At our annual conference in November, we were privileged to have Professor Karl Ulrich be the keynote speaker. Professor Ulrich is the Vice Dean of Entrepreneurship and Innovation and the CIBC Professor of Entrepreneurship and e-commerce at Wharton, and he shared his fascinating experience in the personal transportation industry. We’ve summarized his presentation below but please check out the full talk here — it’s worth the time: https://youtu.be/CulDRU8vbTM
In 1987, Professor Ulrich first began building personal transportation vehicles (including a snow bike) in graduate school and in 1999, he cofounded a scooter company called Xootr. The company faced almost immediate competition from Segway but ultimately had over 20 years of organic growth due to the introduction of the popular Razor scooter in the early 2000s.
The interest in mobility expanded into angel investing and in 2013, Professor Ulrich invested in a dockless bike share company called SoBi (or Social Bicycles). It’s important to remember that 2013 was a time when bike share was unheard of in the US. As a result, SoBi faced many obstacles and was on the cusp of ceasing operations more than once. However after Mobike’s launch in 2016 and its subsequent rapid consumer adoption throughout China, SoBi began to attract the attention of investors and tech companies in the Bay Area. Soon, SoBi introduced a fleet of electric bikes and rebranded as Jump. In 2018, Jump was acquired by Uber.
As we can see, the concept of personal mobility has been explored since the 1990s but it’s only in recent years that investment dollars have poured into the industry. Professor Ulrich offers these key takeaways on why that is.
Luck is a key determinant of venture success. The launch and popularity of Razor scooters perhaps singlehandedly led to Xootr’s survival and its early success.
Sometimes, the business model is more important than the product. Even though Xootr’s scooters in 2000 were just as good, if not better, as a Lime scooter today, a successful business model in this space had to incorporate GPS and smartphones, which are technologies that didn’t exist in everyone’s hands two decades ago.
Forecasts of new category ventures are often too optimistic. Xootr’s major competition back then was Segway. When it was first launched, Segway estimated that it will sell 40,000 units per month in the first year, but we know that the product ultimately didn’t achieve product-market fit. New categories products usually do not become a success in the first two to three years and won’t achieve rapid growth for the first five to six years.
Diffusion in new categories takes a long time. In 1995, the EMPower scooter launched and the product itself was similar to electric scooters today. However, the market was not ready for it due to a lack of consumer acceptance and technology enablement.
If there is a benefit proposition, consumers will eventually get over a product “looking weird”. Products look silly or weird to the market in the beginning (e.g. AirPods), but consumers will disregard superficial features if the product offers real benefit.
The importance of being a disciplined investor. Xootr’s product was better and 10% cheaper than the Segway, but Segway received far more media attention and investments from top VCs before its decline. Therefore, it’s important for long-term investors to ask these three questions when evaluating opportunities — 1) What is the job to be done, 2) does the solution do the job, and 3) does the company possess the assets and capabilities to be competitive and win.
Sometimes, new venture success is about staying alive long enough for something good to happen. For eight years, SoBi encountered numerous challenges from all sorts of angles but the CEO never gave up and quit. Once the dockless bike share trend reached the US from China, everything changed for SoBi for the better. Therefore, burn rates are especially important when looking at investments, because when luck strikes, you want the company to be still there.