(Bloomberg Opinion) -- Electric scooter company Bird is raising $200 million, valuing the company at $2 billion, the company announced this week. It’s a heady ascent from the $15 million the company raised toward a $300 million valuation just three months ago. According to Alison Griswold at Quartz, it is the fastest a company has ever reached a valuation of $1 billion.
The news comes just a week after San Francisco ordered Bird and its peers Lime and Spin to pull scooters from the streets before starting a formal pilot program later this year with a total of 1,250 scooters. It came the same day that the city of Santa Monica, where Bird got its start, approved the less restrictive Shared Mobility Pilot Program for scooters and bikes, with no vehicle cap, but it requires operators “to develop systems that remedy improper parking, including pick up/drop off zones and incentives.”
Such stratospheric fundraising and a crackdown in regulations require us to figure out where each company’s moat — how they protect themselves through the unique value they provide — in this new transportation system lies.
Dockless, connected scooters are a service. Even though they are a service of identical units, each transaction is as unique as the user’s route. Like cars, they require energy and therefore need some combination of dedicated space, infrastructure or business model to support charging. Unlike cars, they need redistribution en masse at certain times of day and in certain locations.
So they’re public like buses and trains but personalized like cars; they’re individualized, but they have collective chokepoints around charging and redistribution. They’re a network — but do they have a network effect?
Technology analyst Ben Thompson offers some insight, beginning with a comparison to ride-hailing networks. The reason we have only a handful of ride-hailing companies, he says, is that a system of drivers and riders is a two-sided network: “As one service gains share, its increased utility of drivers will restrict liquidity on the other service, favoring the larger player." A higher concentration of drivers with one provider means that “riders will, all things being equal, use one service habitually.”
Thompson says scooters lack this two-sided network effect: Companies are simply “plopping a bunch of scooters on the street.” That means electric scooter network companies may have a hard time building that protective moat around themselves:
Absent two-sided network effects, the potential moats for, well, self-riding scooters and e-bikes are relatively weak: proprietary technology is likely to provide short-lived advantages at best, and Bird and Lime have plenty of access to capital. Both are experimenting with “charging-sharing”, wherein they pay people to charge the scooters in their homes, but both augment that with their own contractors to both charge vehicles and move them to areas with high demand.
The biggest moat in this transportation system as a whole might not be in the vehicles, the software that connects them or the network that charges them. It’s in regulation.
Each city has its own unique moat: regulatory jurisdiction. When a city sets hard limits on its electric bike or scooter fleet, or caps the number of companies that can participate, there’s potentially no way for a company to enter it at all. Worse still for companies that become active in a market before new rules are enacted: A regulatory reset can give new entrants the opportunity to jump those hurdles far faster.
The question, then, is, What changes the dimensions of that moat? Its users, their behavior, and even their unmet, sometimes not-so-obvious needs.
Venture fund Social Capital said this week that electric scooter use is a desire path showing where people want to go and how they want to travel. Traveling on the sidewalk or the wrong way down the street is bad behavior; it’s also why personal-injury lawyers have scooters in their sights. At the same time, it could be useful “for city planners and managers, not only as a way of actually getting work done, but also as a signal for what citizens need.” Trips that don’t follow rules or norms “may offer real clues as to what your users really want but aren’t telling you.”
That desire path isn’t “I like to ride on the sidewalk.” Rather, it is “I want a service that isn’t a car, can travel a few miles in a personalized fashion, and can be parked off the street.” I doubt that any city could have clearly articulated, much less quantified, this “last mile” demand prior to the introduction of vehicles that could meet it. Scooter users might not have been able to quantify that need, either, until there was an opportunity.
At the moment, regulation is the widest, deepest moat in the electric bike and electric scooter landscape. I think, though, that their users’ desire paths will cross it.
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