A woman rides a dock-free electric scooter Lime-S by California-based bicycle and scooter sharing service Lime, on a street in Madrid, Spain, October 24, 2018. REUTERS/Paul Hanna
This is not a good time to be a tech start-up with a bloated valuation, seasonal business and troubling unit economics © Paul Hanna/Reuters

The little English town I’m living in during lockdown looks more like an idealised illustration of Miss Marple’s village every week.

Without cars, the streets have been taken over by families cycling along together. Freshly painted bike lanes have appeared — as they have in large global cities. If this preference for two wheels lasts, perhaps it will justify the billions of dollars poured into bike and scooter start-ups.

Whether the companies can last is not clear. The biggest shared-scooter companies in the world — San Francisco’s Lime and Santa Monica’s Bird — were already burning through cash before the coronavirus pandemic. In late March, Bird laid off more than 400 of its 1,400 workforce in a brutally short video call. Lime is reported to be looking for emergency funding that could knock 80 per cent off its valuation. Both have pulled vehicles from cities across Europe and the US.

This is not a good time to be a tech start-up with a bloated valuation, seasonal business and troubling unit economics. Venture capital investors might have ended last year with more than $120bn in cash, according to data from the US National Venture Capital Association, but a recession will make them choosy about who they back and at what price. Down rounds, in which companies raise funds at lower valuations, are expected to become the norm in the second half of the year. Bird, valued at $2.5bn, and Lime, at $2.4bn, will probably suffer.

A sanity check has been on the cards ever since China’s bike-share boom led to predictions of a global transport revolution. Even as that experiment turned sour, investors in the US held steady. Early last year, McKinsey forecast a US market worth $300bn within a decade. Giddy investors threw money at expansion plans. Between them, “micromobility” start-ups have raised close to $6bn, according to CB Insights.

Similarities with ride-sharing companies such as Uber are no accident. Before founding Bird, Travis VanderZanden created a car-wash app that was acquired by Lyft and later worked at Uber. Both Uber and Lyft have e-bike and scooter sidelines.

But lavish spending encourages recklessness. Like the chancers who renamed juice and sofa companies “blockchain” at the height of the cryptocurrency craze, a US scooter maker called Unicorn used its name to evoke a billion-dollar start-up. Instead of making vehicles, the company spent large sums on adverts. It ran out of money without delivering a single scooter.

I like the idea of motorised scooters more than the wobbly and surprisingly fast reality. I managed to skid off the first one I tried after hitting a twig. Few riders wear helmets — not even the commuter I used to see in San Francisco on an electric unicycle. Bikes are sturdier but take up space. City authorities have pushed back hard, concerned about injuries and cluttered sidewalks.

Building, charging and replacing electric scooters and bikes has high upfront costs too. A report from Quartz calculated the average lifespan of a shared Bird scooter as less than one month — not enough time to recoup the $500 outlay. Later, more durable models have not stemmed losses.

To succeed, companies will need help from city officials via improved infrastructure and fee cuts. As cities try to reopen safely, this help is warranted. Dockless e-bikes and scooters are a good alternative to public transport. It is going to be a lot easier to clean handlebars than to socially distance on trains and buses. The alternative is a rise in individual car use.

It is also worth remembering that this experiment is still young. Companies and cities are still working on their relationship. The best new measure I’ve seen so far is Santa Monica’s geofence, which forces electric bikes and scooters to stop in certain areas. The scheme is so effective that angry LA residents have finally stopped throwing scooters into the sea.


elaine.moore@ft.com

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