The scooter was invented in 1817 by Baron Karl von Drais de Sauerbrun of . In 1916, Arthur Hugo Cecil Gibson received a U.S. patent for what was called the Autoped — a “self-propelled vehicle.” While used by postal delivery workers and for entertainment, it was not a commercial success.
But no good idea should go unpunished. Just over 100 years later, venture capitalists invested over $5 billion in at least 11 different electric scooter companies. They thought it was the second coming and that e-scooters would be used all over the world again and again by millions of people.
In December, Bird Global declared bankruptcy after going public in late 2021 with what is called a special purpose acquisition company (SPAC) at an agreed valuation of $2.3 billion. Two other scooter companies, Micromobility and Superpedestrian, have died as well. A few are still spinning (Lime), although at a lower valuation.
Dare we say, venture capital lemming excess or how many scooters can squeeze through a small doorway at the same time?
Growth at any cost: The companies lost money for a long time. They aggressively entered new markets in an effort to gain market share and spent a lot on trying to attract new customers. This proved to be an expensive money-losing proposition. Oversaturation combined with declining usage, and many of the venture capitalists finally pulled the plug.
Expensive infrastructure and capital investment: Fixed cost vs. variable. A lesson for the ages. The companies had to first purchase the physical scooters, then once they entered a city, they had the expense of developing a system to deploy the scooters, pick them up every night for re-charging, re-deploy them the next day, and service them when they broke. High cost, low margin. This contrasts with Airbnb’s model of not owning any physical inventory.
Regulatory hurdles: Not only from government, but also from the local citizens who felt their sidewalks had become the Daytona Speedway. s were often more tourists than locals. Add on limitations on the number of scooters, where they could ride and where they could park — an almost perfect storm was brewing.
For example, California requires that electric scooter operators be at least 16 years old, have a valid driver’s license and not have any engers. You can only drive on a bicycle path, trail or bikeway, not on a sidewalk, and at a maximum speed of 15 mph.
San Diego was on the early front line of the e-scooter war because of our year-round temperate climate and our ranking as a top tourist destination. I was on the San Diego City Council at the time when they appeared without warning on our downtown streets, and I was a strong proponent of regulation.
The City Council finally ed regulations prohibiting scooters on the beach boardwalks and required the companies to install speed-throttling technology that automatically slowed the scooters on sidewalks to 3 mph.
Repair: They break, and they don’t always brake. At the peak, I visited an e-scooter graveyard stacked with hundreds of scooters that were broken or had been left on private property.
Currently no e-scooter company operates in the city of San Diego. Recently, the City Council was unable to agree on how to roll back its strict regulations in order to attract them back — which not everyone s.
Safety issues: In its bankruptcy filing, Bird cited significant litigation expense related to more than 100 lawsuits. Helmets were never required in most places.
According to a report from the Consumer Product Safety Commission, there were an estimated 360,800 emergency department visits related to all micro-mobility devices from 2017 through 2022. Majority being fractures and contusions. What did you expect, paper cuts?
The story is still being written, but the subtext here is classic. How many winners can there be in a category, especially when the only barrier to entry is how much money you are willing to burn.
Lime CEO Wayne Ting told Fast Company magazine in an interview last July that he had streamlined the company’s hardware and operations in an effort to get to profitability. He might want to review arrival time for the next blue moon.
Rule No. 798: Unlimited funding is never the innovation.
Bry and Neil Senturia are serial entrepreneurs who invest in startups. Please email ideas to [email protected] and [email protected].
