Analysis Mgmt 2 14-153 July 25, 2014 This case was prepared by Deborah Ancona and Cate Reavis. Copyright © 2014 Deborah Ancona and Cate Reavis. A

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14-153
July 25, 2014

This case was prepared by Deborah Ancona and Cate Reavis.

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mechanical, photocopying, recording, or otherwise—without the permission of the MIT Sloan School of Management.

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Robin Chase, Zipcar, and an Inconvenient Discovery
Deborah Ancona and Cate Reavis

You’re out selling, selling, selling all the time. You’re selling to prospective employees, you’re selling
to prospective investors, you’re selling to suppliers. And when we’re in selling mode, we’re
constantly so upbeat and excited, and it’s only good stuff. You have to remember, deep in your heart,
when something sucks, you’ve got to change it out right away.

— Robin Chase (MBA ’86), Co-Founder, Zipcar1

Robin didn’t have any particular fears about informing people about the ‘handwriting on the wall.’

— Jean Hammond (MBA ’86), Zipcar’s first investor

What had been a picture-perfect mid-October day in Cambridge, Massachusetts, quickly turned bleak
for Robin Chase, co-founder of Zipcar. She was not prepared for what the Excel spreadsheet was
telling her nearly four months after the car-sharing venture had launched. The amount of revenue that
Zipcars had generated for the month of September was half of what she estimated. Chase was
stunned: the company would never be able to break even with the numbers she was seeing.

At the time she launched Zipcar, Chase’s vision for the car-sharing startup was simple: she wanted to
provide urban dwellers with convenient, reliable, fast access to cars.2 She wanted Zipcar to become
ubiquitous in a country where 66 million people lived in the top-20 largest metropolitan areas and 20
million people used public transportation to get to work.3 Chase considered the environmental
benefits of Zipcar a secondary part of her vision, although worth noting. In her due diligence about

1 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
2 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
3 Myra Hart, Michael J. Roberts, Julia D. Stevens, “Zipcar: Refining the Business Model,” HBS Case No. 9-803-096, rev. May 9, 2005; U.S. Census Data 1990.

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the car-sharing industry, Chase came across a number of European studies that estimated every shared
car would result in 7.5 fewer individually owned cars on the road.

Since its June 2000 launch, Zipcar had received positive press with stories appearing in USA Today,
The Wall Street Journal, CNN, and The Boston Globe, and by October 2000 the company had 430
members. The car-sharing concept was clearly resonating with many urban dwellers, as Chase
thought it would. The problem was that like many car-sharing concerns that preceded Zipcar, the
financials told a different story. The business model Chase had spent months developing was not
working.

With just three weeks until the company closed on its first round of funding worth $1.3 million,
which included a sizeable investment by a new angel investment group composed of MIT alumni, and
two weeks before the company moved into its first official office space, Chase had to decide what, if
anything, she could and should do.

Upbringing

The daughter of an American diplomat father, Chase spent the majority of her childhood in the
Middle East with stints in Swaziland and Washington, DC. From a young age, she was exposed to a
variety of cultural norms and customs. As Chase explained it, her childhood had a significant impact
on the business leader she grew to become. She learned, for example, the importance of respecting all
people, regardless of income and skill levels, a value that was of significant importance to her father:
“My father always treated everybody incredibly well, and politely and respectfully…. I was brought
up with this idea of we’re born into many different kinds of circumstances, and what clothes you’re
wearing and what education you happen to have had doesn’t have a bearing on what kind of a person
you are or how hard you’re working or what your intent is.”

From her artist mother, Chase learned the importance of being flexible and making do with “the
inputs at hand.” In the various countries where they lived, Chase’s mother would start and leave
behind cottage craft industries:

In many countries, in the two to four years we were there, my mother would be painting on things
or doing macramé, carving, or doing potato prints, and then she would hire the gardener to do it
with her and then another person and, no kidding, in three countries she left cottage industries that
turned into companies…. I would watch her with admiration and [think] wow! She created
something out of nothing. In hindsight, I felt the power of what she did. She had this passion that
she did for her own pleasure, and then she shared it, teaching and employing people. When she
left, she left this significant thing behind.4

4 “Entrepreneur Robin Chase: Transportation Is the ‘Center of the Universe,’” Stanford Graduate School of Business,
https://www.youtube.com/watch?v=adxpqGSTRK0, May 3, 2013.

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Chase began her university years at the American College in Paris and then transferred to Wellesley
College where she majored French, English, and Philosophy. Upon graduating, one of Chase’s first
jobs was at John Snow Inc. (JSI), a public health research and consulting startup, where she was
project administrator for several United States Agency for International Development (USAID)
contracts. During her time at JSI, Chase remembered thinking to herself, “These multimillion-dollar
projects are being run by MDs and MPHs5, and they know nothing about finance or operations and
they were doing a really crummy job. I decided I wanted to go to business school so I could run these
big projects with a business school background.”

Building Quantitative Skills

With a desire to “feel confident in all things numbers,” Chase applied to MIT Sloan and was initially
rejected due to her low GMAT math scores; she had not taken math since high school. She begged
MIT Sloan’s Admissions Office to reconsider its decision, and was told that if she retook the GMAT
and significantly improved her math score, she would be admitted. Chase spent weeks studying for
the math portion of the GMAT and did well enough to be admitted to the Class of 1986. She was one
of 32 women in a class of 220 students.

Chase’s focus on math did not end with the GMAT or with her acceptance to MIT Sloan. She was
committed to mastering finance, knowing that it would serve her later on. (Ironically, Jean Hammond,
an MIT Sloan classmate who went on to become Zipcar’s first investor, said that Chase was known as
a “quant jock.”)

Chase reflected on the mathematics challenge she encountered when she arrived at MIT Sloan and an
important realization she made about herself:

I hadn’t taken math since I had been in 11th grade. I hadn’t taken math in a very, very long time
when I got to the hard finance course. Everything was completely over my head, it was all over
my head, and during that semester I worked so hard on mastering the subject that in the final
exam I got an A, and the highest grade in the class…. It was a demonstration to me within myself
that I can master any subject. And it’s been important for me…around engineering or wireless
spectrum or radio spectrum or options or derivatives that, if I need to, I personally can master that
subject. And it really gave me the confidence that I could be a peer; that I could match whatever
anyone was talking about; that I shouldn’t be intimidated; that I could take it; that I could stand
on my own two feet.

Aside from the important personal discovery Chase made after mastering the finance course, a second
key takeaway from her two years at MIT Sloan happened during an Orientation exercise called
Subarctic Survival Situation. Chase and her new classmates were broken up into small teams. The

5 Master of Public Health.

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teams were told that their plane had crash-landed in the subarctic region of Newfoundland, Canada,
and that they had to rank 15 items that were salvaged from the plane in order of importance for their
survival. Chase’s ranking of items differed from her teammates. After much discussion, Chase ended
up conceding her position only to discover that the order in which she ranked the 15 items had been
right. She learned, as she put it: “Some times you are right and really have to fight for it.”

Opportune Idea, Opportune Time

Between the time she graduated from MIT Sloan and the launch of Zipcar, Chase worked, as she
liked to say, “full-time, part-time, or no time,” all while giving birth to three children, each born three
years apart.

By 1999, after having taken the previous year off from working, Chase was itching to start a
company. One reason she was looking to launch a startup was that it would enable her to create work
that she personally wanted to do, something that would give back to society and give her a certain
amount of autonomy and flexibility. “Most of the world’s jobs are things I think are uninteresting,”
she remarked. “I wanted to find something that had real tangible value, not just monetary value.”

Having coffee one day in September 1999, Chase listened intently as her friend, Antje Danielson, a
geochemist who worked for the University Committee on Environment at Harvard University, told
her about a car-sharing business she had learned about during a recent visit to Berlin, Germany. The
concept struck a chord: “I felt like I was the right person to hear that idea at that exact moment,”
Chase said.6 “I thought to myself, ‘Wow, this is exactly what the Internet was made for: sharing a
very specific resource among lots of people.’” Furthermore, wireless technology, which, as Chase put
it, was “the buzz of the entrepreneurial community,”7 held tremendous promise for what it would
enable a car-sharing startup to do, namely allow reservations and usage data to be seamlessly
communicated among the cars, the company, and the users. At first glance, the percentage of adults
who regularly used the Internet in the United States (46%8), owned cell phones (just over 53%9), and
used the Internet wirelessly (0%10) suggested that Chase faced a steep uphill climb in her quest to
build an Internet- and wireless-driven company. However, she knew these usage percentages were
changing by the day, particularly in a technology-centric city like Boston. She believed the time was
right for car sharing in the United States.

6 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
7 Dinah Eng, “Robin Chase: Zipcar’s Founder Finds a New Gear,” Fortune, December 4, 2012.
8 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School
of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).
9 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School
of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).
10 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School
of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).

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But there was another reason why the car-sharing concept was illuminating. It was exactly the type of
solution Chase was personally seeking. With three kids and one car that her husband took to work,
there were certain times when Chase needed a car, but she knew that she didn’t need or want one full
time. She was embarking on building a company with her own lifestyle in mind.

Within days of their initial conversation over coffee, Chase and Danielson shook hands, agreeing to a
50-50 ownership of the company that eventually became Zipcar.

Networking and Learning

Upon deciding to start a car-sharing venture, one of Chase’s first phone calls was to her brother Mark,
who lived in Portland, Maine. After earning his master’s degree in urban and environmental policy
from Tufts University, Mark Chase founded and led the Seaport Transportation Management
Association (Seaport TMA) in Boston. The Seaport TMA worked with large companies like Gillette
and Fidelity to find ways for their employees to get to work in a more sustainable way. Chase knew
Mark was familiar with car sharing and that he would be a gold mine of advice on whom to talk to.
(Mark later admitted to Chase that starting a car-sharing company was something he had hoped to do
one day, but she beat him to it.)

With Mark’s help, Chase began networking. Her list of whom to talk to was long and included
policymakers in the cities of Boston and Cambridge, owners of parking lots, owners of land upon
which parking lots sat, car manufacturers, car rental companies, the U.S. Environmental Protection
Agency (EPA), engineers, academics, entrepreneurs, and, of course, investors. One of her stops
included the Conservation Law Foundation (CLF), which was running a pilot study looking at the
environmental impact of selling auto insurance by the mile. It was through the CLF that Chase met
Peter Nessen. A member of the CLF’s board, Nessen was a public accountant who had been the chief
financial officer of former Massachusetts Governor William Weld’s cabinet during the early 1990s.
He lived on Beacon Hill and did not own a car. Soon after meeting him, Nessen became one of
Chase’s most trusted advisers, advising her on budgeting, cash flow, and financial models. He
became, as she put it, her “reality check.”

At some point during the networking process, while never doubting its value, Chase explained that
she began to feel like a blind mole rat:

You are trying to find the way up, find the path upward, and you are blind. You have no idea
which way is the path. You have to construct the path. And during this networking piece someone
says, ‘Oh, you should go talk to those three people,’ and you go talk to those three people. And
then they say, ‘You should go talk to these other two people.’ And then some of these people are
totally useless, and you never, ever talk to them again. But you are constantly going in these odd
directions, and then you’re kind of making your way up. And then when you’re up, you can look

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back and see, ‘Oh wow, it was like a straight path. I can see it.’ But there’s a million dead ends….
I was learning how to become an entrepreneur.

One key industry contact Chase made during the exploration phase, and who was not a dead end, was
Benoît Robert. In 1994, Robert founded Communauto, a car-sharing company based in Montreal,
Canada. Knowing there were a number of other car-sharing organizations operating in Europe and
two new companies in the United States—Portland CarSharing, which launched in 1998, and
Seattle’s Flexcar, which would launch a few months ahead of Zipcar—Chase honed in on learning
about Communauto. After fifteen years of operation, it was the largest car-sharing organization in
North America, with 1,300 members sharing 50 cars in Montreal and another 700 members sharing
40 cars in Quebec City.11

Chase’s visit with Robert proved to be very valuable. She was struck by how open and generous he
was with sharing his learnings about the business as well as company financials. Chase came away
from her visit with two key observations about Communauto’s business model: first, the company
was primarily paper-driven and was not harnessing technology in any way. Reservations, for instance,
were taken over the phone and written down in pencil in the company’s ledger. Second, all cars had
the same price, which proved problematic in the area of the city where parking was most expensive
and where demand was highest. Due to the parking expense, Communauto placed fewer vehicles in
these areas and, as a result, failed to meet demand. Chase recognized that this was a not a model she
wanted to replicate.

On her networking and learning tour, Chase heard words of criticism and doubt about the car-sharing
concept. It was no secret that profitability had eluded many car-sharing organizations (CSOs) in the
past. The high cost of overhead, cars, insurance, and parking spots were largely to blame. As one
transportation scholar put it, CSOs had been “synonymous with bathing in red ink.”12 Chase was well
aware of the industry’s financial history:

I knew they had all failed. There were a lot of experiments on the West Coast where car sharing
had failed many, many times with big government grants. There was one program in San
Francisco where people would take public transit to the end of the line and drive a shared car to
their remote office park located outside the city. Then they would reverse course at the end of the
day. This program failed because the economics were nonsensical. To own and operate your own
car is $25 a day. And no one in their right mind is going to pay $25 to rent a car to travel the last
few miles to their office. Furthermore, once the car is out at that distant office park, there would
be no one there willing to rent it since every single person would have arrived there by car. Many

11 Carol Harrington, “Car-Sharing Gaining Fans,” The Canadian Press, October 12, 2000.
12 Ilan Mochari, “Deals on Wheels,” Inc., February 1, 2001.

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of these pilot programs were set up in a stupid way. They were trying too hard. They didn’t
leverage technology.

The car rental companies didn’t think Chase would be able to scale the business due to the fact that
her car purchases would be in such small volume. Others doubted there was a viable market. One vice
president of a Somerville-based car rental company told The Wall Street Journal that Chase’s idea
was “awful. I don’t think it’ll work.”13 Meanwhile, Fred Salvucci, the former secretary of
transportation for Massachusetts and a lecturer at MIT specializing in urban transportation planning,
and from whom Chase sought advice, worried that the rental companies would get into the car-
sharing business. (In May 2000, Hertz launched a “shared-car” pilot program in San Francisco. For
less than $400 a month, “subscribers” had access to a fleet of Ford Escorts parked at a rapid-transit
station.14)

Chase was able to tune out the critics and naysayers, firmly believing there was market demand and
that wireless technology would help put the concept of car sharing in the black. It was clear to her that
she would be able to launch a car-sharing business with few employees. Zipcar’s first investor, Jean
Hammond, who gave Chase a $50,000 convertible loan in February 2000, was also a believer: “My
thought was that it was such a great idea, and that Robin could pull it off.” While Hammond
acknowledged a good portion of her investment was in Chase and her ability to put an idea into
practice, she was placing the majority of her investment bet on the Zipcar concept.

Putting It Together

“Zipcar, Inc.” was incorporated in January 2000 with Chase taking the title of CEO and Danielson,
vice president. In choosing the company name, Chase turned to her potential customers. Without
saying anything about the car-sharing venture she was putting together, Chase would stop strangers
on the streets of Cambridge and Boston and ask them to say what came to mind when they saw the
following words: Wheelshare, U.S. Car Share, and Zipcar. She discovered that 40% of people didn’t
like the word “share” and Wheelshare made many people think of wheelchair. Zipcar ended up being
the hands-down winner, and, best of all, the URL wasn’t taken.15

Chase got to work building a team to help develop technology and get Zipcar’s operations up and
running. While involved with the technology and operations part of the business, the majority of
Chase’s time was spent raising money, writing and designing the website, and determining a pricing
model for the business. As with any startup, no task fell in a particular order or could be tackled
linearly.

13 Adrianne Appel, “Company Wants Clients to Whom Days Seem Long,” The Wall Street Journal, June 14, 2000.
14 Ilan Mochari, “Deals on Wheels,” Inc., February 1, 2001.
15 Carol Tice, “Zipcar: Two Moms, a Business Idea and $68 in the Bank,” Entrepreneur.com, June 1, 2012.

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Team

From the beginning Zipcar had immediate access to automotive experience and engineering expertise.
Danielson, who before Harvard had spent three years as a research assistant at a German-based
institute working with semiconductors and two years selling and repairing cars,16 focused on in-car
technology and acquiring cars. Danielson’s involvement, however, was constrained by the fact that
she had a full time job at Harvard. She mainly spent nights and weekends working on Zipcar.

Chase’s husband Roy Russell, an electrical engineer from MIT who worked at a technology company
managing the development of speech recognition applications, was on hand to help Chase during the
evenings and on the weekends. Russell set up the company’s server and eventually spent a lot of time
working on in-car technology. (His role at the company became permanent in the fall of 2000.)

Due to his vast network and knowledge about transportation policy and the industry, Chase’s brother
Mark focused on business development.

Chase sought additional people to join the team who were, in her words, “can-do, non-complainers
who were ingenious and innovative, didn’t need a lot of oversight, and didn’t need money to get
something done.” She was in search of generalists: “I didn’t want anyone to say, ‘That’s not in my
job description.’ Or, ‘I don’t make copies.’ That was not acceptable to me.” She purposely did not
seek out people from the car rental business to join the team, knowing what she was creating would
be very different than standard car rental. She did not want Zipcar to be uttered in the same breath as
Hertz or Avis.

Chase’s hiring philosophy was driven by the respect she had for other people’s work:

I really think people are trying to do the best of what they can do. And when I hire someone it’s
because I believe that they are good at something, and so I have real respect for people’s skill sets
and you have to break that in order for me to stop believing. So that is why you can feel free to
make mistakes…. I think that generally speaking, people are skilled at what they’re doing and
they know what they’re talking about. So one or two mistakes doesn’t diminish someone in my
eyes. I really do think that people are good at certain things and we have to find the right person
and the right place, so hopefully we do a good job hiring and pulling the best out of people.

Stephen Oakley and Larry Slotnick were two key additions Chase made to the Zipcar team during its
early days. Both were hired as “consultants” and were paid by the hour for the first few months they
were with the company. Chase felt it was important to “try” before she “bought.” Money was scarce
and she wasn’t in a financial position to make a wrong hire in the early stages.

16 Myra Hart, “Zipcar,” HBS Case No. 9-802-085, rev. August 24, 2005.

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Stephen Oakley had known Chase and her family for some time. He and his family lived in the same
neighborhood, and their kids went to school together. With a master’s degree in public health, Oakley
had been interested in getting into transportation planning because of the impact he believed it would
have on health. One thing about Oakley that appealed to Chase was his varied professional
background. During the 1980s, Oakley quit his job as a nursing assistant to open up what became a
popular bar and restaurant in Cambridge.

When Chase first approached him about working for Zipcar, Oakley was the business manager of
clinical operations at Cambridge Health Alliance. When Oakley heard Chase’s idea for car sharing,
he thought she was insane: “Car sharing seemed like a brilliant idea, but it was like trains in America.
I couldn’t see it happening. People love their cars. They don’t like to share things.” However, despite
the career risk Oakley was taking, Chase’s passion and commitment to initiate something new won
him over, even though he often wondered what Chase saw in him:

I kept wondering whether she was assessing my skills appropriately. She had this impression of
me as a numbers person, and I’m really not a natural numbers person. I soon discovered that her
expecting me to be able to do it made me able to do it. None of it is really rocket science. It’s not
like this secret skill. The power of somebody to set up a situation where you feel there is no
question you can fulfill an expectation is very powerful.

In Oakley, Chase saw someone who could relate on various levels to those with whom the company
would have to work, and that through his experience in opening and running a successful bar and
restaurant he would be adept at managing many small details and working with people of various
professional levels. “I knew that he was an articulate, smart man,” she stated, “and he could talk to
someone important at Harvard or MIT as well as the garage and gas station attendants.” Furthermore,
Oakley had a vast network in the Cambridge area. Chase was also drawn to his sense of humor and
knew he would be fun to work with. Oakley focused on operations. (He eventually became the
director of Boston operations.)

When Chase’s brother Mark first approached Larry Slotnick, whom he knew through the
Massachusetts Bicycle Coalition, about joining the Zipcar team, Slotnick was serving as the
coalition’s interim director. A biking enthusiast who was an engineer by training and had spent his
early career in electronics manufacturing, Slotnick shifted his professional focus toward marketing
after earning his MBA. Like Oakley, Slotnick found Chase’s vision to create something brand-new to
be inspiring and infectious: “She was very inspirational when it came to educating us about what
Zipcar was hoping to accomplish. This is not to say Zipcar was the first attempt at car sharing. But it
was the first attempt, at least in the United States, for a really sustainable and scalable system that
would become a part of the lives of millions of people, potentially.”

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When Slotnick joined …

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