With a market valuation of $17 billion, San Francisco's Uber is the darling of Silicon Valley venture capitalists. But in Sacramento, where legislation is unfolding that could shape the future of the app-based ride service, its valuation means little.
Political power in the state capital comes from relationships cultivated over decades, and building those connections costs money. Uber and fellow San Francisco ride service startups Lyft and Sidecar are exploding in popularity nationwide, but in Sacramento, they're being vastly outspent by their opponents when it comes to lobbying.
Eventually, observers say, that disparity could cost them.
"I feel sad to say it, but in order to play the game, an industry needs to spend money in order to get access," said Kathay Feng, executive director of the California chapter of the nonpartisan Common Cause, which tracks the influence of money in politics. Because these companies are new, and spend less money on lobbyists and next to nothing funding political campaigns, "they have less access."
Nowhere is this disparity more evident than in AB2293, a bill that would require the ride service companies' insurance to cover its drivers from the instant they turn on their smartphone app. The services would prefer that the insurance clock be started when a driver accepts a passenger. Insurance companies and consumers attorneys, two of the most powerful interest groups in Sacramento, want the startups to play by the same rules as the decades-old cab companies.
In response to this legislative threat, all of the ride-sharing companies have beefed up their lobbying teams, hiring A-list advocates from Washington to Sacramento.
Still, it's no contest as to who is spending more on lobbying in Sacramento.
Legal and insurance groups who want the tougher rules in AB2293 have spent $6.1 million to lobby the Legislature from 2013 through March of this year, according to a Chronicle review of records kept by the secretary of state.
The ride-service companies and their supporters, including Uber, Lyft and Sidecar, as well as Google, whose Google ventures is a major investor in Uber, have spent $539,133 over that same period, those records show. The list of organizations interested in the legislation was compiled by Maplight, a nonpartisan organization that examines the influence of money on politics, based on state documents.
While the $150,305 that Uber has spent on lobbying in Sacramento since 2013 is not paltry, it is pocket lint compared with the $1.8 million that one of its biggest AB2293 rivals, the Consumer Attorneys of California, dropped over that same period.
"It's a classic David versus Goliath story," said Robert Callahan, executive director of the California branch of the Internet Association, which lobbies for digital companies. "You have the newcomers in town who are up against very powerful interests who for their own particular interests want to regulate them."
Despite having nearly 1,000 employees, a global presence and hundreds of millions in venture capital backing, Callahan insists that Uber is a David compared with the insurance and trial attorney lobbies, which have built relationships with legislators for decades.
Uber "is four years old. They're a startup. Lyft is two years old," Callahan said. "They're growing exponentially because they've found a way to create efficiencies in transportation that have never been done before. And as a result they've drawn the ire of these long-standing powerful interests."
Perhaps because of that, "AB2293 reads to me like it was written by and for California's insurance industry," said Steve DelBianco, executive director of NetChoice, a trade association of e-commerce companies, including Lyft. He noted that the bill's sponsor, Assemblywoman Susan Bonilla, D-Concord, has received $94,200 in contributions from the insurance industry since her election four years ago.
Bonilla, who said she doesn't monitor her political contributions, said, "It's unfortunate that they're choosing it to portray it that way."
"I've never seen this as a bill that was any way against any new innovation or technology in the marketplace," said Bonilla, who believes her bill is "charting the middle course."
And while the ride-sharing companies may be new to Sacramento, Bonilla said, they are hardly being outflanked on this measure. She has met numerous times with Lyft and Uber representatives and has seen them rally drivers and riders to the state capitol.
"In some ways," Bonilla said, "they're more active" than their opponents.
Some insurance industry representatives agree, and say they have seen more lobbyists in the Capitol since the ride services have muscled up their political presence.
And while the insurers and attorney groups may spend more overall in Sacramento than the new techies, they say that amount is spread out over several issues.
"We've not done what they've done, which is hire an army of lobbyists focused on a single issue," said Mark Sektnan, president of the Association of California Insurance Companies, which has spent $124,999 from 2013 through March lobbying on several issues before the Legislature, according to the secretary of state's office.
But, Sektnan said, after seeing how aggressively the tech companies swarmed around the issue in other states and in California, the insurance industry poured resources into this issue.
"We needed to make sure we protected our policyholders," Sektnan said. "That's what this is about: Making sure that our policyholders don't subsidize this new business model.
"We love the business model," Sektnan said. "But like any new business, they've got to pay for the cost of doing business."
And Kara Cross, who is general counsel of the Personal Insurance Federation of California, said Bonilla's bill is hardly the creation of the insurance industry.
"The compromise is that this bill comes a long way in allowing them to innovate," Cross said.
But there is no denying that the tech upstarts are being outspent. For now.
Part of the reason for the disparity is rooted in how tech startups operate and part of it comes from cultural distaste among some techies for the schmoozy business of politics.
When new tech entrepreneurs are starting their business, "the last thing on their list is to start a long-term program of political giving," DelBianco said. At that stage, they're focused on survival.
And culturally, many tech leaders feel that the power of their ground-breaking ideas will do more to change the world than anything that political decision makers in Sacramento and Washington could muster.
"You clearly have a streak (of tech entrepreneurs) that doesn't believe in putting more money into a political system that is broken," said John Doherty, who was an aide to former Democratic Assembly Majority Leader Alberto Torrico. Now Doherty is vice president of state policy and politics and general counsel for TechNet, a bipartisan organization that represents tech companies in Sacramento and nationally.
And while Uber and Lyft expanded their political involvement when government regulations threatened their business model, Doherty said, "I wouldn't foresee a spike" in tech lobbying any time soon.
"It all comes back to the cultural thing," Doherty said. "Some of them just aren't into it."
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