Zagster Raises $3.5 Million to Take Bike-Sharing Across the U.S.

Public bike-sharing programs in North America have performed variably, with less than hoped-for ridership in Chicago, Denver, Chattanooga and Minneapolis, and technical glitches and disputes over where to place bike kiosks in New York.

One supplier of bikes and related technology to a public bike-sharing program in Toronto, Bixi, even went bankrupt.

But venture investors are betting $3.5 million on Zagster (formerly CityRyde), a Cambridge, Mass.-based startup that provides bike sharing as a service to private entities. The new investment brings the startup’s total funding to $6 million.

Investors in Zagster’s Series A included LaunchCapital, Fontinalis Partners, Clean Energy Venture Group, Launchpad Venture Group, Otter Consulting and several individual investors from the Boston area. The company is a graduate of the Techstars Boston accelerator.

Fontinalis Partners’ Chris Cheever cited research by consulting firm Roland Berger that estimates the global bike-sharing market will reach $6.3 billion by 2020. Mr. Cheever said he thinks that “growth potential is even more impressive” for Zagster, which is bringing the concept to private asset holders such as schools and corporations.

Zagster charges its clients about $100 to $150 per bike a month for bike-sharing programs on college and corporate campuses, or other commercial real estate. Clients offer Zagster’s bikes to their employees, customers, students or other constituents for various reasons.

Timothy Ericson, chief executive and co-founder of Zagster, said bike-shares help people to get around quickly without the hassle of parking a car, to stay healthy and active, and to avoid crowded shuttles or other transportation options.

The startup sources its bikes and other hardware from third-party providers, includingFuji Bikes, rather than manufacturing its own. Depending on a client’s specifications, the bikes are outfitted with smart locks, GPS and other Web-connected technology.

The company’s software is proprietary. It is used for “fleet management,” or the tracking of and reporting on the utilization of the bikes by a given organization. Companies can evaluate the returns on the investment in a bike-share program through Zagster’s reports.

Zagster also dispatches bicycle maintenance and repair specialists to fix any bikes that have an issue, whether it is a simple flat tire, rusting chain or something higher-tech. That can be a relief for companies that want to offer bike sharing but don’t have the engineering and maintenance staff to support a program like deeper-pocketed corporations might.

Launch Capital’s Bill McCullen said he expects Zagster to use its funding primarily on marketing, sales and customer support, and bringing bike sharing to a geographically diverse set of markets within the U.S. and Canada.

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