The Future of Micromobility
How VCs and E-Scooters kicked off the future of micromobility (and what’s up next)
“The next big thing will start out looking like a toy.” — Chris Dixon
Growing up in the early 2000s, scooters were an integral part of daily life. Razor’s launch of their first electric scooter model was the must-have toy of the year in 2000. The proliferation of scooters among children had long relegated them to lowly toy-hood.
The launch of Bird in 2017 and subsequent consumer and investor fervor initially seemed surprising, if not completely outlandish, as a startup hocking children’s toys became the fastest tech unicorn ever. However, the transition from a piggy bank savings purchase to the “future of mobility” was not a surprise to the original creator of the e-scooter, Wim Ouboter, who designed the original electric scooter with the intent of radically transforming transportation.
Current State
Over the past ten years, ride-hailing/sharing startups have laid the groundwork for not only the possibility but the potential for massive success in launching disruptive transportation methods. The initial launch of e-scooters demonstrated the market's readiness for a novel solution to urban mobility. In 2018, the first full year after e-scooter sharing’s launch, Americans took 38.5 million trips on shared e-scooters. This level of ridership immediately eclipsed station-based bike-share (36.5 million trips) which had been in the market for almost ten years.
Strikingly, the introduction of e-scooter sharing did not cannibalize existing demand, instead, total rides taken has grown by 140% year over year, indicating a significant opportunity for growth in the micromobility market as well as the markets potential to support multiple different models/vehicles.
Growth in micromobility continued into 2019 with a 62% increase in total rides taken driven mostly by a 130% increase in e-scooter trips. COVID-19 greatly impacted the trend, causing an estimated 60 to 70% drop in rides initially. However, the initial shock from COVID-19 has since reversed and is trending positively toward making a full recovery by 2021–22.
Given the high demand and rapid adoption of micromobility options, the global market potential upwards of $500 billion by 2030. The emergence of an untapped market of this size has created a frenzy of investment into the industry with the battle to win market share still raging.
Market Analysis
China Bike-Sharing Overshadows the Market
Venture investment in micromobility sharing platforms originally began with bicycle-sharing services in China. In 2016, 67% of all venture funding in micromobility sharing was raised by Chinese bike-sharing companies. The trend of astronomical investments in Chinese bike-sharing has continued to dominate the investment landscape through 2020 with a whopping 55% of all micromobility platform venture funding flowing to just nine bike-sharing firms in China.
Given its drastic deviation from the rest of the market and existence prior to the 2017 definition of micromobility, the removal of Chinese bike-sharing firm funding rounds paints a clearer picture of the micromobility platform landscape.
E-Scooters
As the true first mover in the micromobility industry, e-scooter sharing startups have captured the lion’s share of venture investment. E-Scooter platforms raised 48% of micromobility platform venture funding between 2016 and 2020. Share of funding increases to 77% when platforms offering E-Scooter and Bike-sharing are included.
Investor fervor in the market has created a landslide of new startups across the globe, all looking to corner part of the market. These new firms vary in their business models: some are looking to add technological improvements to existing business models, others are launching in new or underserved geographies, while still others are trying to bring brand new solutions to the industry.
The flooding of the market with new firms and new funding is understandable. If we use ride-hailing startups as a proxy to analyze this new market, public adoption of new transportation platforms has the potential to grow rapidly and result in various levels of success from global dominance to lucrative acquisitions. If the micromobility platform industry traces a similar maturation path to the ride-hailing industry, smaller startups that hyperfocus on regional/local dominance will still have the opportunity to succeed. Depending on their ability to leverage local knowledge and regulations, these firms may be able to fend off global external competition, or they may be able to corner a small market and end up with a lucrative exit through acquisition by the eventually global “oligopoly” — i.e. Lyft and Uber for ride-hailing.
There is however a key difference between this onslaught of e- “insert vehicle” startups and the former growth of ride-hailing firms. Ride-hailing was a marginal technological improvement on traditional taxis — with the slightly added difficulty of getting into a complete stranger’s car — while the success of micromobility platforms is dependent on mass adoption of an entirely new model for urban transportation. This is no small task, especially given the various other operational and financial challenges facing micromobility platforms.
Unit Economics
Most, if not all, micromobility platform startups are unprofitable. As growing startups, this is normal, especially in a more capital intensive industry. The expectation is that as they begin to scale, the companies will eventually move down the cost curve due to more favorable cost economics.
The difference for most micromobility platforms — especially E-scooter sharing platforms — is that most were, at least initially, unprofitable even at a unit economics level.
The major drivers of operational cost for e-scooter operation are charging, repair/maintenance, insurance, and payment fees. These costs were eating away at their contribution margins to the point that the payback period for the initial scooter purchase was less than the life of the scooter leading to a negative return on investment on a per scooter basis.
According to Bird CEO Travis VanderZanden, unit economics have improved notably over the past four years. Upgrades to scooter durability and increases in price for customers have driven contribution margin growth for Bird and presumably other micromobility platforms as well. As promising as these changes are for the industry, further operational cost reduction and significant market share will be necessary to reach sustainable profitability.
Additional Risks & Limitations
Several additional factors continue to plague the industry as it attempts to prove that it is worth its valuation.
As with ride-hailing companies, micromobility platforms have run into a series of regulatory red tape. Officials have slowly begun rolling out new regulations that could limit growth, create losses after building up infrastructure or drive up operational costs in order to comply.
These regulations also play a role in the scalability of platforms. Expansion to new markets will be key to the success of micromobility firms and compliance with differing sets of local regulations adds yet another hurdle to an already difficult task. Local price elasticity of demand, cultural and demographic influences, and infrastructure differences, among others, will create location-specific barriers of entry for new challengers in each market.
Environmental factors like weather, climate, or topography could also severely limit local adoption of micromobility platforms. The environments of Los Angeles or Madrid may create demand for E-Scooter or E-Bike use for much of the year but environmental factors in Vancouver or Brussels could generate much less demand. Multiple major markets are not optimal for micromobility usage as it currently stands.
Offering differentiation, another key factor for capturing market share has been limited in the micromobility market. Other than slight technological differences and aesthetics — i.e. a different color of paint — most e-scooters are commodities for which a consumer will not walk an additional block to select one brand’s E-Scooter if another brand’s scooter is closer.
The industry is primed for a wave of consolidation as the market becomes oversaturated with a commoditized product. High costs — both operational and overheard, barriers of entry/scale, and high levels of commoditized competition will require significant market share to succeed or provide a chance of profitability. Individual cities will not be able to support large numbers of competitors while also generating enough revenue for the firms to continue operations.
Consolidation has begun to occur as the top e-scooter firms look to solve these challenges in the fight to capture share. According to Crunchbase data, 3 E-Scooter sharing companies — with combined venture funding of over $190M — were acquired in 2020. Crunchbase data also shows the failure and closure of several other micromobility platform startups between 2018 and 2020, however, given Crunchbase’s approach to sourcing data, other small regional failures may not have been accounted for.
COVID-19 has potentially accelerated this consolidation. Even e-scooter behemoths, Bird and Lime, have laid off significant portions of their workforce to cut expenditures and stay afloat. Smaller, less well-funded firms will need to build strong localized market share to survive or will be destined for either failure or acquisition.
What’s Next?
Consolidation within the E-Scooter sharing industry is already occurring, however, this is not the only factor at play in the broader mobility industry. Ride-hailing giants Uber and Lyft have begun developing and rolling out micromobility sharing capabilities. Other multi-nationals will also look to get involved in the market as the industry continues to grow. The addition of large established competitors to the e-scooter/micromobility platform market poses an existential risk to existing pureplay startups in the industry.
Opportunity
With the multitude of impediments and an uncertain future, micromobility presents a massive opportunity for investors and startups to leverage short term trends by filling gaps in the current market. Industry fragmentation also opens up the opportunity to shape the future of micromobility by building or funding agile, sustainable companies that align with the anticipated long-term state of the market.
E-scooters are not just toys — adoption rates and growth trends have proven their validity as a legitimate method of transportation — but, they are not the whole solution. Sensationalism around E-Scooters’ potential is more likely a proxy for the rapid and comprehensive changes needed in our present-day transportation model.
The trend toward structural changes in urban transportation will continue to move forward. Increasing urbanization and population growth will create further congestion and pollution, current urban infrastructure is car-centric and public transportation systems are crumbling under the weight of populations many times their original expected ridership. Some cities have already rolled out plans to shift away from current transportation infrastructures. The path forward for these cities today and most cities in the future will likely be centered on, or at least include, micromobility.
Current leaders in the micromobility platform industry are likely not the comprehensive answer to the current problems with transportation. They do, however, have the opportunity as first movers in the space to build out capabilities and transform themselves to design the future of mobility.
Future Trends & Promising Startups
In developing this post, I have come across thousands of startups operating in the micromobility industry. The research I conducted has also led me to develop a set of trends I believe are likely to occur in both the short-term and long-term micromobility space. I have leveraged the combination of these sources to develop investment theses for the industry and have identified promising startups poised to succeed in the frameworks defined below.
Short-term Trends & Opportunities
Fleet Services
Trend Prediction: Short-term success in the micromobility platform industry will be defined by market share, cash flow, and growth in consumer adoption. These success factors will require market consolidation, geographic expansion, increases in offerings (e.g. vehicle types) & options (e.g. alternative business models, add-on services), and increased profitability to generate improved cash flow.
Investment Thesis: Products and services that complement micromobility platforms and assist these platforms in achieving operational efficiency and growing profitability through fleet services present an opportunity to generate near-term returns with the potential for sustainable long-term success.
Surve Mobility— Surve offers intelligent mobility operations solutions to shared mobility providers. Their micromobility services include battery-swap, fleet rebalancing, vehicle recovery among additional infrastructure and software solutions developed to increase fleet efficiency and reduce operational costs. The firm raised a $6M series A to continue it’s expansion — Surve already provides services to Voi, Sixt Share and Share Now. Surve directly solves for micromobility platforms greatest challenges and develops proprietary, custom infrastructure solutions creating a defensible moat and placing them as a strong early contender with tremendous up-side potential
Raido —With $100K in Seed funding, Raido has developed a proprietary, universal swapple battery that can be installed on any micromobility vehicle at any point in production. The startup has continued to build out innovative offerings targeting micromobility profitability including modular charging stations, portable charging units along with their own charging network. Most recently, they have developed their own line of e-scooters for both B2C & B2B markets. Notably, Raido claims it’s innovative suite of solutions can increase platform revenue and cut charging costs by 50–80%. Raido’s continuous innovation in the fleet space and focus on profitability could potentially generate significant growth for the startup.
Other Promising Startups: Ubiq, Luna Systems, ChargeWheel, Swobbee, HUDJO, ZapBatt, Meredot
Regional & Local Platforms
Trend Prediction: Global expansion is a natural next step for micromobility sharing platforms as they look to scale and capture market share. Entry into new geographies will require high up-front costs and risk as the firms navigate local nuiances, ensure regulatory compliance, develop an infrastructure presence and compete against incumbent providers. Local governments may support local founders over foreign transplants or bow to populace pressure and hinder or outright ban global players from their region . As we had seen with ride-hailing firms, global micromobility leaders have already faced similar challenges with foreign market expansion.
Investment Thesis: Global expansion by leading micromobility platfroms — and other external players entry into the market — presents an opportunity to for local/regional micromobility platform operators and white-label platform solutions. Local operators can build geography specific market share by utilizing local knowledge and subsequently exit through acquisition by expanding global players. Local operators may be able to build up enough market share to create barriers of entry and, assuming improved unit economics, build a sustainably profitable company in a single market. Turnkey mobility solution will be able to partner with both local and expanding global players to launch new fleets and markets.
Luup — Micromobility platform founded and operating in Japan. Luup recently raised $7.5M in seed funding in 2020 to launch multimodal micromobility sharing options in Japan. Luup was chosen as one of three providers selected by the Japanese government to pilot micromobility in the country — the other two being Bird & Lime. Luup’s strategy includes building out mobility infrastructure in Japan and developing several alternatives to complement e-scooters and e-bikes. Japan is notoriously difficult for foreign countries to break into and Luup’s local expertise and strategic roadmap will be difficult for Bird, Lime and others to combat.
ATOM Mobility — ATOM provides all-in-one, white label solutions to enable the launch of individual micromobility platforms. The Estonian startup has yet to raise a venture round. The only funding they have received so far was a $240k grant from an Estonian angel group. ATOM’s full-service offering supports the creation and launch of sharing platforms across multiple vehicles & operating models along with integrated operations management solutions. ATOM has focused its business model on markets forgotten by large micromobility platforms — for example Zarasai, Lithuania— therefore enabling the organic, decentralized expansion of micromobility sharing.
Other Promising Startups: Comodule, ATOM (Latvia), Koloni, Joyride, Tuul, Electricfeel, Marti, Bit Mobility, Hobo
Personal Electric Vehicles & Innovation
Trend Prediction: The growth of micromobility platforms is also generating an increase in personal sales of electric micromobility vehicles. Incumbent e-scooter/e-bike/e-mobility manufacturers have cut prices and stopped innovating, leaving a gap in the market for quality, innovative personal mobility manufacturers. Consumer concerns about micromobility sharing platforms, especially around cleanliness — which is likely to linger post-COVID, could drive buyers toward personal ownership.
Investment Thesis: Personal mobility manufacturers developing innovative micromobility vehicles with significant safety, technology, and hardware improvements coupled with installment-based ownership models present an opportunity to substitute micromobility platforms for at least a subset of consumers with the potential to cannibalize large portions of the micromobility platform market to become the normal business model of future micromobility.
Taur — With over $4M raised through various sources, including crowdfunding, Taur is developing E-Scooter models with true innovative improvements based on consumer needs. The firm’s strategy focuses intently on product by leveraging an engineering team with impressive technology experience (e.g. Tesla, Apple). Taur’s proven consumer demand (multiple oversubscriped crowdfunding projects), continuous improvement in design to ensure product-market-fit, and prudent financial practices place the startup as a strong contender to up-end the current sharing platform trend with their subscription-based ownership model.
Angell — Founded and initially funded by successful serial entrepreneurs Marc Simonici — founder Meetic — and Jules Trecco. Angell’s e-bike includes a sleek design by french designer Ora Ito. Angell’s electric bike offers significant technology and safety improvements over traditional e-bikes. The startup’s key competitive advantage is the bike’s integrated software and communication system along with its unique touchscreen display. Operating as more of a software startup than bicycle manufacturer, and planning to invest heavily in smart cities through an internal incubator, Angell is well-positioned to build an end-to-end, integrated micromobility experience.
Other Promising Startups: Scooterson, Stigo, Superpedestrian, E-Floater, ACTON, Sushi Bikes
Alternative Business Models
Trend Prediction: The micromobility market is mostly split into two divergent factions: lump-sum personal purchase & ownership, and cost-per-mile sharing which utilizes micromobility platform owned vehicles. Micromobility sharing platforms currently dominate the market but as overall adoption grows due to industry maturation, a broader consumer base may look toward alternative models to join the market. Micromobility platforms looking to differentiate offerings and increase market share may also differentiate business models to offer multiple tiers of service.
Investment Thesis: The existence of only two business models may provide opportunities to provide hybrid or net new models to capture part of the current market or generate industry growth through additional market demand. Although the cost-per-mile is near ubiquitous across the industry as of now, there is little proof that this model is optimized for consumer adoption or company profitability. Micromobility startups which offer innovative or differentiated models can disrupt the market leading to potential acquisition or long-term growth.
Cosmic Go — An early stage micromobility sharing startup based in Colombia, Cosmic has turned the traditional business model on its head. Besides offering white-label fleet setup solutions. Cosmic operates its own mobility network that changes the structure of micromobility on both the supply and demand sides. From a supply standpoint, the firm operates as a facilitator, providing end-to-end services including software, hardware and know-how to potential fleet founders. They also offer potential investors the ability to purchase vehicles as microinvestments starting at just one vehicle. Cosmic also allows those with a second, unused, vehicle to rent it through their network. On the consumer side, they offer a traditional, on-demand model as well as a subscription based model with the goal of getting “any vehicle at anyone’s hand to as long as they need it”. Cosmic’s unique model offloads much of the upfront cost onto partners while also creating a community of owners and riders. This model could significantly increase user adoption through affordable options while also improving profitability and reducing capital investment. The combination of these factors position Cosmic to rapidly and profitably scale. The main question which will determine success is investor interest and continuity.
HumanForest — London-based micromobility platform which, at first glance, looks to be a knockoff of every other e-bike sharing company. The firm’s key differentiation comes down to it’s revenue models. HumanForest has raised over $3M through an angel round and crowdfunding crowdfunding campaign to launch “Free” e-bike service in London. They have developed three unique revenue verticals: traditional cost-per-mile, corporate subscriptions for employees and most notably, free rides (limited to 20 minutes per day) supported by in-app advertisements. This alternative business model has the potential to drastically increase adoption, create new unit economics (to be determined if they work) and produce brand-loyalty as the affordable micromobility option. Conversely, this model is unlikely to retain sustainable growth as this model is lacking in a significant defensible moat while operating in the saturated London market.
Other Promising Startups: Mobeelity, Vaigo, Vooom,
Long-term Trends & Opportunities
Global trends toward urbanization and population growth will only exacerbate the problems already plaguing cities — congestion, noise and pollution. Mitigating these issues will require the complete redefinition of our concept of transportation in order to create a seamless, sustainable mobility system. Micromobility has the potential to lead — or force — this redefiniton on a city by city, as well as, global scale. The significant impediments facing both micromobility firms and governments will require a joint effort between the two along and facilitation by advancements in micromobility & smart city technology.
Alternative Vehicles, Autonomy & Robotics
Trend Prediction: Future mobility systems will require technological innovation to improve current vehicles and methods. This innovation will be driven by advancements in vehicle autonomy, robotics and vehicle design. Given the differing problems facing electric cars/trucks and e-scooters/e-bikes, there may be convergence toward alternative vehicle which bridge the gap thus mititaging the problems with each vehicle type individually. Other alternative vehicles may leverage new technologies to fill gaps in end-to-end human-mobility market.
Investment Thesis: Autonomy, robotics and alternative vehicle startups in the micromobility industry are likely to first improve on existing transportation methods prior to developing groundbreaking innovations. Startups operating in this space that have developed solutions or products which can generate consumer interest and revenue to test and sustain their development of futuristic technologies will be able to leverage existing consumer bases and adjust their designs to ensure product-market-fit.
Promising Startups
Pre-Seed: Weel Autonomy, Infinite Mobility
Seed Funded: Tortoise, CtrlWorks, QIQ Global, Enuu, Nimbus, Lit Motors, Kiwibot
Venture Funded-Early Stage: Organic Transit
Smart Cities & Infrastructure
Trend Prediction: Widespread adoption of micromobility and progression toward an integrated mobility system will require major changes in urban design and updates to urban infrastructure. Government officials will need to be heavily involved with the creation of new micromobility regulations and optimization.
Investment Thesis: Startups that provide cities with smart infrastructure solutions — especially solutions which will mitigate current clashes between governments and micromobility platforms — and those that provide city planning & micromobility data solutions will be instrumental in micromobility’s long-term success.
Promising Startups
Pre-Seed/Unfunded: OONEE, Leon Mobility, Urban Radar
Seed Funded: Drover AI, DUCKT, Perch Mobility, Trailze, Knot, Vianova, Populus
Venture Funded-Early Stage: Remix, AppyWay, Lacuna Systems
