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Of course, less is relative. A Crunchbase News tally of reported funding rounds for startups in the core Silicon Valley counties of Santa Clara and San Mateo finds that companies there have pulled in more than $15.4 billion so far this year. That’s a huge sum, and is roughly on pace with 2018 funding levels.1

As a percentage of total California funding, however, Silicon Valley is slipping.

Until about five years ago, the two-county region pretty reliably took in more than 40 percent of statewide seed through growth stage financing. In recent years, its share has regularly dwindled to less than a third of statewide totals.

Blame San Francisco

The money isn’t going far away. Silicon Valley’s declining share of funding comes as its neighbor to the North, San Francisco, continues to suck up ever-growing sums of capital.

As we reported earlier this month, San Francisco is devouring California’s venture funding to feed its vast stables of startups and money-losing unicorns. In roughly the first three quarters of 2019, companies based in the city raised around 45 percent of statewide seed through pre-IPO funding, per Crunchbase data.

The ascent of San Francisco seems to prove out the notion that startup epicenters aren’t driven by space to sprawl. San Francisco covers just 47 square miles  – compared to 2,000 square miles for the Silicon Valley counties.

Silicon Valley Is Still Drawing Near-Record Sums Of Capital

Still, it’s important to recognize that while Silicon Valley is drawing a smaller share of California’s total venture funding, in dollar terms investment is actually rising. In recent years, companies in San Mateo and Santa Clara counties have collectively hauled in roughly double the annual tallies raised at the beginning of the decade.

It’s not entirely surprising to see a rise in investment totals alongside a decline in investment share. That’s because a lot more money overall has been going to the startup and unicorn space in the past few years. That’s led to higher investment totals in most tech hubs — just some more than others.

In case anyone’s wondering, Silicon Valley companies still raise some of the biggest rounds of anyone in startup-land. This year, for instance, top funding recipients include:

• , a Mountain View-based robotics startup developing autonomous delivery vehicles, raised $940 million in a February Series B round backed by SoftBank.

• , a Palo Alto-based developer of hardware and software for a self-driving vehicle platform, raised a total of $600 million in two Series B funding announcements this year, with lead investors including Sequoia Capital and Hyundai.

• , the zero-commission stock and crypto trading provider, raised $323 million in a Series E round led by DST Global, bringing total funding to date to more than $860 million.
• , the fast-growing scooter and bike sharing service, closed on a $310 million Series D round earlier this year to build out its already enormous footprint.

So far this year, Silicon Valley companies have scored at least 42 known “supergiant” funding rounds of $100 million or more. And the Sand Hill Road corridor is still chock-full of venture capitalists with big checks to write.

So, does it matter for Silicon Valley that more startups are headquartering in nearby San Francisco (and, to some extent, the East Bay)? One could argue it doesn’t make too much difference, as these places are within commuting distances of each other.

Seeing more startups blossom just outside the Valley also isn’t obviously a bad thing for locals. Silicon Valley still lays claim to ultra-low unemployment rates, high average incomes, and a highly educated populace. The region’s downsides — scarce housing, high cost of living, and traffic — are more the result of too many tech and startup jobs rather than too few.

Moreover, the surge in overall startup funding levels means Silicon Valley is still seeing as much investment as ever. Plus, the region is already home to an outsized share of the most valuable established tech and tech-adjacent companies, including Google, Facebook, PayPal, Cisco, Tesla, and the list goes on.

So, in short, Silicon Valley doesn’t appear to be getting any less tech-centric. The region’s innovation engine, however, is increasingly reaching farther beyond its original borders.

Illustration: .

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Yesterday that , an American scooter unicorn, expects to post an operating loss of over $300 million against gross revenue of around $420 million. The same report also details select unit economic data that we’ll examine.

The Lime news is not the first expected or reported scooter-induced loss that we’ve covered this year. Recall that , a key Lime rival, posted a roughly $100 million loss against $15 million in revenue during the first quarter; the loss was boosted by a writeoff and the revenue hit by seasonality making the ensuing deficit appear worse than it might under less irksome circumstances.

But as with the Bird result, caveats or not, Lime’s expected losses are sharp and troubling.

Bird, Lime, and their global rivals rose quickly on the back of strong consumer demand for their products. Initial scooters placed in-market proved flimsy, but well-funded startups were confident that they could improve their hardware, tune their business model, and begin to juice gross margin from their fleets; the bet was that eventual scooter gross margin could cover operating costs, and scooter startups would, therefore, rise to new heights in terms of scale, and value as they grew.

Instead, after rocketing into the unicorn club — a private valuation of $1 billion is all you need for entry — Lime and Bird have managed continued growth, but haven’t yet beat back skepticism regarding their business model.

On that point, let’s examine what The Information reported regarding Lime’s gross margins:

In July, the company told investors it spent about 35% of gross revenue on depreciation, 40% on local operations and 17% on charging. Other smaller costs include payment processing, customer support and insurance.

As depreciation isn’t usually counted as part of a company’s cost of revenue, we can exclude it in our first calculation for Lime’s implied gross margin.

To get a gross margin figure, let’s add, say, 20 percent for “payment processing, customer support and insurance” to the other, known revenue costs. Using our guesstimate, Lime’s gross margins comes in at 23 percent.

If you counted Lime’s depreciation as a cost of revenue, (a cost of goods sold, if you want to phrase it that way) and it’s not hard to argue that it should be, the company’s gross margins appear negative.

In The Distance

The game that Lime has to play isn’t merely getting its scooter rides to generate a bit more margin (or indeed any at all, depending on how you count depreciation costs). Instead, it’s getting its scooters to generate enough margin at scale to cover its operating costs.

That’s a tall order. Recall that Lime is expected to post an operating loss of $300 million against $420 million in gross revenue. That means the company has to generate gobs of gross margin to cover its operating costs, before taking into account whatever its free cash flow must total to (a negative number).

It’s going to take a pretty penny for Lime to get there if it can. Bird is in the same boat. Crunchbase data indicates that Bird has . Lime . That’s well north of $1 billion between the two firms. Capital that has likely largely been spent.

But don’t worry. After Bird raised more money, The Information reports that Lime has a new investor on the line at a new, higher valuation.

Illustration: .

This morning that , a San Francisco-based scooter company, added more capita to its Series A with “an undisclosed amount of new funding from Toyota AI Ventures.”

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Skip’s Series A, was announced in June of 2018. The startup in December of 2018, boosting its war chest as it competed with and , two leading domestic scooter startups with far greater capital bases.

Now with new funds, Skip is touting a new scooter design that Axios reports is easier to take apart. The design could help the company secure better unit economics for its scooter fleet. And thus, perhaps, prove that scooters are an economically viable business. That scooter companies have been prodigious fundraisers is fact; that they have yet to find the balance set of revenue and cost of revenue to generate enough gross margin to show that the model can fund companies with Silicon Valley cost structures is not yet clear.

Both Bird and Lime, the domestic Uber and Lyft of scootering, have introduced new hardware models in the last year. But what’s fascinating in all of the discussions of new scooter designs is how much money was raised and spent by companies in the category before they did the hard engineering work to give their new devices a shot at profitability.

For example, Lime introduced its third-generation new scooter in October of 2018, that the new hardware “is built to last up to or even over a year [while] earlier versions generally conked out at six months.” Bird dropped its new scooter in October of last year as well, that the design was “more rugged and long lasting than its predecessors.”

However, Lime had $120 million in a and . Presumably, some of that later round (the startup also ) went into developing the new scooter, but a chunk of its earlier money certainly went into buying and deploying scooters that weren’t as economically sensible. That’s a lot of equity capital that went through the firms and onto the market while not generating economically-favorable results.

Bird’s fundraising is a bit more opaque, but the company did put together , and before it closed its final known round () which also came before its new scooter.

Backing up our idea that Bird and Lime spent money on scooters that didn’t have a shot at making their money back while helping fund the business is backed up by Bird’s $100 million writedown from earlier this year that the company’s CEO confirmed on Twitter. The hardware hadn’t lasted as long as expected.

Skip’s comparatively small raises to-date, even with the extension of its Series A, imply that it has spent far less on scooters that weren’t great in terms of financial return. It would be pretty ironic, in Silicon Valley-terms, if the company that raised the least became the most viable in terms of economics. Not scale, mind. Bird and Lime are far larger I’d reckon given what we know about their relative market penetration. But as we recently learned with The We Company, scale doesn’t always equal success.

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In fact, there’s enough room in global markets for competitors to thrive, and even break even—a feat Uber is far from accomplishing. Startups in these “frontier markets” aren’t worried about the ride-hailing firm as a competitor, such as Bykea.

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“The growth is costing [Uber] too much money, so I think they’ll restrict themselves to certain geographies,” said , the founder of Bykea. “It takes coming to Karachi to realize why the most powerful company in the world has less than 10 percent of market share” in the bike category. Uber, which appears to operate in Pakistan, did not immediately reply for comment.

Maayr says Uber’s failure in the motorbike industry, specifically within Pakistan, is that “they were addressing a market which was not very savvy in English.” (Such an oversight is a problem that has been documented by Crunchbase News in the past.) And unlike Uber, Maayr’s startup claims it breaks even. That financial security in an industry known for steep losses encouraged investors to put $5.7 million into the company’s Series A.

Maayr said that his real competitor is Uber-owned Careem. Also, while not in the same region,  falls into a similar bucket as it focuses heavily on motor-bike sharing, and he thinks logistics will make up a large part of Bykea’s business in the future.

The CEO of �����Բ�����ǰ���’s Beam, , who I met for coffee and Chia seed lemonade hours before he hopped on his flight back to Singapore, has also found success in prioritizing the nuances of local markets. For context, and sold its business to Grab. Uber has a 27.5 percent stake in Grab as a result of the sale.

“It’s the problem that US companies face when they try to set up businesses in such a fragmented place,” Jiang said, referring to Southeast Asia’s diversity from country to country.

Jiang calls Beam’s flexibility the “last man standing approach” amid the big competitors. Beam’s more modest footprint let’s it customize its product to the city it’s in.

For example, the scooter accessibility turns off during Typhoon season in Korea. And after Rundle Mall in Adelaide complained about Uber-owned scooters, Beam listened to the city and didn’t offer scooters in that region. Limiting access, Jiang says, is in the company’s best interest.

This is especially true for Singapore, where the company is headquartered. Jiang, who worked at both Uber and previously (both companies known for their rapid, sometimes reckless, growth), was told by Singapore officials that Beam can’t offer a scooter to the average consumer until around. And unlike Uber, which in its early days had a tendency to flout local laws in hopes that consumer demand would make it too big to shut down, Beam toed the government line.

“If they want us to wait for a license,” Jiang said, “we’re going to wait for a license.”

Meanwhile, Uber took a step out of Singapore with its scooter business, citing a reprioritization of efforts.

Yet Beam keeps it headquarters in Singapore. The location, despite the ban, gives Beam intimate access to local markets, engineering talent, and also a shot at �����Բ�����ǰ���’s business in 2040. Furthermore, neither founder seems incredibly intimidated by Uber. Both founders cited Uber’s fragmented distribution, reckless attitude, and inability to work with the local clientele and government as the reason it is sputtering abroad. It has given both companies market share, and confidence, that they can dominate.

Illustration Credit:

and reported this week that , a popular scooter startup, will raise a new round of private capital as expected. The new funding event will be led by , a .

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For Bird, then, the game is still afoot. And for critics of the scooter boom and its corresponding scooternomics, the round will likely prove some combination of baffling or surprising.

The new money values the firm at “slightly above the $2.3 billion,” according , or “at a $2.5 billion valuation” . Both publications agree that there’s new money coming, it puts the sticker-price of Bird at around its preceding valuation, and that Sequoia is taking point.

This backs up prior reporting from The Information, .

Questions

Some regular Crunchbase News readers have written in, asking questions about the workings of scooter companies, especially concerning how they calculate certain costs. In honor of the emails let’s try a summary of sorts.

We’ve recently mulled the vagaries of the business model of scooter companies, wondering if their operations will prove viable and lucrative over time. The back-and-forth goes something like this, starting with the negative take and closing with the correlating1 positive argument:

• As scooter companies take on the purchase and maintenance and fuel costs of scooters, their margins will prove worse than the unprofitable ride-hailing companies. Thus, they will struggle.
• Scooter companies generate more net revenue per ride than ride-hailing companies, and through technology investments now generate more contribution margin than ride-hailing companies on a per-ride basis. Thus, they will thrive.

Recall that scooter contribution margin is effectively equivalent to gross profit at a software company; gross profit is revenue minus costs of revenue, or, in the case of scooter shops it’s gross ride income minus the costs of the scooter and its operation. Roughly.

So does Bird generate enough gross profit to fly?

Contribution Margin

Recall that Bird claims that it generates $1.27 in contribution margin per ride on one of its new scooters; that hardware variant now makes up the bulk of its fleet, allowing us to use it as a stand-in for all Bird machines.

At $1.27 in effective gross profit, how much gross profit did Bird rack up during its good quarters?

Recall that reported that Bird posted $40 million in gross revenue in the fourth quarter of 2018. That figured was shaved to $25 million in net revenue due to now-discontinued rider discounts. But let’s not quibble. Let’s instead be generous and pretend that we can apply Bird’s present-day (and improved) economics against the full $40 million figure.

That works out to 9.37 million rides. And, at the company-provided $1.27 in per-ride contribution margin, Bird’s Q4 2018 gross profit would have come to $11.9 million. Of course, the actual figure was lower as Bird’s fleet makeup was different at the time (giving different economic results; recall that Bird had to write down $100 million in inventory the following quarter), and the firm was providing discounts that limited its net revenue result.

This allows us to estimate with reasonable confidence that Bird’s gross profit (the sum that it could deploy against its corporate costs) was under $10 million in the fourth quarter of last year. And we know that the figure dropped sharply in the first quarter of 2019 when the firm’s revenue fell to $15 million.

This brings us as up to date as we can be. Bird’s Q2 2019 results are unknown, so far at least. But the above result set was good enough for the company to, it seems, raise a few hundred million more.

Here’s my guess as to why. I’d bet you $1 that Bird’s new scooters do have encouraging economics compared to their two-wheeled predecessors. And that so far, the operational math checks out when it comes to ride spend and ride margins. With the new math, that Bird is raising another venture fund worth of cash could mean that the firm will have enough cash to buy enough scooters to build out enough supply to grow its top line to generate enough gross profit to pay for its operating costs. Or at least get close.

So, the scooter boom shall continue provided that the round closes. And that’s pretty good, at least where I live. There are lots of Birds and and here in Providence, and they seem pretty popular. It would be too bad if they all went away.

, who helped Crunchbase News take the featured picture this morning in the Providence rain.

If you can recall all the way back to last week, you will remember news that , a popular American scooter company, as both its net, and gross revenue declined. The first quarter wasn’t overly kind to Bird, a firm which has raised huge sums of money in the name of growth.

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The timing of Bird’s revenue decline wasn’t entirely a surprise as the first quarter included traditionally inclement months during which scooters are likely less popular — you can’t scoot in the snow. And, we knew Bird was running at a deficit, making the only surprising thing the scale of the loss compared to the size of its temporarily embarrassed revenue result.

Things, naturally, have become more complex. Bird’s CEO uncorked a few tweets after the first story was published, firing back at the new narrative coalescing around his firm and industry.

The negative theme that VanderZanden wanted to combat went something like this (my words, not his – that comes later): Sure, everyone knew that scooter companies were having a harder time than expected squeezing margin from their popular two-wheeled machines. But $100 million in a single quarter against a revenue result of just 15 percent that total? That’s worse than expected.

VanderZanden’s various tweets included enough different data points, and implied arguments, that I think we’ll do some work this morning to unspool them. Let’s get into it.

Tweets

In order, here’s a summary of what Bird’s CEO tweeted, with our notes following each bullet point (tweet):

• : The Information’s story was fake news.

Bird did lose the $100 million that The Information reported, something that VanderZanden confirms in his fifth tweet. However, the CEO begins his tweetstorm by calling their reporting “fake.”

• : Bird is growing rapidly.

The CEO posted a chart, showing what is presumably Bird’s revenue run rate (not ARR, mind) over time. The chart shows that the company’s revenue fell precipitously during the winter months, matching the direction of The Information’s reporting.

VanderZanden states that Bird’s run rate is up “over 4x from this time last year.” The data point has little to do with what The Information reported regarding Bird’s revenue declines from Q4 2018 to Q1 2019, something the CEO’s own chart appears to defend.

• Tweets and : Bird’s unit economics are better than you thought.

In his third and fourth tweets, Bird’s CEO states that its Bird Zero scooters (75 percent of its in-market units) generate $1.27 of contribution margin on “every ride.” This means that each Bird Zero scooter ride, after paying for itself, provides $1.27 to help fund the company’s operations.

The stated margin includes depreciation, and “in-market support.” That’s good, and makes the resulting contribution margin figure seem sturdy.

Tweet four digs into how the $1.27 result is calculated, including the gross spend from a customer that is used to run the math that results. Bird scooters are grossing $4.27 per ride. That’s up from the last time we heard the figure ($3.65 in gross spend per ride). So, Bird has managed to grow its average ride cost by about 17 percent if we’re correctly comparing sums (always tough to do with non-public companies).

Reading the CEO’s table detailing the company’s resulting per-ride “Pro Forma Contribution,” two final things jump out. First, that Uber and Lyft each generate negative contribution from each ride they support according to the presented math. This is a non-subtle diss from the scooter company against the larger and more valuable ride-hailing companies.

And, second, that Bird books no sales and marketing costs that are shared on a per-ride basis. That’s to say that Bird doesn’t count any sales and marketing spend costs in its per-ride revenue and costs calculations. If Bird boosts sales and marketing spend, you can see where it will ding margins simply.

• : Bird did lose $100 million, but it was a write-off due to an accounting mistake (“our original depreciation window was too long”) and not something you should care about.

Let’s be clear, Bird had to write off $100 million in scooter value because it expected those machines to last longer than they did. That’s not good. Trying to spin losing $100 million, spent money raised by selling shares, that you didn’t expect as not a big deal is odd and oddly aggressive.

VanderZanden also details a lack of maturity by calling The Information “DisInformation,” which isn’t witty in the slightest. Nor is it accurate. Especially when the CEO himself states that “[w]e sent this data to the reporter.” I can’t quite figure out why the CEO is unhappy about a publication reporting data that was shared with it. But, hey, I didn’t lose $100 million in Q1 2019.

So What?

If Bird’s CEO had simply followed up The Information’s story by saying “our first quarter was hard, but we’re generating $1.27 per ride today and we think our business has never been more viable,” all this would have been easier. Instead, by attacking the press for reporting accurate numbers, albeit in a manner that he didn’t approve of, VanderZanden put a bad taste in my mouth and lowers market trust in himself.

Let the numbers do the talking; let the Trumpian insults stay untweeted.

What we know is that Bird’s own math shows scooters’ margins and results improving. That should help the firm raise the money it needs to. Just don’t forget that each Bird ride generates positive contribution, which is not the same thing as the company itself making money.

Here’s one way to think about it. For every one million rides that Bird supports in any given quarter, it generates $1.27 million in margin that it can use to fund its corporate-level costs. Those include engineering, its executive group, its government relations work, and so forth. How many rides it will need to power to break even I don’t know, but if you do, please get in touch.

Precisely how the scooter industry will shake out in time isn’t clear. I only have guesses. But if Bird’s math holds, and works for other companies like Lime and the rest, perhaps some of the scooter legions will make it.

Illustration: .

, one of the two leading American scooter companies, is losing money at a terrific rate according to a .

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The scooter company and its best-known rival have each raised hundreds of millions of dollars (, ), totaling more than $1 billion between the pair. The Information reports that Bird is seeking $300 million more, matching a sum .

Losses

That Bird is losing money is neither surprising nor notable. The pace at which it is losing money, however, may be.

When high-growth companies raise cash, they raise it to put the funds to work. Rare is the company that raises money just to sit on it. Lime and Bird have been among the fastest growing companies that we can recall, so their deficits are expected.

But, perhaps, things are more difficult than we anticipated. From The Information:

In this year’s first quarter, [Bird] lost nearly $100 million while revenue shrank sharply to only about $15 million, people familiar with the matter said. In the spring, it told people it was down to about $100 million in cash, even after raising more than $700 million over a year and a half. […]

In the third and fourth quarters of last year, Bird said it generated about $25 million and about $40 million in gross revenue, respectively, the person said. Net revenue was more than $20 million in the third quarter and about $25 million in the fourth quarter, this person said.

So Bird’s revenue has fallen while its losses have continued. The result of such quarters would be dwindling cash. Bird will, therefore, have to raise during a time when its numbers aren’t pointing in the right direction; that’s precisely when you do not want to raise.

Indeed, shrinking from $40 million in gross revenue to $15 million in gross revenue is tough from Q4 2018 to Q1 2019, though Bird did limit discounts according to The Information, so the gap isn’t as sharp as those figures detail.

The company does have a natural advantage in Spring. While warmer weather likely helped the company, whether Bird had a good Q2 or not isn’t clear. But we can presume that the firm lost more money in the period. As such, it probably has less cash than it had when it reported the $100 million figure. That puts a timer on its fundraise, and explains why it wants $300 million and not a smaller sum.

Lime, its archrival, raised earlier this year. That brought Lime’s valuation to $2.4 billion. Presumably, the green scooter company has enough cash to get it to the fourth quarter. But, with Bird showing that it is possible to lose nine figures per quarter, how long each scooter round may last is somewhat hard to predict.

So it’s double-down time. Lime and Bird have had time to develop new hardware, explore new markets, and have made it through winter. If the companies are going to make it, which is to say if their models wind up proving economically viable or not, will likely be answered this summer.

Which is now. More when we have it.

Illustration: .

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Happy Friday and welcome to the end of the week. Let’s wrap on something that we haven’t written about in what feels like months: Scooters.

Yes, everyone’s former summer fling is back in the headlines this week with news that , a European scooter company, has raised another round of capital, .

The new funds come after the firm (Crunchbase lists the total , but we can round as it’s nearly the weekend). Dott is based in Amsterdam and was founded just last year. (Dott’s Series A has been led by and , with a host of other capital sources taking part.)

Why talk about a relatively minor scooter round today? Two reasons. First, Dott is trying to do something operationally different inside the scooter space. Second, we’ve learned about scooters recently. Let’s explore.

Dott’s Gig

American scooter giants and depend on crowd labor to charge their scooters. This idea wound up providing lucrative employment for teens and jokes for the Internet. Dott is going the other direction, hiring more of its staff.

Here’s :

The company has its own warehouses to charge and repair vehicles. There’s no juicer who collect[s] scooters at night and charge[s] them at home. Dott hires full-time employees and works with third-party logistics providers.

TechCrunch goes on to note that Dott is local-government friendly, and deploys “reasonable” numbers of scooters to new markets.

In short, if Lime and Bird’s attempts to ape Uber’s famous speed of execution and brashness were the initial mold for their industry, Dott is trying to break it by being polite about the whole thing, coloring inside the lines and paying its people more fairly.

I can hear the capitalist in your heart sputter, saying something like this: “But if Lime and Bird are losing so much money, how can Dott afford to avoid gig workers as a way to lower labor costs?” I don’t know. But what we can do is go over a few things that we’ve seen recently from scooter companies, and see if any of it can help us understand more fully.

Bumpy Paths

This morning I went back through some of scooterdom’s recent issues. What follows isn’t exhaustive, but goes to show the sorts of issues that Bird and Lime have had recently:

• Recall in 2018 when Uber was said to consider buying either Bird or Lime? That didn’t bear out.
• Bird in March of this year. That’s not a very good sign from a company that has raised a lot of money.
• And then Lime .
• The meme of people throwing scooters into the lake or river or pond or stream is not merely a Bay Area problem. Scooters we’ve recently learned.
• And scooters aren’t welcome in Nashville as of late June. A pilot program is over after someone died.

And on and on, you can find a lot more of the same.

How I read the above is that the Bird and Lime model is now bogged down in the reality that seems to settle in after a period of what Silicon Valley loves to call “hypergrowth.” Except in the case of the scooter princes, Uber had already taught the local magistrates a trick or two when it blew through their fiefdoms years before.

By the time scooters came to town, the principalities were ready, and it’s slowing Lime and Bird’s rise in America.

If that’s a good thing or a fair thing or a bad thing or a symbol of American decline is up to debate, but it seems to be fact that Bird and Lime aren’t having as easy a go of their jobs today as they did a year ago.

Which brings us back to Dott. Initially, I thought that if the go-fast, and avoid-hiring model that Bird and Lime have undertaken is struggling, surely what Dott is up to will have an even harder time in the market. But there is a cost to moving fast, a price to pay for putting speed first.

Perhaps Dott can show that a more deliberate, accommodating, and employee-inclusive model can work in 2019. Now that would be contrarian. Now that would be disruptive.

Illustration: .

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When Bird laid off about 4 to 5 percent of its full-time staff in March, it seemed that the scooter company was working on containing costs. Also read, it was working on overcoming some of the logistical challenges that come with two-wheel travel (expensive repair costs, theft, charging infrastructure, etc). Now, it’s back in the news with another move, this time, with its fingers crossed for growth. 

Each scooter company is going through what Bird did regarding costs and vehicle longevity, and more. Two things have become clear since Bird and blew up back in early 2018. First, that scooters are harder to eke profit from than expected. And, second, that too many scooter companies were founded.

Given both facts, seeing consolidation in the space is the opposite of surprising. Throw in the fact that Scoot has and Bird does not, and the calculus of stacking the two companies up together makes even more sense.

The TechCrunch story also reports that . Perhaps Lime will purchase Spin (its launch ) Who knows! But if Bird does buy a rival, it could tip the market towards a period of consolidation.

Recall that both Lime and Bird were sniffed-over by Uber before the latter declined to buy either.

According to its Crunchbase profile, buying Scoot would constitute Bird’s first acquisition. Its most recent round was almost one year ago, a $300 million led by Sequoia Capital. As such, we presume that the deal would be for more stock than cash, as the latter is likely in tight supply at Bird, which has both growth costs and vehicle-related capex to cover.

Bird’s been busy. It , an e-scooter available for purchase for $1,299, and then this week, announced a .

More when we have it.

Illustration: .

It wasn’t too long ago that scooters and scooter startups were the hottest things in tech; quick ridership growth helped investors make successive, and successively larger wagers on companies like Bird and Lime. International competition is rife, and rental scooters are now sprinkled around the world.

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But there may be some turbulence on the horizon that we’ve touched on before, and I want to highlight that in the wake of a few news items and something excellent that .

Bikes

Let’s start with the news. , a China-based bikesharing platform, has been in financial trouble for some time. In December, the company’s cash situation . Despite raising huge sums of money, the company’s investments in hardware and growth seemingly wound up not generating sufficient profit to be viable. Reports surfaced this week that the firm had entered bankruptcy, seemingly capping the arc. However, Ofo later “denied reports of impending bankruptcy and maintained that the company is ‘currently operating normally,'” .

But what’s clear is that Ofo’s financial troubles continue. This set of factors are coupled to that Meituan Dianping, which owns Ofo-rival , will scale back its operations following losses.

So the biggest bikesharing players, despite raising billions, are finding that their model didn’t work. Even at scale.

Scooters

You can see the parallel to the scooter world, of course. But the analogy may not hold. Indeed, it could be that scooters see enough rides per-day in the long-term to allow for their economics to bear out. As a sometimes rider of the little devices, that would be fine by me.

But a details how the economics don’t work quite yet:

More recently, operators like Bird and Skip have spoken more publicly about the rough reality of unit economics.

“When I think about opportunities to figure out our unit economics,” Shalin Mantri, head of product at [scooter company] Skip, told TechCrunch a few months ago, “it’s no secret now — it was probably a dirty secret of the industry, you know, a few months ago — that it’s hard to make money, and some of the biggest challenges to doing that are the cost of charging, the lifetime of the battery, the repair costs, the depreciation of these things being used in a fleet use case and the last is vandalism and theft, which is another big issue.”

There are probably a lot of places to squeeze margin out of the above list, but it will be difficult. The counter argument to pessimism is that companies like Bird and Lime are stocked with smart people tasked with solving the costs and improving unit economics. They may pull it off.

What I do think is notable, however, is how far the scooter groups (again, this is a global phenom, not something merely domestic) managed to raise and scale so quickly before figuring their model out a bit more. Perhaps there was so much capital available, looking for growth-oriented shares, that the scooter boom became a money arms-race?

Whatever the case, as the bikesharing boom unravels, we’re keeping an eye on scooters.

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