ENSAE 2011 / 2012

Economics of Innovation and Entrepreneurship

C. Lelarge (INSEE-CREST)

Assignment for « ZIPCAR : Refining the Business Model »

Case: One time permission to reproduce granted by Harvard Business Publishing, 12/12/2011

1. Evaluate the venture and the progress made since creation:

People involved?

Opportunity (“value” of the business idea)?

Context (Demand side, technologies available)

Deals with investors : why is it so hard to raise money ?

2. What is the business model, and how has it changed between December 1999 and May 2000?

Describe the economics of the business model: per car, per subscriber, per city?

Are security deposits revenue?

What is the relationship between the number of cars and the number of members?

Is the car cost a variable or a fixed cost?

What matters: hours billed or hours driven; what is the difference? (Important aspect

to notice here about patterns of use by members…)

What are the most important drivers of the economic performance?

What do the actual data say about the initial business model? Does this data give you comfort or

concern?

3. What actions should be taken as a result of the September operating results?

4. What are the strongest arguments the entrepreneur(s) could make to a potential investor about the

attractiveness of the venture?

A few more hints:

A. Per car economics: it is useful to look at the following quantities:

Total car cost per month

Revenue per car and per month

Margin per car

City overhead

Number of cars required to cover these overheads (*)

Corporation overheads

Cars required to cover the total overheads (**)

Why is it useful to make a difference between (*) and (**)

B. Per subscriber economics: it is useful to look at the following quantities:

Revenue per member per year / per month

Average number of members per car

Car costs per member and per year / per month

Margin per member and per year / per month

City overhead

Number of members required to cover these overheads (*)

Corporation overheads

Members required to cover the total overheads (**)

Why is it useful to make a difference between (*) and (**)