The Truth About the Scooter Economy — An Insider’s Perspective

There is a story to the electric scooter market. It took the world by storm in 2018, but was second-guessed in 2018. Now, it quietly re-emerges as a strong force of growth. Few people appreciate the scale and speed of what has occurred. I would like to share some insight with you.

Act 1 was an invasion of scooters in urban areas in 2018. They literally appeared to have come out of nowhere. Bird, Lime, and other companies received large funding rounds. It was so popular that Jim Carrey rode in a Bird during an opening segment on the Jimmy Kimmel Show (hilarious, if you haven’t seen it).

Act 2 was a "revenge for the luddites". Some local governments had banned them while some citizens stole or broke them. The term "luddite" is the English term for those who broke the progress of the industrial revolution by putting wrenches into the machinery.

Act 3 was the "I said you so" remark of anyone who believed that the electric scooter market would collapse. Too high were the valuations! The slowing of funding rounds, seasonality, theft and tough unit economics were all factors.

We are currently in Act 4. As an insider, I thought I would offer my views on where we are in Act IV and perhaps some perspectives for the future.

Acceptance & Invisibility

Bird's adoption was so rapid that in 2018, we saw thousands of people using them every day in cities that had never seen one before. They were unusual, new and ridden by mostly young people. The company had no revenue at the beginning of the year and a peak run rate exceeding $100 million per year. This is truly remarkable.

All around us, there are invisible things that have always been there and don't bother us. We might be angry if our streets were clean and uncluttered. They've been there since the beginning. They're a part of our daily lives and are not a problem. They are invisible. They are acceptable.

The second year of the life for electric scooters is essentially invisible. They are not as popular in Santa Monica, Venice, or many other cities in America and Europe. We as drivers look out for them and pedestrians might be annoyed if they steer in front of us, but riders have better norms than we do. This is what happens with all modes of transportation. They are not new. They are not new. They are invisible. Their usage is increasing.

Some cities and universities have made scooters a mainstream feature. Others are watching and waiting to see what happens. Santa Monica, my hometown, painted 19 miles of bike lanes in green to distinguish scooters and cars. They also built 3 miles soft barriers to see how it works with traffic flow. Santa Monica has congestion issues in the summer and weekends. Ride-sharing only exacerbated these problems. The local government now considers scooters a long-term solution for congestion and pollution reduction.

Springtime is here: A new watermark

Yes, seasonality was present. Yes, scooter usage soared in December -- February, especially this winter. The drop was not steep enough for the scooter companies to be prepared. Bird has a plan of action and is 100% prepared for next winter, I am sure. Seasonality is not a problem. It affects all industries that have assets, including airlines, hotels and rental cars. It is important to be able reduce variable costs during this period.

Spring is coming. Because there are now global assets deployed, we're at a new level. As the sun rises so do the riders and the revenues. Bird had achieved great success in Santa Monica and Venice last year, so it was still planning for its multi-city rollout. We're now in more than 100 cities and 100+ campus locations and are operational with street teams and better software. It is amazing to see that just one year ago, we hadn't even begun globalizing or nationalizing. It does make things seem more reasonable, doesn't?

Unit Economics Accelerating

A common theme I heard in investor circles and in the media last year was that there wasn't good unit economy and the scooter market would not perform well. Reid Hoffman's book, " Blitzscaling", will show you that being the first to scale global markets can be more important than unit economics in short-term. This only applies if: 1) funding is available to finance short-term loss; and 2) if there is a profitable positive unit-economics company when you are the winner.

Bird used off-the shelf scooters, which weren't designed for long-term commercial usage for the first year. They were short on spare parts, broke down more frequently than anyone would like and had inadequate battery life.

Bird took the initiative to create its own scooters when it launched the Bird Zero scooters last September. They were more efficient, easier to handle and had longer battery life. Bird was the only company that had them, so they were a competitive advantage. The battery life was 65% better, which has resulted in a significant improvement in unit economics. This also means that the company can afford to have lower theft rates and longer-term maintenance. Although it is slow to replace old inventory and roll out new scooters, this is already having an impact on the business's underlying operations.

It turns out that there are competitive moats

Last year, there were tech memes that scooter companies didn't have moats. Bird is growing rapidly and I have made it clear that this was not the case. The Bird Zero has made significant improvements. However, the company has created an entire vehicle team and designed a whole roadmap of scooters for 2019/2020. I have ridden several of the new models and they are absolutely stunning. They have better handling on hills and better suspension.

It is clear that there is no business model that can be run on consumer-skimmer hardware. You will need your own vehicle teams, or you can access stock from a supplier who knows how to make industrial-useable scooters. Bird's uniqueness is that each new generation of scooter platform is launched, the unit economics improve. There is competition among drivers in the ride-hailing market. They eat a significant portion of the riders' ride fee. The scooter market is dominated by the driver. They are free to use their time and there are no driver COGS (costs of goods sold). The ride-hailing industry sees autonomous vehicles in the future, but the e-scooter marketplace already has it.

Last year, I suggested that software could help create competitive moats. We're already seeing this. It's not possible to simply put a few electric scooters on a market and expect to be able compete with the software and data advantages of incumbents. Perhaps the greatest advantage of incumbents is how complicated it can be to manage a global, national, or even local transportation company. We owe this to those who have achieved it. This is something I doubt I could accomplish.

Bird has implemented massive programs to decrease theft and integrate with law enforcement. Although some social media users find it hilarious that someone would steal $500+ assets and then repurpose or resell them, it's theft in any other world. This isn't any different from stealing cars, bikes, computers, or purses. None of these are acceptable or funny. Bird works with local law enforcement to combat theft. He has created a team and technology to make it easier to track criminal rings and even petty thieves. People will soon realize that theft of cars can have the same consequences as car theft. We've seen some high-profile cases of people being arrested for possessing thousands of dollars worth of stolen goods.