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5 Principles That Drive The New Market For Sharing

Posted on the 11 May 2016 by Martin Zwilling @StartupPro

uber-mumbaiThe pervasive ability and need to communicate constantly and globally through the Internet and smartphones is incenting everyone to get more out of their own assets and time, and capitalize on the idle resources of others. This new sharing economy is rapidly becoming the new business of sharing, with major winners already including Airbnb (rooms), Uber (rides), and Chegg (books).

If you are an aspiring entrepreneur, or an existing business, and haven’t yet sized any of these opportunities, you may be already late to the game. Until I read a recent book “The Business of Sharing,” by Alex Stephany, who founded JustPark (current valuation estimated at £20M), I too had no idea of the scope of opportunities, and the 200 or more players already out there.

The business tenants of the sharing economy, with alternative names including collaborative consumption, peer-to-peer economy, or “we-conomy,” always imply these five basic principles and assumptions:

  1. Sharing economy platforms create reciprocal economic value. Usually these are revenue-generating e-commerce sites, or have the potential to be revenue-generating. Even if the goods and services are changing hands as gifts, or the revenue motive exists only to make services sustainable, the economic value is evident.

  2. There is value in the “idling capacity” of all assets. Idling capacity is a notion that was first systematically studied and measured in the context of industrial processes. The sharing economy applies the same ruthless logic of how best fully utilize our clothes, bicycles, driveways, computers, pets, and free time.

  3. For utilization to increase, assets need to be made accessible. These days, accessible starts with being visibly listed online, in lieu of the now old-fashioned rental sites and swap-meets. It can mean selling through peer-to-peer e-commerce (eBay), renting (HomeAway), gifting (yerdle), or even swapping (Swapz).

  4. Assets need to move in a community of engaged users. Community means more than supply and demand. Often these communities are built around special interest groups, where the members interact through social media, help each other, and trust each other, and the relationships go well beyond the transactions.

  5. Access to assets in a community leads to a reduced need to own. One consequence of the new sharing business model is that goods become services. The Zipcar sharing service is said to take 17 other cars off the road, as opposed to Hertz car rental, which only adds more vehicles into every community.

Where and when is all this leading? I believe that we have only seen the beginning. Certainly change happens more slowly in areas encumbered by political systems, long-standing cultures, and large dominant brands. Although the sharing economy isn’t really new, here are a few of the arenas that Stephany and I believe are still ripe for disruption:

  • Education. With US student debt at over one trillion dollars, startups like Skillshare and Udemy provide top-class vocational training for the price of a Harvard hoodie.
  • Insurance. An example is Berlin-based startup Friendsurance connecting people to create a private insurance pool for payout on household and consumer electronic claims.
  • Healthcare. Cohealo is now allowing hospitals to share medical equipment. Fertility can be helped by less restrictive ways for people to share their sperm and eggs.
  • Restaurants. In Cuba today, there are over 1,000 restaurants in people’s homes, known as paladares. Chefs are beginning to offer peer-to-peer dining platforms or cooperatives.
  • Financing. With crowdfunding, entrepreneurs and artists no longer need to wait for family money or venture capital. In the US, we are still waiting for equity crowdfunding, but the rewards, donation, pre-order, and debt-funding models are already working.

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