Can Bird build a better scooter before it runs out of cash?
A year ago, Bird Rides Inc. was flying high — and Silicon Valley was betting that it would keep on climbing.
Thousands of the Santa Monica startup’s signature black-and-white scooters appeared on street corners across the world, bought with venture capital and rented to smartphone-toting riders.
Investors saw how quickly riders took to the new mode of transit, and visions of Uber-size growth and revenues flitted through their heads. In March 2018, just six months after the first Bird hit the pavement, venture funds poured in $100 million. In June, they dumped an additional $300 million. Bird’s valuation soared to $2 billion in a matter of months.
But today, facing a crowded field of competitors, pushback and fees from local governments, and fundamental questions about whether any company can make money by releasing electric scooters into the wild and charging per ride, staying aloft is proving harder than it appeared.
“Growing from $50 million to something like $2 billion in eight months has never happened before, and is probably not supposed to happen,” said Bradley Tusk, an early Bird investor and former Uber adviser known for helping the ride-hailing firm navigate its early political battles.
“If this was a normal startup that was two years old, yeah, of course they haven’t figured everything out yet — this is not the point in the cycle where you’d sweat it,” Tusk said. “But a normal startup also wouldn’t be looking at a $2-billion valuation.”
The ill omens began in January, when the company quietly raised another $300 million at the same $2-billion valuation. In an industry that prizes a perpetual uptick in valuation to propel a narrative of constant growth, a flat round spells trouble, and often a desperate need for cash.
Around the same time, the company deleted all mention from its website of its commitment to give cities a dollar per scooter per day to maintain infrastructure and build more bike lanes (though many of the deals it reached with individual cities contain fees).
In March, Bird laid off 5 percent of its workforce, which had grown to more than 700.
And the company’s official strategy began to shift. In the whirlwind summer days of 2018, Bird had adhered to the startup mantra: Grow at all costs. But as 2019 arrived, Bird Chief Executive Travis VanderZanden (a Lyft and Uber alumnus) started to sing a different tune.
“2018 was about scaling,” he said at a Malibu tech conference in January. “2019 is about really focusing on the unit economics of the business.”
By unit economics, VanderZanden meant the simple math of making money on each scooter dropped into the world. And while trying to make money might seem like a basic imperative for any business, it goes counter to the preferred pattern for 18-month-old startups flush with venture capital cash.
Many venture-backed businesses operate on the idea that new companies should spend their first years focused on increasing market share at the expense of actually making money — once everyone in the world uses their product, the thinking goes, they can achieve economies of scale, come up with innovations that smaller companies couldn’t pull off, or simply reap the benefits of being a monopoly.
This strategy, termed “Blitzscaling” in a popular business book written by LinkedIn co-founder Reid Hoffman, paid off for world-eating firms such as Amazon, Facebook and Netflix, and has been the animating principle behind Uber and Lyft, which have been locked in a deeply unprofitable race for maximal market share from Day One.
VanderZanden acknowledged in January that the company was far from solving its fundamental economic problem. The tens of thousands of scooters Bird had spread across the world — a mix of retail models made by Ninebot (the parent company of Segway) and Xiaomi — broke down (or were stolen or vandalized) long before they could earn back their cost.
“Those things were fragile,” he said. “Clearly the unit economics didn’t work on those scooters, but that was a test anyway.”
The company is pinning its hopes on the Bird Zero, a custom scooter with longer battery life and sturdier construction.
Bird declined to share details on unit economics with the Times for this article, but VanderZanden told tech website the Verge in March that the scooters would need to stay active for six months — around 180 days — for the company to just break even on the purchase price, once charging, repair and permit costs were factored in.
Bird has experimented with its business model in recent months. In early March, the company altered its repair program in Los Angeles, which had relied on gig workers to fix broken scooters. It moved repairs in-house (though scooters are still charged each night by an army of gig workers). Later that month, the company introduced scooters with locks in some markets, in a bid to prevent theft and vandalism.
The company also raised prices on its core dockless product in cities across America. Riders once paid a dollar to unlock a scooter, and then a flat rate of 15 cents per minute of riding. Now, per-minute fees have increased to 25 cents in Los Angeles and Austin, 29 cents in Baltimore, and 33 cents in Detroit and Charlotte. In other cities such as Bloomington, Ind., and Charlottesville, Va., rates went down to 10 cents per minute.
Scooter companies are betting that more durable two-wheelers will lead to profitability, though questions about brand loyalty remain.
Suster says Bird’s headstart on the competition has given it operations expertise and a wealth of rider data that constitute a “moat” — a defense against any competitors trying to steal its business.
“It looks so easy — you just put these scooters out and have revenue,” Suster said. “But it’s a complex asset management business, like owning airplanes or trains — our ability to maintain these scooters at cost, repair them quickly, and have them back out in the street at scale means our advantage is much greater than any new entrant.”