SPAC Startups Transportation & Logistics Venture

VCs Squandered Billions On Scooter Startups. Markets Think They’re Worth A Pittance

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

The company, founded by former Lyft and Uber executive Travis VanderZanden, touted itself as a solution for last-mile transportation. In dense locales like campuses and downtowns, those willing could just click on an app and scoot happily to their destination.

Early adopters saw scooters as a fast, fun and cost-effective way to get around. Non-adopters saw them as a quick way to end up in the ER. Motorists mostly wished they’d get off the road.

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No matter what you thought of scooters, by late 2019 their ubiquitous urban presence seemed a fait accompli. By that point, VCs had poured over $2 billion into so-called micromobility upstarts globally, most of which relied wholly or partly on electric scooters.

Fast-forward a few years, and it’s apparent this bet hasn’t gone particularly well, with Bird now a penny stock, bringing broader scooter company valuations down for the ride. While scooters are still around, any expectations of solid returns from investments on the space are not.

Peak scooter

How did it happen? We’ll start with the up times. In total, well over $5 billion in venture funding went into assorted startups engaged in the renting, charging and making of scooters in roughly the past five years. For reference, we list 34 of the most heavily funded companies:

There were European scooter upstarts, Asian entrants and two U.S. market share leaders—Bird and Lime—duking it out for dominance in domestic markets. Scooter makers also scaled up, along with backend charging, service and infrastructure providers.

At some point, we hit “peak scooter.” City dwellers at the time recall this as a period when sidewalks were regularly blocked with hastily parked two-wheeled tripping hazards of varying brands. Their popularity, at least in my neighborhood, seemed to hit its zenith just prior to the onset of the pandemic. After that, many of us no longer had anywhere to go, beyond masked trips to the grocery store.

Of course, this wasn’t the scooter companies’ fault. But it made for unpredictable forecasting.  Had peak scooter already come to pass, or was a COVID-induced slowdown merely temporary?

There was room for tempered optimism. In late 2020, the depth of the pandemic, Lime CFO Andrea Ellis chatted with Crunchbase News about why “open-air single passenger forms of transportation” (i.e. scooters and e-bikes) seemed especially desirable. And in fact, they were doing pretty well among that diminishing percentage of humans who had somewhere to go.

Scooter meets SPAC

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

In truth, Bird’s financials didn’t look great at the time. Its 2020 revenue was down over 40% year over year to $79 million. Net loss exceeded $208 million.

Still, Bird forecasted revenue would hit over $400 million by 2022. And even that number would represent just a tiny slice of a global micromobility services market it estimated at $800 billion.

Like virtually all VC-funded SPAC deals, it worked out badly. Bird plummeted immediately upon completing its merger in November. So far this year, the price has gone steadily downward, with shares recently going for less than 50 cents each.

These are exceedingly bad numbers, even by terribly performing SPAC standards. For perspective, Bird’s recent public market cap was around $135 million. At that level, it has to see its market cap increase just over 20x, or 2,000%, just to break even with the $2.9 billion valuation it reportedly scored in its 2019 Series D.

It’s not just Bird that public markets dislike. Helbiz, another scooter and bike rental operator that went public via SPAC last year, has also been an awful performer, with shares recently hovering around the 50 cent level, down roughly 95% from their autumn high.

But while valuations in its sector collapse, Bird keeps chugging along. The company reported Q1 revenue of $38 million, up about 46% year over year. In addition to rentals, it also sells branded scooters and bikes and runs a service for independent operators to set up their own scooter networks.

Goodbye, millennial lifestyle subsidy

If there’s a lesson to be learned from Bird’s up-and-then-down trajectory, it seems more pertinent to investors than startup founders.

Scooters networks simply did what virtually all California unicorns of the era did: They grew rapidly while losing gobs 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.

Venture backers who bankrolled these losses, however, failed to see a market shift in which public investors would no longer want to support high valuations for high-growth, high-loss companies. That leaves scooter networks and scores of other once heavily subsidized business models eschewing growth-first to focus on stemming losses and pushing toward profitability.

Today, a scooter rental ride hardly seems like a bargain. At typical rates, which include an upfront and per-minute fee, a 20-minute ride would cost about $6. That’s more than a quick bus or subway ride in places that offer those options.

Still, last-mile transportation remains a tricky niche to fill in urban networks, and scooters do have a place in the mix. We’re not done with them yet. Just don’t expect the days—or valuations—of the peak scooter era to return any time soon.

Illustration: Li-Anne Dias


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