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Episode 148 Guest Benjamin Birnbaum

Experience as a public transit executive influences how Benjamin Birnbaum of Keyframe Capital now makes investment decisions that shape what the future of mobility, electrification, and automation looks like.

Cohen: Josh Cohen

Birnbaum: Ben Birnbaum

F: Female Speaker

Cohen: Over the last decade, billions of dollars have been invested in transit technology, like ride-hailing, scooters, autonomy, and electrification.  So coming up next on The Movement podcast, we talk with Ben Birnbaum, who is not only investing capital, but also worked in public transit, to hear how he’s shaping the future of mobility.  Let’s go. 

F: The freedom of movement to access jobs, education, and social activities is a fundamental human right, but that freedom is not distributed equitably, undermining our ability to create vibrant and sustainable communities for all.  Welcome to The Movement, where we talk with the leaders who are reshaping their communities with brave decisions, inspired advocacy, and a stubborn unwillingness to accept the status quo, all in an effort to inspire the next generation of leaders.  Here’s your host, Josh Cohen.

Cohen: Our guest today is Ben Birnbaum, a partner at Keyframe Capital, an investment firm with a strong focus on transportation, energy, and fintech, and how disruption in those industries will impact the broader economy.  And I first met Ben a few years ago, when he was VP of strategy at MV Transportation, the largest privately owned transportation company in the U.S., serving over 250 municipal transit agencies and other clients.  Welcome to The Movement, Ben.

Birnbaum: Thanks for having me on, Josh.

Cohen: I’m glad we finally got to do this.  We’ve been trying to get this scheduled for a little while, so—

Birnbaum: Only took us two or three years.

Cohen: Yeah, you know, it’s taken us a little while.  It’s all right.  It’s all right.  You’re a busy guy.  But I was really excited to have you on here because, you know, we’ve had a couple of folks that have had kind of experience or work on the investment side or, you know, coming from the capital side, but not that many.  So I’d love to maybe chat with you a little bit about that, because I think your experience, having worked for MV, I’m sure—I’m guessing—maybe you’ll share with me, maybe not, but I’m guessing has impacted how you’re looking at this space.  So I’d love to maybe, you know, share your connection, maybe a little bit of your background, your mobility story and connection there, and then how that’s impacting how you decide where to invest capital at Keyframe.

Birnbaum: Yeah, for sure.  It actually is—not only informs where we invest but also how we invest and how we are set up and structured as a firm.  Many firms, especially ones who focus on—I’ll answer your question, you know, sort of fully.  But many firms who are focused on early-stage companies and growth companies, typically call themselves, like, venture capital firms, a lot informed by my experiences at MV and my team’s experiences at similar businesses in spaces like, you know, ground transportation and airline travel and energy and stuff like that, we kind of recognize that there was a gap in firms that could invest in both the sort of corporate capital needs as well as, you know, the assets that, you know, businesses that want to be successful in these markets often need to get off the ground.

If you think of MV, you know, if you were going to start a new MV today, you couldn’t so easily do that without access to sites and vehicles and, you know, a lot of expensive things that, you know, venture capital dollars don’t really allow for.

Cohen: Certainly not the margins that they normally play at.

Birnbaum: Yeah, exactly, and for good reason, for good reason.  But it also squanders innovation from asset-intensive or lower-margin business models.  And so we set ourselves up to be able to invest in, you know, equity, debt, and assets at different stages of companies so that we could be a partner to folks who are trying to innovate in the markets that we focus on, and not try to—not have to force them into the same box that, you know, other folks who are more constrained have to force them into.  So that actually, you know—it’s not all that come—you know, I have more my partners to thank for that, like, you know, ingenuity around our structure.

But it is certainly, like, very much informed by the kind of experience that I had at MV and, you know, working in the part of the transportation space that was responsible for bearing that brunt for the, you know, entire market.  Our role at MV was, you know, go through that thousand-page RFP for the city and, you know, bring all of the labor, all of the vehicles, procure the technology from you, you know, and maintenance and facilities, and bring it all together, and sign a 10- to 30-year contract with the city and, you know, be the operator.  And so innovation in that layer is just different than innovation in, like, a software layer.

So, anyways, my—that was what MV was, and my role there was to, you know, go find, you know, the next thing.

Cohen: Yeah.

Birnbaum: And when I joined, it was sort of Uber was a big existential threat to our paratransit business.  Go find the next thing, whether it was Uber or micromobility or EVs or autonomous vehicles, and figure out how to bring them into that contract layer in—you know, because that’s how, as you know super well and anyone who’s crazy enough to listen to your podcast probably knows pretty well—

Cohen: [LAUGHS]

Birnbaum: —that’s how money gets into transportation, is from cities, through those contracts to everyone else.

Cohen: Yeah.

Birnbaum: And so I got this seat to where I got to, you know, be the buyer of sorts for a variety of different kinds of new transportation technologies and figure out how they plug into the rest of the ecosystem, as we were sort of like—that contract we had was sort of like the balanced ecosystem, you know, manager from like an economic perspective.

Cohen: Yeah.

Birnbaum: So that—you know, that taught me a lot.  It taught me sort of the fundamental thing about innovating within the heavy assets that I was describing, but it also just gave me perspective on, like, what makes money and what doesn’t make money in transportation, so, yeah.

Cohen: It’s funny you mention that, though, because I was thinking about that as you were talking, that, you know, how you’re really focusing on these kind of—the innovation and the asset-heavy type of world.  Because transportation has traditionally been pretty asset-heavy.  Right?  I mean, if you want to do something in transportation, you have to have vehicles, you have to have infrastructure and so forth.  And it really wasn’t until Uber and Lyft kind of—and again, maybe you might have some different thoughts on this, but it seems like Uber and Lyft kind of really created this, like, asset-light software kind of layer level.  But you’re kind of going back to the roots, right?  I mean, you’re going back to like, how can we bring some innovation to some of this stuff that is kind of the traditional way we’ve delivered transportation perhaps?

Birnbaum: Did they, though?  You know, did they?

Cohen: Yeah, that’s a fair question.

Birnbaum: Did they create an asset-light business?  Or, like, you know, I talked to a business today that owns 6,000 Ubers in New York City alone, you know, and so I’m not so sure that, like—unless, until people can fly— 

Cohen: Yeah.

Birnbaum: Like, maybe you can, like, do some abstraction of the software from the assets, but, you know, it’s—they—it will always find balance and, like, come together.

Cohen: But that’s not on Uber’s balance sheet, though, right?

Birnbaum: It’s not on Uber’s balance sheet, but, you know, the total profits or losses of the space is sort of zero-sum.

Cohen: Right.

Birnbaum: And, you know, Uber still makes lots of losses, while people out there lease vehicles to drivers—

Cohen: Right.

Birnbaum: —to make it all work.  And so, yeah, like Uber is asset-light, but does it work yet?  You know, I don’t know.

Cohen: Well, no, that’s a fair point.  Right?  So, to put a finer point on that, yes, Uber itself may be asset-light, but somebody still has to get in a vehicle, somebody still has to have a vehicle in order to transport one person or a group of people from point A to point B.  Right?  And that’s where that—that’s where the heavy part of it comes in, right?

Birnbaum: Yeah.  And I think just having an appreciation for sort of the full cost of things came from working in public transit.  And a big element of that was the fact that, like, the gold-standard public transit systems—I’m sure you know this—are like—you probably know the real stat—are like 15, 20% covered by fare revenue.

Cohen: Yeah, except for just a hand—I mean, maybe there’s a couple more.  I think New York City does better than most; it’s like 50%.  But—

Birnbaum: Yeah, like—

Cohen: —overseas, I think they do even better, but you’re right, I mean, most of the ones—

Birnbaum: Those are really low.

Cohen: —it’s 20%.

Birnbaum: Yeah, they’re really low.  And so to just, you know—to both have that appreciation of the full cost of things, as well as know what you’re really competing against, which is like 80% subsidized, you know, I’ve always been skeptical when I look at, you know, the cost of an Uber or the cost of a Lime ride and needing to—they need to be comparable with or beat transit or some multiple of transit versus, you know, their value, you know, to be able to be sustainable business models.  And who’s subsidizing them 80%?  You know?  No one.  So, it’s—I think a lot of the folks who—I don’t think many people who are early-stage company investors have that kind of public transit experience.

Cohen: Yeah.

Birnbaum: So I don’t know that they have that same amount of skepticism, obviously, given how much capital those businesses have raised.  But also, clearly, I’d have been very wrong about some of them, so—

Cohen: Yeah.  Well, yeah, but, I mean, your point is raised.  I mean, it’s still pretty early in the story for all those.  I mean, yes, there have been some—they’ve gone public.  But again, you know, these haven’t been generational companies yet that have made it through multiple cycles and all of that.  Right?

Birnbaum: Yes.  And almost none of them have made, you know, any money yet.

Cohen: Yeah.  Yeah, that’s—it’s a tough business.  So, I mean, from that standpoint, do y’all think about how can we reduce cost?  Like, so if you accept that, like, there’s this fundamental, like, you know, cost of moving people, is one strategy to say, “How can we reduce that cost as much as possible to maybe try to find some value there?”  Is that a strategy?

Birnbaum: That’s a good question.  I’m thinking about, like, our existing transportation investments, which are companies like HopSkipDrive and May Mobility.  I think either, you know, if you’re going to change the operating model, then I think it’s got to be about making it more efficient, because you need to fit in with the way that that money is distributed, in whatever segment of transit or transportation that you’re in.

And so I think if you’re—you know, I—there are certain segments where improving the experience matters as well, like we have an investment in a niche airline, but that’s like totally different.

Cohen: Yeah.

Birnbaum: But like in transit, I think it’s about lowering cost.  Or, you know, if you—we don’t actually have any investments in this way, but like if you—I think there’s always innovation to be done in whatever the natural buying motion is of a space.  Like, an example of a company that I think did that well, TransLoc did that well, or like your competitor—

Cohen: Thank you.

Birnbaum: —like, Syncromatics and folks like that—

Cohen: Yeah.

Birnbaum: —who are just like, you know, there’s plenty of innovation to be done in just, like, core product that helped, you know, improve the overall way that the system works.  So, yeah, those—I think that’s a good way to characterize it. 

Cohen: Thinking of the work you’re doing, certainly, you know, technology and innovation is kind of a part of that, and that’s certainly a theme that we kind of talk about pretty regularly in the podcast, is just trying to tease out, you know, as there’s been a lot of investments in technology, you know, throughout the industry over the course of the last, you know—I mean, forever; I mean, there’ve just been different kinds of investments and different kinds of innovation.

Birnbaum: Sure.

Cohen: I’m curious how you think about maybe the barrier to getting to mobility that works for everyone.  And I’m curious, like is it technology that, you know, that is getting in the way of giving us mobility that everyone can access?  Is it leadership and some of those policy decisions that is going to impact technology adoption?  Like, what do you think is getting in the way there? 

Birnbaum: Yeah, what do you—how do you define “everyone”?  Like, what’s your, like—what’s perfect transit to you?

Cohen: The way I think about it is kind of as mobility as a fundamental human right to access jobs, education, healthcare, community, so forth.  And, you know, the then question that is a reasonable follow-up is, like, what’s enough, right?  And, you know, this may be a harder question to answer, but I would say that, like, you know it when you have it.  Right?  I’m guessing where you live, you have pretty good mobility.  You’re in New York City, I believe.  You know, I’m guessing you have pretty good mobility where you live, and there’s a lot of communities that don’t have that same level of access.  Now, they’re not as dense, but they still need to move.

The current way that our system has defaulted, at least here in November 2021, is car-centric in most locations.  So there’s some folks that just don’t have access.  So, that’s really the way I think about it.

Birnbaum: Yeah, got it.  So like access?

Cohen: Yeah.  Yeah, fundamental access.  Yeah.

Birnbaum: Because, you know, full equity is really difficult because there’s so many aspects of it.  You know, so if we’re thinking about—like, I think that the technology is almost mature enough to give people full access to transit.  I’m curious, your view on this, too.  Maybe you share this all the time.  But I don’t know if full access is like that practical, because of what it costs.  Like, I just don’t know if we’ll ever have technology that would be low cost enough that it would make transit accessible and equitable in all different types of communities.  Even in like the lowest-cost-version of transit that I could think of, which would be like fully optimized, really low cost, shared autonomous vehicles on, like, deviated, fixed routes that had also the ability to, like, maybe fly short distances.

Cohen: It’s like The Jetsons.

Birnbaum: Yeah.  [LAUGHS] Yeah.  Like, I guess I just put forward a technology future that doesn’t exist, and, you know, so—

Cohen: Yeah.  Well, I think that’s fair.  I mean, I guess part of what I’m trying to get at there is you’re investing in technology companies, right?

Birnbaum: Yeah.

Cohen: And so I guess what I’m trying to figure out, is the barrier that the technology isn’t there yet, or is the barrier that even if the technology was here, we don’t have the political leadership that is going to allow that technology to even do what it needs to do?

Birnbaum: Yeah.  In that way of asking the question, like, I don’t think we’re optimizing what we have today.  You know this well, but we don’t have optimized bus routes, for starters, and things like that, because of how complicated it is to, you know, to even have, at a stop level, changes made to transit systems, even if they’re for the benefit of optimizing access to transit.  You know, if you were moving where the bus stop was or making a system to not have stops, there’s a lot of politics that happen even at a local level.  So I think that’s a people issue.

I do think that, like—I’m not sure that I think that that’s wrong.  Like, I think that the local political process, like, you know, when done correctly, with good intentions, has a lot of merit because access to transportation is not the only thing that matters, and, you know, civilizations are complicated to manage.  So I think everybody should have a seat at the table to bring forward all the things that matter and have a discourse about them, but that’s a people issue as well.  So—

Cohen: Yeah.

Birnbaum: I sort of expect that technology will always be a couple of steps ahead, and we’ll always be a little frustrated by the pace of its adoption because it has to go through, you know, the same level of scrutiny that any other kind of local development has to go through.

Cohen: I mean, it’s interesting to me.  I mean, I think about something like—you know, and this is like not fancy technology by any stretch of the imagination, but something as simple as open-gangway trains.  Right?  New York City doesn’t have open-gangway trains.  So that if you get on the car and it’s full and the next one’s empty, you got to get out at the next stop and go around to the next one; like, you can’t actually just walk through the whole way.  It’s like dramatically inefficient as far as like, you know, instead of one huge car, you have 15 separate cars.  Right?

Birnbaum: Yeah.

Cohen: You know, and that’s like one of these things, there’s like—you know, I’m sure there’s some very good reason why New York City doesn’t have open-gangway, you know, trains.  But, you know, you go to any other major city around the world, they have open-gangway trains.  Like, it’s kind of wild.  Right?  Like—

Birnbaum: Do you know why?

Cohen: I don’t.  I bet it has something to do with the gauges of the—some gauges somewhere.  [LAUGHS]

Birnbaum: Well, yeah, there’s probably a—there’s either probably an obscure law that hasn’t been changed or like a very sad story about it that, you know, you’d be like, “Ooh, I shouldn’t have brought that example up.” 

Cohen: Yeah.  Well, I think they’re doing a pilot, I think, on a couple lines.  I mean, you know, and obviously there’s the old IRT, and, you know, there’s different lines.  I’m sure there’s different things.  But I’m just—I’m struck by that whenever I travel.  And I’m like, “Oh, yeah, like, New York City, love the subway, but, man, that’s like—that’s something that could have been improved years ago.”  But—

Birnbaum: Yeah.  [INDISCERIBLE] is strong.  You know, I take it every day.  Love/hate, I think—

Cohen: Yeah, no, I think that’s fair.  You know, I had Stacey Matlen on a couple weeks ago, who works with the Transit Tech Lab, and, I mean, she’s trying to identify ways to, you know, help especially smaller companies, you know, solve some of these problems that, you know, might be hard to do with the MTA just being the behemoth that it is.

Birnbaum: Yeah.

Cohen: And I think that’s exactly the type of thing where maybe there’s some innovation that can be applied there that can help in certain ways, and she mentioned a couple examples there in her episode.  But I don’t know.  I think this is one of those things where, you know, I think you’re right that people are always going to be holding stuff back for whatever reasons, whether it’s political, whether it’s more nefarious, whether it’s lack of capacity, whatever.  That does strike me that when technology is done right, there are some really great things that can happen when you apply that to mobility.  And I think, to me, that’s the hope.  Right?  I mean, I think what you want to make sure is that, your know, it’s done with good intentions, and I think that where we’re just figuring out the right guardrails to work with the private sector, from the public sector side, to kind of help—how are we achieving these goals that we have set forth in our communities?

Birnbaum: Yeah, for sure.  I mean, transportation businesses and transit agencies are just very difficult to run and operate on a daily basis.  And so, you know, finding the extra time and resources to be able to fold in innovation projects, I understand why they come as lower priorities to meeting service levels and safety and stuff like that; they just have to.

Cohen: Yeah, no, I think about that all the time.  It’s—you know, and I distinctly remember a conversation.  I don’t know if I’ve ever shared this on the air, but I had a conversation with the former city manager of a major city, and we were talking about, you know, some micro-transit-type service.  And I distinctly remember what he said, is he said, “You know, we still are focused on getting the basics right.  I don’t want to be chasing something shiny here, because we still have to get the basics right.”  And that—I think you’re right; I mean, that, to me, is a struggle that any transit agency CEO or public official is probably having to reckon with at any given moment, especially ones that—even the ones that are investing in innovation.

Birnbaum: Yeah.  I mean, hiring drivers, for example.  There’s a national driver shortage.  It’s like, “Okay, don’t think we can really focus on anything else until we solve that part.”

Cohen: That’s a tough one.  I think everyone’s dealing with that.  Is there an area that we’re sleeping on?  Is there an area that we’re not thinking enough about yet that you think is coming that is going to be pretty interesting coming forward?

Birnbaum: I’ve got two.  My first is, fleets of vehicles are going to adopt electric vehicles at a ridiculously faster rate than consumer passenger vehicles.  And, you know, I think we’re at a place where, you know, it’s been sort of early days and steady penetration for consumer vehicles.  And I expect that to sort of stay steady.  Maybe it picks up a bunch because there’s, like, over a hundred EV models coming to market in the next couple years and there hasn’t been a lot of availability, especially at, like, affordable price points for most people.  But we’re about to pass the point of, like, TCO, like total cost of ownership, parity for fleets.  And when we do, we’re just going to see fleets of all kinds, you know, rapidly changing over as soon as it makes economic sense to.  And our view is that it’s just going to, you know, flood the, like, trans—it’s going to bring transportation and energy together in a really unique way and flood the market with a bunch of really different kinds of opportunities because it changes the operating model of many businesses as they shift from fuel-based and a certain kind of maintenance to electricity-based and another.  

Might change, you know, the locations that different kinds of fleets operate out of.  It changes a lot of the skills needed.  It, you know, replaces certain kinds of fuel companies with other kinds of fuel companies.  So that’s one I think is, like, transformative to transportation as a market, but also brings its relationship to energy, like completely redefines it.

Cohen: You’re talking about public works.  You’re talking about transit.  You’re talking about UPS.  I mean, you’re talking about all that?

Birnbaum: Yeah, like every vehicle class, you know, one through eight, and honestly, some vehicles that don’t even have classes, like bulldozers, are—

Cohen: Whoa, electric bulldozers.

Birnbaum: —electrifying.  Yeah.  Mining equipment, farm tractors.  We see all sorts of vehicles just passing this point of operating price parity.  It’s changing the way that a lot of these businesses work, and that’s pretty cool.  People probably aren’t sleeping on that, but the part of it that I think people are sleeping on is the speed of fleet adoption versus consumer adoption.  It’s going to be fast because it just—you do the math, and the math works.  And, you know, I talked to people that a year ago were like, “I don’t need to—I don’t really care about EVs.”  And I mentioned a company earlier that owns a bunch of Ubers, and a year ago they’re like, “Nah, you know, that’s a thing in the future.”  Today, they’re like, “As soon as possible, as many EVs as possible.” 

The other I think is, I think, we’re going to see a giant change in the way that school transportation works, on two vectors.  I think, not that early to the game on this, because two giant infrastructure funds just bought, like, two of the biggest school transportation companies out there; EQT bought FirstGroup, who owns First Student.  And this firm called Terramont bought Switzer-Carty.  But school buses are like 40-50% occupied on average.

Cohen: Right.

Birnbaum: And I think that there’s a—when it comes to opportunities to use, like, smart routing—like we’re investors in HopSkipDrive—like, integrating rideshare in and reducing the number of buses is a thing that I think we’ll see happen nationally over the next couple years.  And then, I think we’ll also see people start to use school buses as they electrify, as like giant grid resources, as batteries, and that’s why I think these infrastructure funds have bought these school bus companies, to like take them electric and then, you know, run their energy services business models.  No one has told me that, but, you know, people are putting other batteries out there, just sitting on the grid and making money off of them.  And, you know, as you might imagine, it takes a pretty big battery to get a school bus cranking.  So—

Cohen: And I imagine that that will take a little time for any shift there.  Right?  I mean, you mentioned those two new companies and so forth, or two new owners of those companies, but—

Birnbaum: Yeah, sure.

Cohen: I mean, that will take a little time, but maybe that’s kind of related to that first point, which is related to how these fleets transition and how quickly that happens will impact that.

Birnbaum: Yeah.  I mean, I think it’s going to happen faster than people anticipate.  Like, the New Flyers, as well as variety of startups in the space, like, have real production to deliver buses.  And there have been some, like, sizeable public procurements.  Obviously, school buses have longish useful lives, but folks are just out there getting quotes and continuously running that math, and as soon as it looks good, they’re clicking “order” to swap out the entire fleet.  And uniquely in school bus, if you have like 200 buses sitting there all day, and you’re having them participate in, like, battery storage, business model, on the grid, you have additional motivation to, you know, have a bunch of them.

And it makes your conversion math look even better.  That’s an easy place for subsidy to hit from all angles because utilities are subsidizing renewable energy resources on the energy side, and, you know, transportation agencies are subsidizing EVs on that side.  I think that that’s a change we’ll start to see, like, honestly, in 2022, and by 2025, like real penetration.  I mean, there’s been—there’s real transit bus penetration in—for EVs in the U.S.  And it’s only constrained by, you know, how fast Proterra has been able to scale up.

Cohen: Right.

Birnbaum: If you look at, like, China, where they’ve scaled EV bus capacity at like the rate that China scales thing, it’s like, you know, more than double where we are.

Cohen: Yeah, they’ve got some insane number of electric buses.

Birnbaum: Yeah, it’s—I love the promotional videos of the Shenzhen bus station with all the EVs.

Cohen: Yeah.  I’m curious.  I mean, I guess it’ll be interesting to see, like, the quintessential, you know—I don’t know if it’s diesel, but whatever that kind of smoky school bus that we’ve all had blow in our face when we were kids, and still do when we walk around our neighborhoods.  You know, like that could be gone in the next several years, you know.

Birnbaum: Yeah.  One would hope.

Cohen: Yeah.

Birnbaum: One would hope.  I do know that school buses tend to make their way over their life from around the country to the Southeast. 

Cohen: Huh.

Birnbaum: I don’t know if you knew that.

Cohen: No.

Birnbaum: Yeah, that’s the—

Cohen: Less stringent air quality?

Birnbaum: Exactly.  Less stringent, like, operating conditions.  And so the life of a school bus, you know, typically goes from, like, the Northwest or the Northeast, maybe spends some time in the Southwest, and then ends in the Southeast.  And—

Cohen: Great.  Just great.

Birnbaum: Yeah, exactly.  So, you know where I’m going there, but—

Cohen: Yeah, well.  Yeah, I’m not moving anywhere, so I guess I got to work on helping figure out different ways to get folks to and from school there.

Birnbaum: Yeah, you can pull out the stats on the—I’m pretty sure the DOT, you know, publishes, you know, all the registered, you know, fleet vehicles and stuff like that.  So you can use that lead of information to get on your own soapbox about that or do your own investigative journalism.

Cohen: That’s right, that’s right.  Well, Ben, thank you so much for taking us inside a little bit of the way that you’re working at Keyframe Capital to invest in some of these technology and mobility companies that are going to be changing what’s on our streets and how we move around and maybe how some of our kids are moving around here in the next—you know, starting in 2022 and beyond, pretty quickly, especially as it relates to some of the energy and electrification.  So, thank you so much for giving us an introduction to that, and keep up the great work.

Birnbaum: Yeah.  Cool, man.  Thank you for having me.

F: Thanks for listening.  If you like what you hear, head to Apple Podcasts and subscribe, rate, and review this podcast.  You can find out more at or follow Josh Cohen on Twitter at @CohenJP.