There is a story arc of the electric scooter market that took the world by storm in 2018, was second-guessed late in the year and has quietly re-emerged as a powerful force of growth where few really appreciate the speed and scale of what has happened. I’d like to share some insights with you.
- Act I was the invasion of scooters that seemed to be taking over many urban environments in 2018 and literally seemed to come out of nowhere. This led to massive funding rounds at Bird, Lime and others. It became such a quick part of popular culture that Jim Carrey rode a Bird in an opening segment of the Jimmy Kimmel show (hilarious if you haven’t seen it).
- Act II was “revenge of the luddites” in which some local governments banned them and some annoyed citizens stole them or broke them. (luddite is literally the term for the people in England who put wrenches in the machinery in the industrial revolution and broke things to prevent progress).
- Act III was the “I told you so” comeuppance of anybody who was sure that the electric scooter market would fail. The valuations were too high! There was seasonality, theft, tough unit economics and slowing funding rounds.
We are now in Act IV. As an insider I thought I’d offer some views of where I believe we’re at in Act IV and maybe some perspective of the future.
Invisibility & Acceptance
The adoption of Bird was so rapid in 2018 that we went from cities that one day had never seen a scooter to thousands of people riding them daily. They were new, they were strange, they were ridden mostly by young people — they were highly visible. The company started the year with no revenue and at its peak had a run rate well in excessive of $100 million / year. Pause to think about how remarkable that truly is.
The world all around us is filled with invisible things that don’t disturb us because they’ve always been there. If our streets were clear and uncrowded we might be outraged to suddenly have cars along our sidewalks, emitting carbon in our air, honking horns or crashing into pedestrians. But they’ve always been there. We’ve come to accept them as a fact of life and we let ourselves be inconvenienced by their presence and pollution without much thought. They’re invisible. They’re acceptable.
Year two in the life of electric scooters is just that — invisible. They are no longer remarkable in Santa Monica or Venice or in many cities in America, Europe or South America. As drivers we look out for them, as pedestrians we might be annoyed if they steer in our way but the riders themselves have developed better norms as happens in all forms of transportation. They’re not new. They’re not novel. They’re invisible. And their usage is growing.
The best cities and campuses have fully embraced scooters and others are waiting and watching this experiment and hoping to learn. In my home town of Santa Monica they painted 19 miles of bike lanes green to help delineate bikes & scooters from cars and they built 3 miles of soft barriers to test how this works with traffic flow. Santa Monica is a city with congestion problems in the Summer and on weekends and ride-sharing exacerbated this problem. Scooters are now seen by the local government as an important long-term solution to both congestion and to reducing pollution.
Springtime is Here: A New Watermark
Yes, there was seasonality. Yes, usage went off a cliff for scooters in Dec — Feb, particularly this winter. No, the scooter companies were not incredibly well prepared for just how steep the drop would be. I know Bird is 100% ready with a plan of action for next winter. There is no problem per se with seasonality — it affects airlines, hotels, rental cars and all sorts of industries with assets. The key is being able to dial back variable costs during these period.
But springtime is here. We’re at a new watermark because there are now global assets deployed and as the sun peeks out so to do the riders and the revenue. Last year at this time Bird was just planning its multi-city rollout having had tremendous success in Santa Monica & Venice. This year we’re in > 100+ cities and 100+ campuses and we’re operational with street teams, better software, better bikes and a more informed ridership. It’s truly staggering to realize that just a year ago we really hadn’t begun nationalizing let alone globalizing. It really does put things into perspective, doesn’t it?
Unit Economics Accelerating
One topic I heard a lot in investor circles last year and in the press a lot was that there weren’t good unit economics and therefore the scooter market was never going to perform well. If you read Reid Hoffman’s important book, “Blitzscaling” you’ll realize that in some markets that are large, global and being disruptive sometimes being first to global scale can be more important than short-term unit economics. This is only true when: 1) there is funding available to finance short-term losses and 2) when there is a lucrative positive unit-economics business when you become the winner.
So for the first year Bird used off-the-shelf scooters that weren’t really built for long-term commercial use. They lacked spare parts, they broke down more often than anybody would have liked and they had insufficient battery lives.
Bird moved early to design its own scooters with the launch of the well-received Bird Zero scooters in September of last year. They had better performance, better handling and importantly better battery lives. They also were exclusive to Bird so they gave the company a competitive advantage. With 65% improvement in battery life the unit economics improved dramatically and with longer-term between maintenance and lower theft rates it has been a huge boon to the company’s finances. Of course it takes time to roll out new scooters and replace existing inventory but this is already having a dramatic effect on the underlying business.
Turns Out There Are Competitive Moats
There were some tech memes out there last year that scooter companies had no moats. I argued pretty publicly that this wasn’t the case and as Bird scales it is becoming more apparent. While the Bird Zero has shown massive improvements, as you can imagine the company has built an entire vehicles team and designed an entire roadmap of scooters that will hit the roads in 2019 / 2020. Having ridden some of the future models I can tell you they are nothing short of stunning. Each with better torque for getting up hills, better suspension, lower maintenance costs and improved batteries.
Simply put — there is no viable business running on commodity consumer scooter hardware. You must have your own vehicle teams or access inventory by a supplier that knows how to produce for industrial usage. But what is unique about Bird is that with each generation of scooter platform we launch our unit economics get better and better. In the ride hailing market there is a competition for drivers and they eat a large part of the consumers’ fee for a ride. In the scooter market, the consumer is the driver. Their time is free and there is no “driver COGS” (costs of goods sold). While the ride-hailing market sees autonomous vehicles as nirvana due to no driver costs, the e-scooter market already has this built in.
Last year I pointed out that software would help build competitive moats and we’re already seeing that. You can’t simply drop a bunch of electric scooters in a market and hope to compete with the data and software advantages of the incumbents. But perhaps one of the biggest overlooked advantage of the incumbents is just how massively complicated it is to run a global or even national or even city version of a transportation company. Hats off to the teams that have done this. I’m not sure I personally could do this.
At Bird, we have built in massive programs to reduce theft, including integration with law enforcement. While I know some people on social media find it funny that people would steal a $500+ asset and repurpose and resell it, in any other world that’s simply theft. It’s no different than stealing bikes, cars, computers or purses — none of which are funny or tolerable. Bird is working with local law enforcement to crack down on theft and has built a team and technology that makes it easier to track criminal rings or even petty theft. We’ve had some high-profile arrests of people in possessions of thousands of dollars of stolen goods and people will begin to realize there are the same consequences as stealing cars.
Sub 3 Miles is Up for Grabs
If you read the S1s of Uber and Lyft you’ve now realized that these are very large, global businesses who deserve all of the credit and financial rewards they have received. You may also have realized that both businesses have a meaningful part of their business tied up in rides that are sub 3 miles. These are the local trips that tend to add to congestion and are the ones that are most vulnerable to alternate forms of micro-mobility. This is the reason you’ve seen the massive rise of Bird and the reduction in some cities (Santa Monica and Venice) of ride sharing.
Aren’t these players just going to Jump into the scooter market? Of course. It’s too lucrative not to. But I would argue that it isn’t either company’s top priority with food delivery, globalization, managing public markets and shoring up operating margins as high on their lists.
In the meantime we think we can build a globally complex, economically viable business that will be hard to disrupt. This business is orders-of-magnitude more complex than even the big ride-sharing companies may fully appreciate and will be hard to disrupt just as Google wasn’t able to crush Facebook in the way everybody was so sure they would.
Early Adopter Cities and Early Majority Are Driving Growth
Cities are changing and many are embracing scooters. I’ve already highlighted Santa Monica, who has also drawn markings on sidewalks where scooters are meant to be docked. There are cities blessed with perfect infrastructure for scooters like Paris where you can ride down the Seine completely uninterrupted by cars. And there are cities like New York City who are desperately in need of new transportation solutions and are currently studying the best way to accommodate electric scooters. I’ve talked with many campus leaders. They realize that students want to get around on scooters and they’re trying to figure out how to best accommodate and they’re watching the schools who have embraced scooters for clues.
What Does Travis Think?
I sat down with Travis at the end of January to ask his opinions of where the scooter market is heading. It was a fascinating discussion in which he also talked about the early days of building Bird. You may enjoy watching / listening. I think you’ll learn a lot.