SF wants startups to behave, so why did it reject the...

Remember back in the spring of 2018 when three companies dumped electric scooters around San Francisco without city permission, and riders illegally zipped along sidewalks, pedestrians be damned?

City Attorney Dennis Herrera quickly issued a cease-and-desist letter to e-scooter operators Lime, Bird and Spin and said, “San Francisco has had enough of the mantra ‘move fast and break things.’”

In a large warehouse in the Bayview, one scooter company, Skip, has been working to change the rogue image of the upstart industry. In fact, you could say it was moving slowly and trying to put things back together.

After the scooter debacle, the city picked two companies to operate during a one-year trial beginning in October 2018. Skip — dubbed by Wired magazine “the nice guy of the scooter industry” — was tapped along with Scoot. During the pilot, complaints to the San Francisco Municipal Transportation Agency of improperly parked scooters and bad scooter behavior dropped significantly.

Skip hired workers rather than using independent contractors and gave them the same benefits as their CEO. At its warehouse, 40 technicians worked to repair broken scooters rather than junking them in an effort to reduce waste. It developed a locking system so scooters could be safely parked at bike racks and created scooter lights that are far brighter and easier to see than other models.

It encouraged riders to wear helmets and gave free ones to its regular customers. On its website, it told its riders to yield to pedestrians, park properly, not allow another rider onboard, stay off sidewalks, and never drink and ride.

So when 11 companies applied for permits to operate under the city’s new, permanent scooter program, Skip’s CEO, Sanjay Dastoor, figured his company was in for a smooth, predictable ride. But City Hall seems to want to make operating a business in the city about as bumpy as possible.

On Sept. 25, those 40 technicians in the Skip warehouse learned through a media report that Skip could not continue operating in San Francisco after Oct. 15.

“Pandemonium broke out in the warehouse — everybody was panicked,” recalled Sam Mollica, who was the lead technician for Skip’s repair operation. She had a Google alert for Skip set up on her phone, and the news popped up. “It was very unusual to be finding out our jobs were now in question through the press.”

Instead, the Municipal Transportation Agency chose Scoot (acquired by Bird), Jump (owned by Uber), Spin (owned by Ford) and Lime. Notice some overlap with the companies that originally dumped scooters all over the city without permission? Thought so. Each company can now operate 600 to 1,000 scooters apiece.

But why did the agency skip Skip? Apparently over a formatting issue.

The agency’s lengthy application process judged each company on a scale of 1 (least robust — their words, not mine) to 4 (most robust). Each company had to have an average of 2.0 or higher in each section or it would be disqualified.

Skip was disqualified because it scored a 1 in the safety category. That sounds shocking and worthy of disqualification. But Dastoor maintains — and a reading of the company’s application shows — a lot of information was included about the safety of Skip scooters. It’s just that the company did not format that section the way the transit agency wanted.

The agency’s entire reasoning for the disqualification was, “Applicant did not provide a response for section A3 in the application.”

Done. End of story. Buh-bye Skip.

“If the information does not have the letter A and the number 3 and then the paragraph below it, then it’s not there and you’re disqualified,” Dastoor explained. “If you read through our application, you won’t see the letter A and the number 3 next to each other, and that was the grounds.”

That can’t be right. Right?

Erica Kato, a spokeswoman for the transit agency, did not respond specifically to that question, but referred to the scoring documents showing that, yes, the issue was the lack of paragraph A3.

“Skip had a one-year permit with no guaranteed right for a second permit,” she wrote in an email, adding a hearing regarding Skip’s appeal of the decision has been scheduled for Jan. 23.

“We are in the midst of an ongoing, active appeal process that will be heard by a neutral hearing officer,” she said.

Not-so-funny story on that, too. Skip asked the Municipal Transportation Agency for the right to continue operating in the city during the appeal process, but was told in emails that the SFMTA didn’t have the authority to extend Skip’s permit. Even though it is the agency that issues the permits and runs the program. If it doesn’t have the authority, who does?

In contrast, Washington, D.C., announced the winners of its 2020 permit program for e-scooters last week. Skip ranked the highest of 12 applicants, scoring particularly well on sustainability, labor, equitable access, innovation and, yes, safety. All the categories San Francisco says it cares so much about.

Jump, Lyft and Spin also made the cut, while Lime and Bird did not.

To be fair, it hasn’t been an entirely smooth road for Skip in San Francisco. The company made the news for a scooter catching fire in its Bayview warehouse in December and for the battery pack on a parked scooter in Washington, D.C., bursting into flames a few months later. Strangely, neither was cited by the agency in its low safety score, and the agency chose Lime and gave it a good safety rating despite that company having its own issues with battery fires.

“We received high safety scores in D.C. after two battery incidents there, and all operators have had battery incidents whether publicized or not,” Dastoor said.

The decision has, of course, been a big blow to Skip. Under the federal act governing plant closings and mass layoffs, it had to give its employees 60 days notice before terminating them. Companies using independent contractors wouldn’t have had to do that.

Because the company had to keep its scooters operational through Oct. 15, many employees are out of jobs as of this weekend, just before Christmas.

Dastoor said the company has tried to help its employees find jobs — even referring them to competitors that won the right to operate in San Francisco. That means if Skip wins its appeal, it’ll have to try to lure them back or hire a whole new staff.

In another blow, Skip had signed a three-year lease costing $35,000 a month for the Bayview warehouse and has subleased it to Lime.

“That investment we made is now benefiting one of our competitors,” Dastoor said.

Mollica has spoken during public comment at agency meetings about how it was hard to find a job as a transgender woman and how working at Skip has allowed her to receive full health benefits and thrive in her profession. Another technician at the company said the job helped pull him out of homelessness, Dastoor said.

This kind of community care seems like what Supervisor Norman Yee was pushing when he created the Office of Emerging Technology, due to launch next month.

“A net public good should be a priority of all new technologies that companies want to test on city residents,” according to his office.

Kim-Mai Cutler is a partner at the venture capital firm Initialized Capital, which has invested in Skip. She said the firm advised Skip to “do the right thing” and not disrespect the city like other companies had done, but it didn’t pay off.

“If there is a genuine interest in having a more collaborative, respectful relationship with companies, the city should think about what types of behavior it wants to reward and what types of behavior it doesn’t,” she said. “There just aren’t very coherent messages coming out of the city about how to work with it.”

Shortly before turning over the keys to Lime, Mollica and Dastoor gave me a tour of the warehouse where there wasn’t much to see because all the scooters, parts and technicians were gone. As they locked up for the last time, they were both downcast.

“We made a lot of investments in this city with the long term in mind, but this process has made it very clear why some companies choose not to do that,” Dastoor said.

The lesson he learned about doing business in San Francisco?

“Don’t invest in the long term,” he said. “Optimize for short-term gain.”

Sadly we have enough of that attitude in San Francisco already.

San Francisco Chronicle columnist Heather Knight appears Sundays and Tuesdays. Email: hknight@sfchronicle.com Twitter: @hknightsf