With all the megaround funding deals for electric scooters that we’ve covered lately, it was inevitable that some sobering news would eventually follow suit.
Yesterday, The Information’s Cory Weinberg broke the news that Los Angeles-based Bird had laid off about 40 employees, or 4 to 5 percent of its full-time staff “in an effort to contain costs.” The company had an estimated 900 employees.
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After soaring to a $2 billion valuation last year, Bird has been locked in market-share-versus-profit battle with rival Lime, as our EIC Alex Wilhelm reported yesterday. The layoff news also comes days after The Information reported how Bird had shifted its growth strategy to focus on profitability rather than further expansion. It also pointed out that both Bird and Lime “have lost tens of millions of dollars in some months, and..met with Uber last fall to discuss the possibility of being acquired.”
As it appears that arch-rival Lime is continuing to press on with expansion, how it will similarly contain costs is unclear. Perhaps Lime thinks it can convert market share into fresh funding rounds.
Coincidentally, earlier this week I (Mary Ann) moderated a panel on mobility tech at SXSW and at least one of the VCs on the panel said his firm “had passed” on investing in Bird or Lime due to the “narrow profit margins.”
(A quick word on profit margins, and why they matter. If a company’s revenue has thin margins, it leaves less money after paying costs for the company to use on other things, like operating costs. And for a company like Bird, slim margins leave small change for buying and maintaining scooters, let alone paying for a tech company’s infrastructure. The inverse, notably, is true for software companies, which is why SaaS companies can sport 10x revenue multiples, as we’ve reported.)
So while we’re seeing more scooters than ever before, the VCs on the panel said they believed that scooter companies underestimated the costs of replacing damaged scooters and hiring people to retrieve them when they’d gone astray. (More here from TechCrunch on Bird’s evolution regarding scooters, and their amazingly fragile past.)
Whether or not Bird can overcome the sector’s challenges remains to be seen, but perhaps the unfortunate act of laying off some people will help it move toward a path to profitability – or at least to not losing as much money.
Illustration: Li-Anne Dias