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Bird shows improving scooter economics, long march to profitability
Newly reported financial data from Bird, an American scooter sharing service, shows a company with an improving economic model and a multiyear path to profitability. However, that path is fraught unless a number of scenarios all work out in concert and without a glitch.
Bird, well known for its early battles with domestic rival Lime, is pursuing a SPAC-led deal that will see it go public and raise fresh capital. The former startup is merging with Switchback II Corporation in a deal that values it at around $2.3 billion, including a $160 million PIPE (private investment in public equity) component. (Note: The group purchasing TechCrunch’s parent company from its own parent company is part of the Bird PIPE.)
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COVID-19 hasn’t been kind to Bird and similar companies around the world. As many around the world stayed home, usage of shared-asset services and ride-hail applications fell sharply. Bird saw rides decline. Airbnb took a temporary hit. Uber and Lyft saw ride demand fall.
Responses to the crisis were varied. Airbnb cut costs and raised external capital. Lyft cut expenses and focused on its core model while Uber grew its food delivery business, which saw transaction volume soar as demand fell for its traditional business.
Meanwhile, Bird flipped its entire business model. That decision has helped the scooter outfit improve its economics markedly, giving it a shot at generating profit in the future — provided its forecasts prove achievable.
This morning, let’s talk about how Bird has changed its business, their impacts on its operating results and how long the company thinks its climb to profitability is.
Fleet management → Fleet managers
In their initial forms, Bird and Lime bought and deployed large fleets of electric scooters. Not only was this capital intensive, the companies also wound up with costs that were more than sticky — charging wasn’t simple or cheap, moving scooters around to balance demand took both human capital and vehicles, and the list went on.
Throw in vehicle depreciation — the pace at which scooters in the wild degraded from use or abuse — and the businesses proved excellent vehicles for raising capital and throwing that money at more scooters, costs, and, as it turned out, losses.
Results improved somewhat over time, though. As scooter-share companies increasingly built their own hardware, their economics improved. Sturdier scooters meant lower depreciation, and better battery tech could allow for more rides per charge. That sort of thing.
But the model wasn’t incredibly lucrative even before COVID-19 hit. Costs were high, and the model did not break-even, even on a gross margin basis, let alone when considering all corporate expenses. You can see the financial mess from that period of operations in historical Bird results.
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Bird’s SPAC filing shows scooter-nomics just don’t fly
Scooter unicorn Bird is going public, per an agreement to merge with a special purpose acquisition company, or SPAC. After rumors and reports circulated for months about an imminent deal, it has finally arrived.
First, a quick overview of the agreement and the players involved: Bird is merging with Switchback II at an implied valuation of $2.3 billion. Fidelity Management & Research Company will lead the deal’s $160 million in private investment in public equity, or PIPE. Apollo Investment Corp. and MidCap Financial Trust provided an additional $40 million in asset financing. (Disclosure: Apollo is buying TechCrunch’s parent company.)
Historically — and based on what we’re seeing in this fantastical filing — Bird proved to be a simply awful business. Its results from 2019 and 2020 describe a company with a huge cost structure and unprofitable revenue, per filings. After posting negative gross profit in both of the most recent full-year periods, Bird’s initial model appears to have been defeated by the market.
What drove the company’s hugely unprofitable revenues and resulting net losses? Unit economics that were nearly comically destructive.
Some of the numbers Bird shared in its investor deck show a business that is growing, in terms of users and geographic footprint. Bird is in 200 cities globally and reports more than 95 million rides to date, and 3 million new riders added during the pandemic. The investor deck also touts year-round positive economics during the COVID-19 era. That all looks positive. But looking into the line-item financials, a different story emerges.
The scooter shop managed to convert a $135.7 million gross loss in 2019 to a smaller gross deficit of $23.5 million in 2020, but it did not manage to shake up its upside-down economics during its full fiscal 2020.
Update: Bird provided a response to questions about its newer fleet management business and how it expects to stem losses. Their response:
Bird’s history to date has been one of milestones. First was securing product market fit and delivering an eco-friendly way for people to travel in their communities and access opportunities – education, health and economic. The second milestone focused on unit economics and laying the foundation for a sustainable business. Then came the pandemic, which served as a catalyst for us to identify how to scale in a way that allowed us to be profitable at a ride level. As a result, in H2 2020 our ride profit (after vehicle depreciation) was positive and people are continuing to embrace naturally social distanced eco-friendly options.
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Micromobility startup Helbiz to go public via a SPAC, and will expand into ghost kitchens
Micromobility startup Helbiz, which now operates across Europe and the USA, is merging with a special purpose acquisition company (SPAC) to become a publicly listed company, giving it a war chest to potentially roll-up smaller competitors in the space, as well as the resources to expand into “cloud” or “ghost” kitchens as part of a move into food delivery.
Helbiz intends to merge with GreenVision Acquisition Corp. (Nasdaq: GRNV) in the second quarter of 2021. The combined entity will be named Helbiz Inc. and will be listed on the Nasdaq Capital Market under the new ticker symbol, “HLBZ.”
The transaction includes $30 million PIPE anchored by institutional investors and approximately $80 million in net proceeds will be fed into Helbiz’s micromobility and advertising businesses, which have 2.7 million users.
Helbiz says the merged entity will have a valuation of $408 million, and by run Helbiz’s existing management under CEO Salvatore Palella.
Palella said: “Through this transaction, we’re committed to fulfilling our vision in revolutionizing transport by using micromobility to become a seamless last-mile solution.”
He further revealed to me that the company plans to establish “ghost kitchens” in Milan and Washington, DC later this year, with the aim of introducing a five-minute delivery time.
Helbiz has tried to differentiate itself from other players like Lime and Bird by offering e-scooters, e-bicycles and e-mopeds all on one platform.
Key to Helbiz’s offering is an integrated geofencing platform that tends to appeal to city authorities who don’t want scooters left in random places, as well as a swappable battery that enables easier charging of the devices. Its subscription service allows users to take unlimited 30-minute trips on its e-bikes and e-scooters every month.
In Europe the company currently operates a fleet of e-scooters and e-bicycles in Milan, Turin, Verona, Rome, Madrid and Belgrade, and in the U.S. it operates in Washington, DC, Alexandria, Arlington and Miami.
David Fu, chairman, and CEO of GreenVision, commented: “Helbiz has distinguished itself as the only company to offer e-scooters, e-bicycles, and e-mopeds all on one user-friendly platform… Helbiz has a proven and capital-light business model that combines hardware, software, and services with extensive customer relationships.”
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Lime touts a 2020 turnaround and 2021 profitability
Micromobility company Lime says it has moved beyond the financial hardship caused by the COVID-19 pandemic, reaching a milestone that seemed unthinkable earlier this year.
In short, the company is now largely profitable.
Lime said it was both operating cash flow positive and free cash flow positive in the third quarter — a first — and is on pace to be full-year profitable, excluding certain costs (EBIT), in 2021.
During the WSJ Future of Everything event Thursday, Lime CEO Wayne Ting painted a far rosier picture of the company’s future than one might have expected.
There was a time when Bird and Lime, competing domestic scooter rental companies, were raising capital at a torrid pace, fighting for market share, regulatory breathing room and sidewalk real estate. Then, the pandemic hit and the companies had to take shelter.
Lime underwent a round of layoffs in April, taking on capital from Uber the next month in a down-round that brought its valuation under the $1 billion mark. As it announced in a blog post that TechCrunch reviewed before publication, it paused most of its operations for a month during the early COVID-19 days.
“It was certainly a very, very tough decision for us earlier this year and I know we weren’t the only company during COVID,” Ting said during the event. “I think it’s been in so many ways helpful to us to realize how hard these choices can be. We’re going to be growing headcount again. We’re going to do so in a careful way so that we’re not going have to make hard choices like the ones we made earlier this year.”
Now things are better, Lime says. Much better. Indeed, the company claims that it is the “first new mobility company to reach cash-flow positive for a full quarter.”
Cash flow positivity, in general, is an important threshold for a startup to reach as it implies that the company can largely self-fund from that point forward, limiting its dependency on external cash for survival.
Lime also claims that it “reached EBIT positive at the company level over the summer.” The specifics of the phrase “EBIT positive” are important. Was the company employing strict EBIT on its math and not discounting share-based compensation, or was it measuring using adjusted EBIT as many startups do, removing the cost of share-based compensation that shows up in GAAP results? According to the company the number did exclude share-based compensation, making the news slightly smaller.
Perhaps the most bullish data point from Lime is that it expects to be full-year profitable in 2021. TechCrunch asked for specifics because again how one measures profitability matters. It turns out, Lime is basing this projection on EBIT, as opposed to more traditional net income. For a startup this is not a surprising decision, but before we declare Lime fully “profitable,” we’ll want some more GAAP metrics.
Still, it appears that Lime is not going to die, and is, importantly, putting capital into developing new products. The company provided the first example of that new product pipeline on Thursday with the launch of the Gen4 scooter in Paris. It also teased a so-called “third and fourth mode” in the first quarter of 2021 as well as the addition of a swappable battery.
The scooter company wouldn’t give TechCrunch much information about what these third and fourth modes will be. The first two modes are bikes and scooters, which leaves skateboards, cars, flying cars and boats?
Lime did give TechCrunch a little bit of clarification, stating that “move beyond,” means the company will be operating an additional mode, accessed through the Lime app, in line with its goal to serve any trips under five miles. These modes will build on the Lime Platform play, but this will be operated by Lime rather than a partner.
Lime has long discussed reaching profitability. Perhaps because it and its competitor Bird were infamous for their losses during their early unicorn period.
By November of 2019, Lime was talking about reaching EBIT positivity in 2020. But the start of 2020 was not kind on the company, with 100 of its staff losing their jobs and 12 markets getting dropped. At the time TechCrunch wrote that “Lime is hoping to achieve profitability this year by laying off about 14% of its workforce and ceasing operations in 12 markets,” with the company itself writing at the time that “financial independence [was its] goal for 2020, and [that it was] confident that Lime will be the first next-generation mobility company to reach profitability.”
Depending on how you measure profitability, that could be true.
Things didn’t get easier for Lime later in the year. Its competitor Bird underwent layoffs, and Lime cut more staff in April. At the time, Lime said that it was focused on coming “back stronger than ever when this is over.”
The company is certainly in better shape than it was in April and May. So, how did Lime come back from the brink? In its own estimation, the company took time during its pause to “drill down on getting the business right, narrowing [its] focus and strengthening [its] fundamentals.” That might sound like corporate babble, but by taking a nearly full stop in its operating business, Lime could probably see a bit more clearly what was working and what was not. And with some cuts to what wasn’t, it could set up a future in which its operations were leaner, and more unit-economically positive.
And, now, here we are asking niggling questions about just what sort of profit Lime is really making. Instead of, you know, who might buy its leftover office furniture. It’s a nice turnaround.
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Why micromobility may emerge from the pandemic stronger than before
Since its inception, shared micromobility services have been in a precarious position — one supported by millions of dollars in venture capital. But the COVID-19 pandemic has brought even more turmoil upon an industry that has long struggled with unit economics. It has led to mass layoffs, operation shutdowns across several markets and more consolidation.
Despite the struggles of individual operators, micromobility as technology will come out of this stronger than before, industry analyst Horace Dediu tells TechCrunch.
Dediu, an analyst who coined the term “micromobility” and founded Micromobility Industries, sees the silver lining in the pandemic for micromobility as it relates to the adoption of public transit alternatives. With ongoing concerns about the disease and social distancing, consumers may look to alternative modes of transportation — ones that require fewer interactions with strangers. But simply because a certain technology takes off doesn’t mean the current slate of operators will benefit.
“The companies involved may not survive a crisis,” Dediu says. “We don’t remember the fact there were 3,000 automobile companies in the United States prior to Henry Ford’s Model T. We don’t remember all the electrical suppliers out there and the consolidation that took place in the electrical field with Westinghouse. There’s a lot of historic references we can cite. But the fact of the matter is that up until the crisis there was an over-investment where probably too much capital was allocated to the industry chasing business models which are not sustainable…I think there will be a washout with a kind of consolidation and we’re seeing that already.”
Earlier this month, for example, Uber sold off JUMP to Lime, while simultaneously leading a $170 million investment in the micromobility startup. That funding round brought Lime’s valuation down 79%, to $510 million, according to The Information. Last April, Lime was valued at $2.4 billion.
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Layoffs at Lime and Getaround herald rise of profit-hungry unicorns
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
A million dollars isn’t cool. You know what’s cool? Positive adjusted EBITDA, or something close to it.
That’s the message from scooter unicorn Lime, which announced this week that it was cutting about 14% of its staff and closing a dozen markets. The staff reductions, numbering about 100, come as the company has touted efforts to improve its profitability — going as far as setting targets for when it might reach capital freedom, as well as highlighting the matter in a recent corporate blog post.
(Bird, a Lime competitor, also underwent layoffs this year.)
What’s going on? Unicorns, once hungry for growth, are now hell-bent to show current (and future) investors that their businesses aren’t unprofitable quagmires. Profitability, or movement towards it, is hot, and Lime is a good example of the trend — as is Getaround, which also wrote about its own layoffs this week. Let’s dig in.
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Lime is laying off about 100 people and ceasing operations in 12 markets
Lime is hoping to achieve profitability this year by laying off about 14% of its workforce and ceasing operations in 12 markets, Axios first reported.
“Financial independence is our goal for 2020, and we are confident that Lime will be the first next-generation mobility company to reach profitability,” Lime CEO Brad Bao said in a statement to TechCrunch. “We are immensely grateful for our team members, riders, Juicers and cities who supported us, and we hope to reintroduce Lime back into these communities when the time is right.”
That means Lime is shutting down in Atlanta, Phoenix, San Diego, San Antonio, Linz, Bogotá, Buenos Aires, Montevideo, Lima, Puerto Vallarta, Rio de Janeiro and São Paulo.
This is not the first time Lime has pulled out of markets. Over the span of about a year, Lime exited at least 11 markets while it entered 69 new ones. Between 2018 and 2019, competitor Bird pulled out of 38 markets and entered 36 new ones.
And while layoffs are not fun, Lime is not alone. Last year, both Bird and Lyft laid off employees working on micromobility. In March, Bird laid off up to 5% of its workforce and then cut up to a dozen Scoot employees in December. Lyft, similarly, also laid off up to 50 people on its bikes and scooters team in March.
Following Lime’s $310 million round in February led by Bain Capital, it hit a valuation of $2.4 billion.
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Uber doubles down on micromobility
Hello and welcome back to our regular morning look at private companies, public markets and the grey space in between.
Today we’re looking into Uber’s bike bet and what the push could mean for Lime and other micromobility companies working to find a sustainable business model. As profitability comes back into vogue among investors at the expense of growth, both Uber and a cadre of mobility-focused startups are hoping that electric- and pedal-powered transport pay off.
Let’s take a look.
Uber’s bike push
Uber is most famous for its ride-hailing business, and the on-demand car-hire service that Uber was founded upon still generates the bulk of its revenue. In its most recent quarter, for example, Uber’s ride-hailing segment generated $2.86 billion in adjusted net revenue. The next-largest Uber business, its Uber Eats segment, generated a comparatively modest $392 million in adjusted net revenue.
Which brings us to the smaller Uber efforts. Freight, its aptly-named hauling business, brought in $218 million in adjusted net revenue in the same quarter (Q3 2019). And finally, Uber’s “Other Bets” segment was responsible for $38 million in adjusted net revenue. That was the smallest result, but also the fastest-growing, exploding from $3 million in adjusted net revenue in the year-ago quarter.
While Q3 2019 was better for Uber than its preceding periods regarding growth, the company’s slowing expansion and stiff losses (its net loss in the period came to $1.16 billion), have left the global transportation giant hunting for new revenue. And its Other Bets segment, which includes incomes from “dockless e-bikes and e-scooters,” is growing like heck.
This recent news item was therefore not surprising:
“We want to double down on micromobility,” Christian Freese, Jump’s head of EMEA, told CNBC in an interview. “We have seen how beautifully it works with our core business and ride sharing, and want to invest more and deeper, especially in Europe.”
Uber claims adoption of Jump’s bikes and scooters in Europe has outpaced that of the U.S. in the last eight months. It says more than 500,000 Europeans rode the vehicles in the last eight months alone, racking up 5 million trips in total.
The move by Uber makes good sense. The firm needs to grow, it has found a vein of consumer interest to mine, and it has the scale (financial, and in terms of an existing userbase) to pull off the scheme.
Of course, even if Uber quadrupled its Other Bets income (which includes more than just micromobility dollars), the segment would only add up to around 4% of its Rides adjusted net revenue (using the company’s Q3 figure for reference.) Growth, however, is growth, and investors love a story.
Uber is not the only company that wants to make bikes and scooters work at scale. There are a number of startups around the world that have raised rafts of capital to do just that. And they don’t want Uber to win.
Lime’s new thing
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Singapore’s Neuron Mobility raises $18.5M to bring its electric scooters to more international markets
Neuron Mobility, a Singapore-based startup, has closed an $18.5 million financing round as it looks to scale its e-scooter startup in international markets — a month after the nation introduced difficult regulatory changes.
The new financing round, dubbed Series A, was funded by GSR Ventures, a venture capital firm that was the first institutional investor in Chinese ride-hailing giant DiDi Chuxing, and Square Peg, Australia’s largest venture capital firm.
Existing investors SeedPlus and SEEDS Capital also participated in the round. The three-year-old startup has raised about $23.5 million to date.
Neuron Mobility, which began its journey in Singapore, operates an eponymous e-scooter rental platform. In recent years and quarters, Neuron has expanded to cities in Malaysia, Thailand, Australia and New Zealand.
Neuron’s e-scooters are affordable in every market where they are available. In Brisbane, Australia, for instance, anyone can begin a trip with a Neuron bike by paying one Australian Dollar (68 U.S. cents) and then 38 Australian cents for each minute of the ride, Zachary Wang, co-founder and chief executive of Neuron, told TechCrunch in an interview.
These electric scooters can go as fast as 25 kilometre per hour (15.5 miles per hour), and automatically slow down at certain places, such as near a school. Wang said the startup closely works with city councils to understand how these e-scooters should operate.
In a statement, Square Peg’s Tushar Roy said, “the culture of collaboration with cities permeates through Neuron. Its entire DNA is built around working very closely with local leadership to bring new mobility solutions to citizens in a safe and sustainable way.”
On a single charge, a Neuron scooter can travel up to 60 kilometres (37.2 miles). These e-scooters are equipped with a swappable battery. Once the ride is finished, a customer can drop the bike at any nearby parking station or any suitable location. Neuron works with a large number of people who actively swap the batteries on these scooters.
Like India’s electric scooter and bike startups Bounce and Yulu, Neuron Mobility also designs its electric scooters, but relies on a Chinese equipment manufacturer for producing them. (Yulu recently inked a strategic deal with Bajaj Auto to task the Indian auto manufacturing giant with the production job.)
Singapore turns its back on electric scooters
As Neuron expands to international markets, it has had to halt its e-scooter rental service in the home market of Singapore. Last month, Singapore said e-scooters could no longer operate on footpaths, creating major challenges for all the players. Wang and executives from other startups have expressed concerns over the decision.
Telepod, which uses e-scooters to deliver food; GrabFood, another food delivery startup; and shared e-scooter service startup Beam, said they could no longer offer the same level of customer service to their users, and had little choice but to focus on other markets.
Wang said that Neuron still has teams that work from Singapore, but they have always focused on the larger Asia Pacific region and other markets. Besides, Neuron stopped its service in Singapore months before the nation passed any new law. (Prior to the recent order, Singapore had other issues with electric scooters.)
Neuron will use the fresh capital to further its footprint in the markets where it operates and explore building new categories, Wang said. “We feel we are in the midst of a wave where a number of technologies are falling into place that could help us improve our electric scooter and build more mobility solutions.” The startup is also exploring new markets, though Wang declined to name them.
Like in the United States, electric scooters and bikes have imploded in Southeast Asian markets, where a growing number of familiar brands such as Lime, Bird, Ofo, oBike and local players are increasingly expanding their presence.
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Lime is shutting down car rental service, LimePod
Transportation startup Lime is shutting down LimePod, its car-sharing service that it launched last November in Seattle. Lime plans to start removing its vehicles from the streets of Seattle next month and will completely shut down the service by the end of the year. The news was first reported by GeekWire.
Lime has operated a pilot program in Seattle since last year and is set to conclude at the end of the year. Throughout the program, more than 18,000 people took more than 200,000 trips in LimePods, according to a Lime spokesperson. At launch, the plan was to explore carsharing for short distances and eventually replace its vehicles with an all-electric fleet. Lime, however, is not looking to make LimePods a permanent fixture of the city at this point.
“While the program was a great learning experience, at our core, we are an electric mobility company first,” Lime wrote in an email to LimePod users. “We are committed — like Seattle is — to sustainability, lower carbon emissions, and to make cities more livable, all of which require reduced car travel.”
Additionally, Lime said it was not able to find the right partner for its LimePod’s electric fleet, which led to the decision to end the program at the end of the pilot period.
“We deeply appreciate our partnership with the Seattle community and the opportunity to collaborate on our LimePod Pilot Program,” a Lime spokesperson told TechCrunch. “The experience is a testament to the city’s forward-looking position on the future of transportation and the necessity of sustainable options for citizens. We are similarly committed to that goal and the information gained during our pilot will support the work necessary should we decide to expand and improve this service with an all-electric fleet in the future.”
Lime, which got its beginnings as a bike-share company, has deployed its scooters and bikes in more than 100 cities in the U.S. and more than 20 international cities. Recently, Lime hit 100 million rides across its micromobility vehicles. Clearly, Lime sees more of a future with shared bikes and scooters than it does with cars.
Earlier this year, Lime raised a $310 million Series D round led by Bain Capital Ventures and others. That round valued the startup at $2.4 billion.
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