investment, Flexcar plans to launch a marketing campaign and expand its operations. Its fleet of 450 mostly gas-electric hybrid cars is in six major cities: Seattle, Portland, Los Angeles, San Diego, Chicago and Washington. The company plans to add at least six more major cities by the end of next year. Also, by the end of this year, Flexcar will double the number of its cars in Washington, Los Angeles and San Diego.
Flexcar has signed former Chrysler Corp. chairman Lee Iacocca, also a new investor in the Seattle-based company, as a senior adviser.
Flexcar is the latest in a series of investments Case has made through Revolution LLC, a Washington-based investment firm he started in April with half a billion of his own fortune.
"Revolution is all about new consumer businesses that are in early stages of development, but are at a tipping point," where they have the potential to change lifestyles for the healthier and better, Case said. Roughly half of the fund has been invested, mostly in eco-resorts and lifestyle-focused media companies. Next month, Case hopes to make additional investments in consumer-focused health care companies.
"The green, sustainability movement is going mainstream," Case said, and "we want to ride that wave."
The by-the-hour car-sharing concept was introduced in Europe two decades ago, said Lance Ayrault, president and chief executive of Flexcar. In Switzerland, for example, 1.5 to 2 percent of the population uses car-sharing programs, he said.
Ayrault said he thinks Americans could join in even greater numbers as gas prices continue to go up and as traffic becomes a bigger daily burden. "They key thing here is that the cost of car ownership is increasing every day. People are frustrated and they're looking for alternatives."
Zipcar, with 45,000 members in many of the same cities as Flexcar, is planning to be in 25 major markets by 2009. Last month, it received a $10 million investment from private-equity firm Benchmark Capital Management Co. LLC, based in Menlo Park, Calif.