Photos courtesy of Yard Club
A recent one-month rental of a Caterpiller D9 Dozer saved the renter $8,500 versus a traditional rental, according to Yard Club.

A San Francisco start-up hopes to save U.S. contractors billions of dollars in equipment rental fees and lost revenue with the rollout of a new online equipment-rental market model.

Incubated in Silicon Valley, aims to expand the service to Southern California, the East Coast and cities throughout the U.S. in the next six months.

"We are hiring like crazy," says company founder Colin Evran.

The online rental concept allows contractors to lend idle equipment to other area contractors at 30% to 40% cheaper than traditional equipment-rental companies, according to club members.

Yard Club is based on the same peer-to-peer social media model that has revolutionized the travel industry and other sectors. For example, Airbnb, founded in 2008, currently lists more than 600,000 private apartments and houses that are available to rent to more than 11 million users.

Since its launch in 2013, Yard Club has attracted the attention of major tech-industry investors. Silicon Valley-based venture capital firm Andreessen Horowitz, a big investor in Airbnb, and former eBay executive Michael Dearing led the initial seed round of capital investment for Yard Club in July.

A graduate of Stanford University's MBA program, Evran was inspired by his own family's 40-year construction legacy.

"It's a tough business [in which] the average operating margin is about 3%," Evran says. "If you choose to own your own equipment, you have to make big up-front investments with little certainty on whether you are going to win work once a month. On the flip side, renting equipment can be pretty expensive."

To test the concept, Evran initially funded the start-up out of his own pocket and brokered deals over the phone between a pilot group of about five contractors in the Bay Area.

"We took that very lean way of testing the idea, got a tremendous amount of feedback and started building the product and service around that," Evran says.

Since then, the club has grown to include more than 20 contractors. Prescreened members rent and lend equipment via a private web portal, where dispatchers browse through photos and descriptions of available equipment and submit orders. Confirmations come via text or email.

"I thought it was a great idea, and we use them as often as possible," says Mike Haley, resource manager with Oakland, Calif.-based heavy-civil contractor McGuire & Hester. "You rent from trusted, reputable contractors that you know within the area that have quality equipment. They are getting utilization on their equipment, and we are getting a better price than from rental companies. It's really a win-win situation."

Some members were skeptical at first. "I didn't think contractors were going to want to see other contractor's equipment on their jobsites," says Mike McElroy, principal of San Jose-based FMG Grinding. To solve this, on each piece of machinery, Yard Club affixes a magnetic decal over the owner's logo.

Fears that crews from competing contractors wouldn't properly care for the equipment were quickly alleviated by the club's vetting process. "They aren't just renting to anybody," says Sean Holifield, operations manager with Silverado Contractors, Oakland. "I haven't heard stories of anything going bad, and it's because they are renting out reputable people's equipment to other reputable firms."

Yard Club handles all the paperwork: verifying insurance coverage, providing the master rental agreement and collecting and depositing payments. High-liability coverage requirements are enforced to mitigate risk. Reduced sales staff and no physical branches or storage yards reduces overhead, which is passed on to renters and lenders equally after Yard Club takes its cut of each rental.

On a recent one-month rental, the owner earned $14,000 on a Caterpillar D9 Dozer that would have otherwise sat idle in his yard, while the renter saved $8,500 versus a rental company, Evran says.

Renters are required to check fluids and ensure the equipment is well maintained and covered. Major maintenance issues are handled by the equipment owner. "They have been extremely responsive so far, just as they would be if the equipment was out to one of their own jobsites," Evran says.

While renting a compactor from McGuire & Hester, Holifield says he noticed the cutting edge was worn out. Once alerted, the contractor fixed it, "no questions asked. If I complained about that to [a traditional rental company], it would take an arm and a leg to get them to come out and fix the blade," he adds.

Product types range from small backhoes to large excavators. Yard Club has set its sights on including, eventually, traffic- control equipment, concrete forms, water trucks, and mining and farm equipment.