VCs have wasted billions on scooter startups. The markets think they’re worth a pittance

Almost exactly five years ago, scooters arrived. That’s when Bird, the first unicorn in this once booming startup sector, launched its first scooter-sharing service.

The company, founded by former Lyft and Uber executive Travis VanderZanden, marketed itself as a solution for last-mile transportation. In dense places like campuses and city centers, those who want to can just click on an app and happily cruise to their destination.

Early adopters saw scooters as a fast, fun, and economical way to get around. Non-adopters saw them as a quick way to end up in the ER. Motorists mostly wanted to get off the road.

Whatever you thought of scooters, by the end of 2019 their ubiquitous urban presence seemed like a done deal. By then, VCs had poured more than $2 billion into so-called micromobility startups around the world, most of which were based wholly or partially on electric scooters.

Fast forward a few years, and it’s obvious that bet didn’t go particularly well, with Bird holding a penny stock, depressing broader scooter company valuations for the ride. While the scooters are still around, expectations of solid returns on space investments are not.

State-of-the-art scooter

How did it happen? We’ll start with the rise times. In total, more than $5 billion in venture capital has been invested in various startups engaged in scooter rental, charging, and manufacturing over the past five years or so. For reference, we list 34 of the most funded companies:

There were European scooter newbies, Asian entrants and two American market leaders – Bird and Lime – vying for dominance in domestic markets. Scooter manufacturers have also grown, as well as charging, service and infrastructure providers.

At some point we hit the “scooter peak”. Townspeople of the time remember it as a time when sidewalks were regularly blocked by hastily parked two-wheeled tripping hazards of various brands. Their popularity, at least in my neighborhood, seemed to peak just before the pandemic began. After that, many of us had nowhere to go beyond masked trips to the grocery store.

Of course, that was not the fault of the scooter manufacturers. But it made predictions unpredictable. Had the scooter peak already arrived, or was a COVID-induced slowdown only temporary?

There was room for tempered optimism. In late 2020, in the depths of the pandemic, Lime Chief Financial Officer Andrea Ellis spoke with Crunchbase News about why “single-passenger open-air transportation” (i.e. scooters and e-bikes) seemed particularly desirable. And in fact, they were doing quite well among that dwindling percentage of humans who had a place to go.

Scooter meets SPAC

Electric scooters were still hot enough last year that when the SPAC boom hit, voracious acquirers of blank checks turned to space for potential targets. Bird announced in May 2021 that it would go public through a merger with a SPAC, Switchback II, at an initial valuation of around $2.3 billion.

In truth, Bird’s finances weren’t good at the time. Its 2020 revenue was down more than 40% year-over-year to $79 million. The net loss exceeded $208 million.

Still, Bird projected revenue to reach more than $400 million by 2022. And even that figure would represent only a tiny slice of an estimated $800 billion global market for micromobility services.

Like virtually all VC-funded SPAC deals, it did poorly. Bird fell immediately after completing its merger in November. So far this year, the price has been steadily falling, with shares recently trading less than 50 cents each.

These are extremely bad numbers, even with terribly performing SPAC standards. For perspective, Bird’s recent public market cap was around $135 million. At that level, she needs to see her market capitalization grow a little over 20x, or 2,000%, just to break even with the $2.9 billion valuation she would have achieved in her series. D 2019.

It’s not just Bird that public markets don’t like. Helbiz, another scooter and bike rental operator that went public via SPAC last year, has also been a strong performer, with shares recently hovering around the 50-cent level, down about 95% from at their fall peak.

But as valuations in its sector plummet, Bird continues to rise. The company reported first-quarter revenue of $38 million, up about 46% year-over-year. In addition to rentals, it also sells branded scooters and bicycles and runs a service for independent operators to create their own scooter networks.

Goodbye Millennial Lifestyle Grant

If there’s a lesson to be learned from Bird’s upward and downward trajectory, it seems more relevant to investors than to startup founders.

The scooter networks simply did what virtually all California unicorns of the time did: they grew rapidly while losing tons of money. And of course, the problem with being popular while losing money is that the more popular you become, the more money you lose.

However, the backers who financed these losses have not seen a market shift in which public investors no longer want to support high valuations for high-growth, high-loss companies. That leaves scooter networks and dozens of other once heavily subsidized business models to eschew growth first to focus on stemming losses and chasing profitability.

Today, a scooter rental ride hardly seems like a bargain. At regular rates, which include upfront and per-minute fees, a 20-minute ride would cost around $6. It’s more than just a bus or metro ride to places that offer these options.

Yet last-mile transport remains a tough niche to fill in urban networks, and scooters have a place in the mix. We are not done with them yet. Don’t expect the days – or valuations – of the high-end scooter era to return any time soon.

Illustration: Li-Anne Dias