Colleges That Rushed to Fund Electric Scooter Startups Don’t Love Them on Campus

(Bloomberg Businessweek) -- Colleges are nervous about the boom in shared electric scooters, which riders can rent with an app and then leave at their destination for the next rider. Administrators see students zipping down campus streets and sidewalks as a safety hazard. They worry about unused scooters littering the quad and people tripping over them.

Shortly after scooters owned by Santa Monica, Calif.-based Bird Rides Inc. began showing up at Michigan State University, senior officials shared the news at a staff meeting that dozens had been impounded by campus police after being strewn around the school’s 5,200 acres. Phil Zecher, chief investment officer of Michigan State’s almost $3 billion endowment, piped up with some surprising news: The endowment invests in Bird as a part of a venture capital fund, Upfront Ventures Fund VI. “As big entities and also as big investors, we sometimes invest in the same companies that are disrupting us,” Zecher says in an interview.

MSU isn’t the only investor with complicated feelings about scooters. San Francisco banned them, then set up a one-year pilot program allowing two companies to deploy a limited number of the devices in the city. Bird applied but didn’t win the bid. Meanwhile, the city’s employee retirement system has a stake in Bird via Upfront. So does the endowment for the University of Texas at Austin, where campus officials created a working group of eight departments including public safety, campus life, parking, and legal affairs to deal with scooter policy and enforcement. The school’s parking department threatens $150 fines for improperly parked scooters. Bird is one several companies whose scooters are showing up on cities and campuses across the U.S., but it’s among the biggest and best funded.

Investors who commit money to a venture capital fund generally don’t get to pick where it invests, and these funds’ investments in Bird are comparatively small. The Texas endowment is $31 billion, for example, and it committed $40 million to the Upfront fund, only some of which went to Bird. Still, small venture investments sometimes pay off big for institutional investors: Yale’s original $2.7 million investment in LinkedIn Corp. produced $84.4 million in gains for the school’s endowment after the company went public in 2011.

Bird says that one of its missions is to reduce car usage, traffic, and carbon emissions. And some see scooters as potentially a good fit for campuses. “Colleges and universities are actively looking for new and different strategies to advance their sustainability goals with programs like scooters,” says Meghan Fay Zahniser, executive director of the Association for the Advancement of Sustainability in Higher Education.

But universities and cities have suddenly found themselves having to deal with the arrival of hot new businesses that are changing how people use their streets and sidewalks. “Because it’s such a competitive market and they are venture capital-funded, they are in a race to show market capture at whatever price,” says Marcel Porras, chief sustainability officer for the Los Angeles Department of Transportation. Bird is one of seven companies that are allowed to provide scooters in L.A. as part of a pilot program. The city’s employee pension fund is another investor in Upfront VI.

The University of Georgia, which doesn’t invest in the Upfront fund, says it’s impounded more than 1,200 scooters—most of them Bird’s, because of their larger presence in the area—which has generated more than $800,000 in fines. “The university’s primary concern is safety—safety for those riding scooters and for bystanders who might be hit by them or whose path might be impeded by an abandoned scooter,” says Greg Trevor, a spokesman for the school. His office has circulated videos taken from cameras on campus buses of students scooting in between the curb and buses or darting in front of buses. (Athens-Clarke County, where the college is located, recently put a temporary ban on shareable scooters.)

Captain Charles Bonnet, who oversees operations for the University of Texas at Austin’s police department, says new technology such as scooters can cause confusion about where to ride the vehicles. UTIMCO, which invests money for the University of Texas and Texas A&M systems, declined to comment on its investments. The San Francisco Employees’ Retirement System declined to comment.

Satish Udpa, Michigan State’s acting president, says the school is trying to work with three scooter companies on campus to create designated parking spots, share data, and have their users comply with where the scooters can be used. Mark Suster, managing partner of Upfront Ventures, says he’s confident Bird’s scooters have a future in cities and on campuses. “Campuses are grappling with them because people actually want to use them,” he says.

--With assistance from Sarah McBride.

To contact the editor responsible for this story: Pat Regnier at pregnier3@bloomberg.net, Mary Romano

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