Why Compare Micromobility to Rideshare?
People think about the future of Micromobility (rentable scooters and bikes) in analogies to Ridesharing (Uber and Lyft).
Uber and Lyft changed the way we get around cities in less than 10 years after decades of a stable mixture of cars, mass transit, and bikes.
So when predicting how Micromobility will change cities, Uber and Lyft provide the only historical comparison.
And former Uber and Lyft employees lead most of the Microbility companies. Travis VanderZanden worked at both Lyft and Uber before starting Bird. Ex-Rideshare employees fill the rosters of Skip, Lime, Dott, Grin, and others.
Lessons from Rideshare
So if Micromobility will evolve like Ridesharing, what does that tell us?
David Sacks, an early investor in Uber (and later in Bird), Tweeted the Ridesharing flywheel in 2014.
The flywheel: riders attract drivers which attract riders.
Uber and Lyft succeeded in the US because they grew quickly and were soon able to provide better service and lower prices than their competitors. Iff you start a Ridesharing company now, you won’t be able to provide the same availability (number of drivers) at the cost of Uber and Lyft.
Today every region has one or two huge Ridesharing companies — Uber and Lyft in the US, Grab and Go-Jek in Southeast Asia, Ola in India, Didi in China, Taxify and Yandex in Eastern Europe.
Uber and Lyft lost the markets they were late to. Uber has strong footholds in Europe and Latin America, but they weren’t strong enough in Southeast Asia before Grab gained prominence. Lyft primarily operates in the US and will have a hard time expanding beyond our borders.
Bird and Lime are emulating this growth strategy. They are raising tons of money to put more scooters on the streets in more cities than anyone else. And they see where Uber has come late and lost, so they’ve shipped scooters to countries all over the world within a year of incorporating (which is fucking wild).
But Scooters Aren’t Cars
The problem with this strategy is that history doesn’t repeat itself, it rhymes. While there are a lot of similarities between Micromobility and Ridesharing, there are a few key differences.
Here I’ll show how Micromobility will evolve differently than Ridesharing. There will be many Micromobility companies in each region that has a Ridesharing monopoly.
Customer Acquisition Costs
Ridesharing — expensive. Micromobility — cheap.
Uber and Lyft invented a new service and correspondingly needed to educate their customers. Ten years ago, ordering a taxi from your phone wasn’t something you thought about. So even if Uber was in your city, you wouldn’t magically know to download an app in order to get a car from A to B.
Uber and Lyft aggressively marketed in each new city. They grew remarkably quickly, but it was expensive. I still see Uber and Lyft marketers hand out referral codes at the entrances to every big music festival or sporting event.
Scooters market themselves. If there are enough scooters in a city so that there is one in front of your home and one in front of your work, you will put two and two together and start commuting via scooter.
Bird launched in Santa Monica by putting out scooters — no ads, billboards, excessive promos — just putting out scooters. And people started riding them at a rate where Bird crossed over 10 million rides one year later.
How to Increase Availability
Ridesharing — hire more drivers. Micromobility — buy more scooters and bikes.
Uber and Lyft grew because they provide a better service than their competitors. Open Uber and you’ll be picked up in minutes.
Uber provides such high availability because they have a ton of drivers in each market. They spent a lot of money and effort to grow their driver base.
To provide the same service as Bird, you simply need to have as many scooters as they do. On a university campus of 10,000 you could get away with 500 scooters. In a mega-city like New York, this requires 10s of thousands of scooters.
Buying scooters is easier than hiring drivers. Hiring drivers requires recruiting, background checks, on-boarding, managing churn, etc, etc. Buying scooters requires… buying them. Once you have the capital, there are many scooter manufacturers in the US and China who would happily trade scooters for dollars.
City permitting also drives towards a more even playing field by capping the number of scooters each operator can deploy. Washington, DC is allowing many operators, all with the same number of scooters. So as an operator you cannot provide better service by putting more scooters on the ground.
Ridesharing — Difficult to regulate. Regulation happens at the state level. Micromobility — Easy to regulate. Regulation happens at city level.
Uber grew a reputation as an irreverent company that disobeyed regulators.
It made sense for Uber to disregard regulation. Cities were not equipped to respond quickly and even if they did, it’s very hard to punish a Ridesharing company.
Uber doesn’t own their cars and doesn’t leave them on the street. An Uber driver looks like a regular driver until they pickup a passenger. And even after a city catches a driver, the city can only easily punish the driver. In many cases, Uber continued operating in markets where they were banned.
Now regulation is slowly addressing Ridesharing. But the regulation is coming at the state level. So if a city is unhappy with Uber and Lyft, they will have to try and get the state to punish them while Uber and Lyft are wining and dining all of the state legislature.
Scooter companies respond quickly to city regulation. This isn’t because they are all nice people who want to play by the rules — these are the exact same people from Uber and Lyft after all — it’s because cities can easily impound scooters.
Scooter companies own their assets and put them in the public space. A city unhappy with Bird can go around, pick up all of their scooters and lock them away. Now Bird won’t have any scooters on the street and their balance sheet won’t be happy.
Cities manage their own sidewalks and don’t need to wait for approval from state lawmakers before cleaning up prohibited vehicles on the streets.
Hardware vs Software
Ridesharing — Innovation happens in the software and algorithms. Micromobility — Vehicle hardware is most important to the customer; apps are an afterthought.
Today Uber and Lyft drivers drive the same cars from 10 years ago. The Prius today, owned seemingly by every Uber driver, looks very similar to the Prius of the past. And Toyota makes that Prius, not Uber or Lyft.
Scooter companies partner with manufactures to make their own scooters. And so far, there are a lot of problems — batteries engulfing in flames, baseboards splitting in half, handlebars falling during rides, wheels braking at high speed, etc.
Hardware requires different competencies than software. When Lime found out that the baseboards on their Okai scooters broke during rides, they couldn’t push out a software update. Each one of those scooters required costly maintenance or total replacement.
In the future, you won’t need to take out your phone to ride a scooter. There will be one in front of your house and you will just get on it and ride.
How to Start a New Company
Ridesharing — Build software platform, recruit drivers, advertise to riders. Micromobility — Win a local permit, buy scooters, use off-the-shelf software.
At the onset of Ridesharing, a few of companies competed in each market. But not everyone could start a Ridesharing company — it’s difficult to build out multi-vehicle routing and to hire a shit ton of contract drivers. And that’s just to get started.
Today, it seems like everyone has a scooter company. That’s because it’s really easy to start a scooter company.
First, you need a permit. Being a small, local company often helps win city permits.
Then, scooters. Today no one has differentiated scooters. You can buy scooters from a Chinese manufacturer or a growing number of US companies. Bird’s new and improved scooters comes from a factory called Electisan. On release, Bird claimed to have an exclusive contract with Electisan. But I know of multiple founders who claimed that Electisan was willing to sell them the exact same scooter that Bird uses.
Then, software. Your users need to be able to unlock your scooters and pay you per ride. This is a much easier problem than multi-vehicle routing and managing a contractor fleet. And mobile app development has greatly improved in the last 10 years.
There are many companies willing to white label software for you to rent scooters to riders and view the status of your fleet.
The Future of Micromobility
Naturally, we want to predict how Micromobility will evolve.
Low customer acquisition costs, ease of buying scooters, and permits given by local governments make starting a local scooter company easy.
The large scooter companies cannot provide a differentiated product to beat the local companies. Local companies buy similar scooters to Bird and Lime and regulatory caps on scooters artificially equalize service across companies.
This ease of entry means there will be many more scooter and bike companies in each region than there are Ridesharing companies.
Companies that partner with local governments to run public systems will have a leg up. Drop Mobility runs a bikeshare program with Kansas City. Motivate, now owned by Lyft, has run bikeshare services including CitiBike, Ford GoBike, etc.
Large scooter companies will try to defend themselves by cutting costs. But this will only be moderately effective. Uber and Lyft can increase market share via discounting because a ride could be $20 vs $30 while a scooter ride is on average just a few bucks. Riders care less about the difference of $1 than $10.
Bird sees this future and is experimenting with a franchise model called Bird Platform. Bird Platform allows local companies to buy Bird scooters and license Bird’s software, all while giving a cut of every ride to Bird.
The franchise model makes a lot of sense but Bird will not succeed with Bird Platform unless they totally pivot the company. As a franchisee, buying scooters from Bird Platform makes you totally dependent on Bird, a company that is losing money at rapid clip. If you have issues with their system, will they rush to fix them for you?
Grow, previously Grin, in Latin America treats their competitors with a lot of respect. They buy them. Grow has already bought 3 scooter and bike companies. This spending spree will avoid fragmentation in the short term. But in the long term, new scooter companies will be able to enter and eat at their margins.
In my view, Bird and Lime’s charger programs serve as their biggest moat. More on this soon…
Ways That I Could Be Wrong
The iPhone of Scooters
Scooters and bikes are essentially commodities today. But someone could build a truly differentiated product that users love, lasts for more rides, and doesn’t get stolen. Skip claims this is their strategy.
Bird, Uber, Lyft, and Lime have already begun work lobbying cities for advantageous permitting rules. Could they alter the permitting landscape so that you have to the capabilities of a big company to win a permit?
A company with a strong lead in a city could roll out subscriptions. If a subscription model turns out to be profitable, this will generate massive lock-in for the first movers. But subscriptions are tough because consumers are savvy and margins are already low (or negative).
Scooters Aren’t Profitable
It’s possible that scooters won’t be profitable in the short / medium term, like bikesharing in China and autonomous driving startups. Then only the companies with capital to burn will stay afloat.
Thanks to Michal Naka, Delian Asparouhov and Oliver Bruce for helping me think!