A little Zipcar history, as company files for initial public offering

In the parking lot, where the City of Cambridge donates a free spot to Zipcar, Griffith takes out his Zipcar membership card and holds it over a special reader installed under the car’s windshield. The car recognizes him as the person with the reservation, and the doors unlock automatically. The ignition key is inside, tethered to the dash so that you can’t accidentally take it with you at the end of your reservation. (Break-in artists beware: even if you got into a Zipcar, the engine wouldn’t start unless a reservation had been made and you’d swiped your membership card.)

Members love Zipcar because it’s easier to use than a traditional car rental service, and for short rentals, like a quick trip to Home Depot, it’s cheaper. (Renting from Zipcar can get expensive if you need the car for a weekend getaway.) Many of Zipcar’s members are students and young professionals who only need a car occasionally; others are urban couples who may own one car and occasionally need to use a second. Monthly membership fees start at $30, all of which can be applied to car usage.

“Our goal is to make using a Zipcar as easy as walking out to your driveway, getting in the car, and turning the key,” Griffith says. “If it’s not easy and hassle-free, people will join, but they’ll drift away after a few months.”

Griffith says the company now has about 7000 members sharing 240 cars spread across Boston, Washington, New York, and a small operation in Denver. While Zipcar started out with mostly Volkswagen Beetles and Honda Civics in its fleet, now members tool around in trendy Mini Coopers, electric-powered Toyota RAV4 sport utility vehicles, and even a Mazda Miata convertible.

Peak usage time is on weekends and weekday evenings, but Griffith says it’s rare for a member to try to reserve a car and not find one available. The company is trying to add cars in Beacon Hill and Back Bay, where usage is high, but parking spaces for the Zipcars are hard to come by. They’re also considering adding cars in Arlington, Roslindale, and East Boston, and are working with real estate developers to park Zipcars in new condo developments.

Late last year, when the company’s investors booted the old board of directors and began the CEO search, they put an additional $5 million into the company, on top of $1 million raised earlier. Griffith will have to do three things with the money. First is getting the company to profitability in its current markets. (Boston is already there, but New York and Washington aren’t.) Second is intelligently expanding to other markets. Finally, the board expects him to build a business around licensing Zipcar’s car reservation technology to customers who operate large fleets of vehicles.

“We want Scott [Griffith] to think not just about what cities we should go to next, but how can we leverage this technology that we have,” says Zipcar chairman Seelig, who is also entrepreneur-in-residence at Polaris Venture Partners. “We’ve filed some patents on it, and we’ve had interest in a number of government organizations and big companies for something like this that would help them more efficiently manage their fleets.”

The idea is that employees would reserve a company car on an internal Web site and use a card to check it out, just like Zipcar customers do. Managers would be able to review car usage and expenses. Zipcar is already in discussions with the Commonwealth of Massachusetts and the City of New York. Griffith believes that the Zipcar system could allow them to cut fleet costs by 10-15 percent, by scheduling and administering fewer cars more efficiently.

But can Zipcar simultaneously build a business around licensing its technology, while continuing to grow its urban car-sharing network?

It sure won’t be a Sunday drive. But already, Zipcar has done a lot with very little money and a small team of eighteen employees. And the corporate culture is incredibly…adaptive.

A story: last November, one of the company’s Volkswagen Jettas disappeared from Manhattan. A new member had checked it out, and simply didn’t return it. Zipcar discovered he’d used a stolen credit card to open his account. The cars aren’t equipped with a Lo-Jack recovery system, since theft hasn’t been a problem. But from Cambridge, the company’s engineers improvised a solution of their own.

First, VP of technology Roy Russell sent the car a signal that disabled the starter, so that no one could drive it. Then, he remotely reprogrammed the computer in the car so that it would tell the engineers which specific radio tower it was communicating with. Russell drove down to Long Island with another engineer, and, using a directional antenna tuned in to the car’s frequency, they zeroed in on it. The Jetta had been abandoned in a Long Island Rail Road parking lot.

Insurance would have covered the theft. But Russell says, “We just didn’t like being scammed.”

The Jetta is now back in the fleet.