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.

The Truth About the Scooter Economy — An Insider’s Perspective was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

No company has ever elicited so many questions by friends, colleagues, entrepreneurs, fellow VCs and journalists as has Bird, the company that pioneered the electronic scooter as a service market. Until recently it was headquartered 2 blocks from our offices in Santa Monica so we literally saw it emerge under our feet and we proudly invested in the last 3 rounds of financing.

Today the company officially announced its most recent round of capital — having raised $300 million — less than 18 months from when the company was created so I thought it was probably a good time to weigh in on the questions I get asked most frequently and why we’re so excited about Bird.

How could Bird really be worth the reported $2 billion valuation that I read about in this press?

While I promised not to comment on the exact valuation you can assume that it is very large and perhaps the fastest rise from zero to what some have called a “unicorn” valuation. I understand that this has caused some journalists and many an arm-chair Twitter commentator to shake their collective heads that some of us may have lost ours.

While this reaction to such a valuation is understandable, to anybody who has seen the meteoric rise in consumer demand and actual revenue the valuation is much less surprising and may turn out to be quite conservative. As I like to tell people who ask about Bird, “consumers have literally voted with their feet.” The company has done zero paid marketing.

Count me in the initial skeptics. The company launched a trial service in Santa Monica just last year and when I first saw the scooters (parked literally outside of our office) I was convinced nobody would want to ride them. Over the course of the first few months I saw a few people out on the street taking Birds and then a steady uptick in riders. The initial usage ramped up to such a heavy level that I would stare out of my 6th floor office while on phone calls and literally watch 5 Birds pass our office every 2–3 minutes. The volume grew so steady that I finally hopped on one, rode down to Bird’s offices and pleaded with Travis to take money from us. I had literally never seen a consumer phenomenon take off so quickly.

Forget the valuation — I think it’s quite possible that Bird could be the fastest growing company to reach a billion dollars in run rate revenue. I’m not providing actual financial information or predicting a number or a date but I will tell you that the revenue growth to date has been astounding. And since the consumer demand has been insatiable it is really only supply that is currently a limiting factor on how fast the company can grow.

Is Bird really defensible? Couldn’t anybody launch a competitor?

This is the gut reaction of many of my friends and many commentators I’ve seen on Twitter and is the first question any skeptic will ask me. Since I see many companies in their earliest days I can tell you that I’ve heard people say this about nearly every great company / market created. People said this about Ring (which went from startup to selling to Amazon > $1 billion in around 5 years), Facebook, YouTube, Airbnb, Uber, Twitter, Instagram and many other great behemoths of the technology industry. Ah, but Bird doesn’t have network effects! There is nothing viral! Anybody can launch a scooter service!

Not really.

1. Capital. Because Bird was first to market, extremely innovative, quick to hire talented leadership and an experienced founder it was able to raise $125 million in an extraordinarily short period of time. That has allowed the company to launch in many markets, build amazing applications, design future versions of the scooter and monetize while many companies are still just drawing up their go-to-market plans. This allowed Bird to then raise $300 million from some of the top VCs in the country. Capital of course drives scale advantages and when you have “winner take most” markets it also has a way of scaring away some investors from investing in the 3–5th “me too” competitors. You can expect some strong competition, but it’s unlikely that there will be 5 great scooter companies.
2. Density. One huge advantage the early-movers have is “density.” A dockless eScooter solution is only compelling if you believe that you’ll always be able to find a scooter in a relatively short walking distance or it defeats the purpose. If Bird has thousands of scooters in a neighborhood (and if it can acquire these scooters at cheaper prices due to scale advantages) then it’s significantly more difficult for new entrants to launch without serious capital and it’s hard to get serious capital from investors who perceive you’re late to the game.
3. Design. As of today, commentators are imagining a world of undifferentiated scooters that all sort of look and feel the same. That’s a bit like imagining Apple launching the 2007 iPhone and then not having 10-years of constant improvements to maintain its market leadership position. Of course Bird already has many generations of scooters planned so if a competitor wants to launch today’s status quo, they can expect Bird to use its head-start and market knowledge to launch its next-generation vehicles.
4. Data. Bird already has an enormous lead in data collection. What appears as just an electric-powered scooter is really a computer with wheels. Between our on-board CPUs and your mobile phone companions we have an enormous amount of data on transportation routes, where riders want to pick up scooters in the morning and where they leave them in the evening. This not only allows Bird to have advantages in right-sizing city inventory levels and proper placement to maximize yield, but the company has already been providing this data to cities to help them better plan their cities of the future. We clearly need a world in which gas cars don’t dominate dense city environments and providing this data to cities is a great start in that direction.
5. Chargers. Many people assume that Bird has a team that picks up scooters in the evenings and charges them but one of the beautiful early innovations was to allow people in each local market to charge the scooters themselves and be financially compensated and then they place them in pre-determined locations in the morning. Of course you can have a few competitors and still find enough charges but once you’ve gotten 2–3 big players in any city it’s hard to imagine many more players building out as efficient of a charger network as the early innovator.
6. Mechanics. What is even more remarkable than “chargers” is how Bird has build out local teams of mechanics in each market, providing large legions of skilled labor the ability to earn meaningful dollars for repairs to wheels, brakes, cables, batteries, electronics, etc. Local politicians wanting to see local job creation rather than jobs at tech firms all migrating to San Francisco should be heartened. Because each market won’t have unlimited labor suppliers of repair people and because the largest services can pay the best, there is inherent advantage in capturing the early pools of mechanics.
7. Batteries. The biggest limiting factor of growth to date has been the supply of scooters in markets and this $300 million capital raise goes a long way to solving the supply challenge. As the scooters are electronic, they do require charging at the end of the day. To the extent that Bird can design scooters with longer-life batteries while others are perfecting the last generation of scooters, Bird can deliver a better daily revenue yield per scooter.
8. Brand. Another obvious advantage is a term that often feels amorphous — “brand.” When you think about the category of scooters you think about Bird and that becomes a brand your friends want to try. The more people that see your brand as the innovator the more “earned media” the company gets and the product becomes synonymous with the category. You don’t “Bing” information or “Hulu and chill.” Brand matters.

How does the Bird service work? How do they make money?

I am in New York today and several people asked me how Bird actually works. “Do you buy one? How do you get access?” So if Bird isn’t in your area yet I’ll point out that you download an app, open the app to find the nearest Bird (as you would an Uber) and when you find one you scan the QR code to rent it. You enter your credit card information and driver’s license once and then it’s $1 to start in and currently 15 cents per minute.

I get why it works in Santa Monica, but will it really work in …. [name your city]?

Yeah, I know your first thought. That’s what we all thought about Uber, too. Turns out that there are many more markets where scooters are already working and booming. It’s obvious that in some markets they will be useable 365 days / year and in others it might be just 9–10 months but the footprint of where scooters will work (and is already working) is much broader than you’d initially think.

Does it surprise you that the fastest-growing “unicorn” was launched in Los Angeles and not San Francisco?

No. Not at all. Leave aside that we’re the second largest market in the United States with the third-largest tech ecosystem and the fastest growing startup market in the country, LA is clearly a pioneer in transportation solutions and has been for the past 100 years having led the way in freeways (highways), aerospace, rocket propulsion, deep water ports and now space flights (with SpaceX) it is no wonder that Bird was started in LA. Bird is the natural evolution in billion-dollar++ outcomes in LA.

This is why so many great LA funds like Upfront, Greycroft and B Capital Global have all backed Bird. And with such a strong and experienced founder in Travis and great local executives like Paige Craig whom we’ve all known and worked with for the past 10 years, we are confident that this team can out execute.

Why scooters? Can’t people just ride bikes or walk?

Yes, I get this a lot. Walking is great and I love to walk around Santa Monica, San Francisco and New York City but there are sometimes I need to be 1.6 miles away and I don’t have the time to walk there and back. Uber or Lyft would sit in a wall of congestion and perhaps public transportation lines aren’t set up between my point A and point B. Scooters crush this situation. Or perhaps you’re commuting daily on the Caltrain to SF, the Amtrak to NYC or the MetroLine from Downtown LA to Santa Monica … scooters provide an excellent “last-mile” commuting solution. If more broadly adopted, they should help reduce urban traffic congestion and help reduce carbon emissions.

And sure, I love riding bikes. Mostly I love my Peloton bike. But if I judge by the usage around Santa Monica I can tell you that scooters are crushing bikes for short-haul (< 3 miles) and bikes are probably the only real solution for 5+ miles if you don’t want to take a car or public transportation. But don’t just take my word for it — below is a regular scene in Santa Monica while behind me there must have been 50 Birds riding by in a 3 minute period and I expect many other markets when scooters are fully deployed. As I said, consumers have “voted with their feet.”

Are the scooters safe? Shouldn’t everybody wear helmets?

Yes, everybody should wear helmets and of course Bird reminds riders of this. In fact, Bird has already given out more than 30,000 free helmets. Of course Bird can’t monitor every rider and to date many don’t wear their helmets. We notice this because scooters are new and stand out. To everybody who has mentioned this to me I walk out into Santa Monica and point out just how many bicyclists aren’t wearing helmets. I point out that they’re there but we have become invisible to them because bicycles have exited our whole lives. Yes, both Bird riders and bicycles should wear helmets. I can tell you that Bird is currently limited to a maximum speed of 15 miles / hour and takes rider safety very seriously.

Summary

Bird has created a brand-new transportation sector that has captured the imagination of riders and investors alike. It is clear that this level of success will breed strong competitors, likely including Uber, who can’t afford not to have an answer to the success of the scooter market. I like Bird’s chances because it has not only been the clear market innovator but is also incredibly focused on execution in this core market rather than having to be excellent in many solutions simultaneously. Yes, it is unprecedented for a company to start from scratch and be worth billions of dollars in less than 18 months. But it is even more rare for a company to do that while also scaling its revenue at such an impressive clip and with no paid customer acquisition.

All The Questions You Wanted Answered about Bird Scooters and Their Recent $300 Million Funding was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.