How Fast Can This Thing Go, Anyway?

Zipcar was a classic founder-run company--long on passion, short on cash. Until a new CEO came aboard, gave the business a seven-step tune-up, and put the pedal to the metal.

Michael Edwards

CLIMB ON IN: Most companies won't rent to the under-21 set. Zipcar's approach? No problem.

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Michael Edwards

"The key question was how big this could be. Was it a one-hit wonder? Or was this something that could really go large scale?" –Scott Griffith, CEO

Michael Edwards

"Making customers feel like they have input and a stake in the game really makes them want you to succeed." –Robin Chase, co-founder

It was a slushy February morning in 2003, and Scott Griffith was on his way to his new job as CEO of Zipcar. But first, he had an early errand to run. He drove up Coolidge Hill, in Cambridge, Massachusetts, and parked outside the appointed address, a brick Georgian house. Inside, Peter Aldrich, a member of Zipcar's board of directors, was waiting. With Aldrich's standard-poodle puppy, Yogi, tumbling around his legs, Griffith signed the terms letter for his new post, gratefully received a good-luck bottle of 1966 Calon-Ségur Bordeaux from Aldrich, and headed out. Then Aldrich, standing at the door, shouted some last-minute advice. Go forth, he told Griffith, and turn this political movement into a company.

Griffith nodded and smiled, then sank into the Prius he had rented from Zipcar. "It kept ringing in my head: 'Turn a political movement into a company," he says. "I started thinking, Did my due diligence miss something?" Zipcar was a hip, three-year-old riff on a car-rental company. Its vehicles were kept in parking lots and at gas stations. Customers--who became Zipcar members by paying an annual fee--could rent by the hour or the day and make all the arrangements online, without having to deal with rental counters and agency personnel. It had been founded, in 1999, by two women who strongly believed in car-sharing as a way to help protect the environment, and its employees tended to be true believers as well.

When Zipcar's board first contacted Griffith two months earlier, at the beginning of 2003, he was uncertain. "The key question I worried about was how big this could be," he says. "Was it a small niche, a one-hit wonder in Cambridge, Mass.? Or was this something that could really go large scale?" As he pored over demographic data on car-ownership rates in major cities, his interest began to grow.

The Zipcar that had taken shape so far was a classic founder-run venture--long on passion but chronically short of cash. The company's CEO and co-founder, Robin Chase, had gotten a lot of the basics perfect. She had come up with the name Zipcar and the memorable tag line "Wheels when you want them." She had assembled fleets in Boston, New York, and Washington, D.C., and made renting a simple online process. The cars--mostly Beetles, Jettas, Mini Coopers, and Priuses--were cooler than the usual rental fare, and each one had a name, like Jetta Judy and Beetle Buster. By winter 2002, the company had 6,000 renters--some of them so enthusiastic that they actually washed their cars before returning them.

But Zipcar was losing money. Making matters worse, Chase had recently informed the board that an expected $7 million in financing had fallen through at the last minute. Even after she came up with some last-minute financing, the board, composed of four outside investors (and Chase), suggested that the CEO take her leave. "There were a lot of questions that had not been resolved," says Jill Preotle, a board member. "While we all think Robin did a fabulous job starting the company, the sense at the board level was that we needed a different type of manager for the next stage."

That manager, the board decided, was Griffith. He had stepped in at two other start-ups. One was successful--Information America, a database company he sold for $25 million in 1999. And one had failed--Digital Goods, a software company that petered out in 2001. With an M.B.A. from the University of Chicago, a number of years as an executive at Boeing (NYSE:BA) and Hughes Aircraft, and his own consulting practice, Griffith believed firmly in numbers and ratios and performance metrics. Zipcar's board found this appealing.

Griffith's approach to Zipcar was systematic and highly aggressive--an approach that has generated its share of critics. The serious, mission-driven, and somewhat countercultural Zipcar created by Chase is gone. Only one employee who worked with the founder remains; everyone else quit or was fired. Many ex-employees say Griffith is overly demanding and that Chase deserves more credit for Zipcar's success.

Still, it's hard to argue with results. Over the past five years, Griffith has transformed Zipcar from promising start-up into a real force. Revenue has soared from $2 million to $100 million. In November, the company acquired its largest rival, Flexcar. Zipcar has about 200 employees, it has raised $35 million in venture capital, and it has a growing international presence. How did he do it? Here is Griffith's game plan--a seven-point strategy for turning a great idea into a thriving company.

1 Break It Down to Build It Up

Griffith's first goal was to break down Zipcar's problems into small bits. He immediately halted an expansion of the service and worked instead on getting things right in Boston, Washington, and New York. "We had to prove the business model at the city level," he says. "The company hadn't really thought through what it would take to get to profitability." He ran financial models that indicated each city would need 150 to 200 cars, and each car 40 members, for the company to make money. Just getting these three cities on track would require from 18,000 to 24,000 members.

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