May 29, 2018
Alex Wilhelm is the Editor in Chief of Crunchbase News, covering the intersection of startups and money.
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I suppose it was only a matter of time.

According to Bloomberg, Bird, a leading US electric scooter company, is raising $150 million with terms “that will value the company at $1 billion.” If the round closes at the reported thresholds, Bird will become the first scooter unicorn.

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On one hand, the pace at which American scooter companies like Bird and Lime have raised capital has been incredible. On the other, they are mostly following the path ground out by Chinese bikesharing companies, a group of companies that has produced prodigious exits and epic flameouts.

You could argue that scooters in America are merely the latest fad, chased after by venture capitalists whose investment decisions are more driven by FOMO than any particular thesis, which is probably fair to a degree. But you could also argue there is something magical about electric scooters in traffic-clogged urban environments.

I could honestly reason it either way. But while investors are happily betting LP money on the sector, they are running the experiment for us. We’ll find out if it the bets make sense as we enjoy subsidized rides. Either way, you and I win.

However, not everything is chance. We can tell from publicly-released metrics that the world of scooter sharing in the United States isn’t a big business, at least yet. As such, we can tell that investors aren’t investing in Bird and company on the back of earned fundamentals.

Let’s run the numbers that we know and fill in some blanks with educated guesses to learn more.

What We Know

First, we need to know what it costs to rent a Bird. Per TechCrunch, you’ll drop a single dollar to start a Bird ride and pay $0.15 per minute after that. So if you take a ten-minute ride, you are down $2.50.

Given that the scooters are aimed at urban locales, and they are pretty zippy, 10 minutes seems like a reasonable guess for a rough average of a Bird run. (Note: most of the math we are doing today works for Lime’s scooters as well.)

So all we really need is aggregate ride volume at two different data points, and we can start to figure out how much money Bird is bringing in and how quickly. Let’s do that!

This February 13th, Forbes reported that “[t]o date more than 250,000 rides have been taken on Bird’s 1,000 scooters.” Returning to our $2.50 number, we can quickly calculate that Bird has generated something in the realm of $625,000 in top line at the time.

February 13th was also the day that Bird announced that it had raised $15 million. Quickly after, in March, the company raised $100 million more. That latter round pushed Bird’s valuation north to $400 million, a staggering figure for a firm that was, moments before, working to get to its first million in top line.

Happily for us, between that March $100 million infusion and the potential $150 million, unicorn-hatching new round, the company released another performance result.

On April 22nd, Bird announced that it reached 1 million rides. Returning to our prior mathmagic, that’s about $2.5 million in revenue. Not bad on a percentage growth basis, but still quite modest for a firm worth $400 million, let alone, now, perhaps $1 billion.

But let’s work a little harder. Between February 13th, when Bird announced 250,000 rides, and April 22, when Bird announced 1,000,000 rides, there were 48 days. We can simply divide the new ride figure, 750,000, by that figure to get an average rides-per-day figure: 15,625.

At our mostly-made-up $2.50 per ride figure, that works out to $39,062 per day or a yearly run rate of $14.3 million. Again, not a very large figure compared to the firm’s valuation, but perhaps more sensible than it appears when we realize that the company did not record the same number of rides at the start of the period between middle February and its end in late April. Instead, the firm likely had more rides towards the end, giving it a higher run rate by the time it hit the million ride figure.

If that growth has continued, you can wave your hands enough to make the $400 million valuation make some sense. It’s far harder to square a $1 billion valuation, however, especially when we remember that we are not dealing with software revenue.

Hell, Bird is not even bringing in Uber-like revenue in terms of quality. Software revenue is notoriously profitable on a per-dollar basis due to its high gross margins. Uber top line is also probably pretty rich as it doesn’t own the cars that power UberX, or fill their tanks. Bird and Lime, in contrast, own the scooters in their network and have to pay people to charge them.

Bird is paying lots more to generate revenue, in other words, than Uber, let alone Box or any other pure software play.

In sum: we can see that Bird is growing very quickly, and it has reached the ten-figure yearly revenue range. But from a cost perspective, it remains an enormous question mark.

iStockPhoto / loops7