[IL-Talk] Why this is a tricky time to pick a city scooter partner

[Kelly Pierce]

For those wondering what’s going on with Chicago’s scooter program
this summer, Crain’s offers a summary.  After the venture capitalists
lose interest, these devices could end up being less popular than
mopeds.

Kelly





Crain’s Chicago business

July 17, 2020 03:25 PM



Why this is a tricky time to pick a city scooter partner



The fledgling industry is beset by losses, layoffs and consolidation.


Bloomberg



The city of Chicago is weeks away from choosing three companies to
participate in its second, bigger pilot program to help officials
decide whether to welcome electric scooters permanently.

But their choice comes amid upheaval in the scooter business.
Persistent losses have forced one scooter company into bankruptcy,
while triggering layoffs and consolidation across the sector,
including a deal that swept thousands of scooters off sidewalks with
little warning. Turmoil seems unlikely to abate, as venture
capitalists that have been funding scooter startups turn down the
spigot for an industry without a single profitable player.


The shrinking field leaves only a few companies with the capacity to
each drop roughly 3,000 scooters on Chicago streets in a matter of
weeks. And if a buyer scoops up the city's choice, Chicago could wind
up in business with a company it rejected in the initial selection
process.

"That level of risk and instability" in the scooter industry "seems
like a big drawback when you're comparing investing in scooters to
investing in walking, biking or transit," says Kyle Whitehead,
managing director of public affairs at the Active Transportation
Alliance. "Are we introducing this disruption, centering planning and
money into a solution that is not proven and might not be around in a
few years?"


The city will announce three picks in early August. That leaves only a
few months of good weather to measure demand and decide if scooters
are a safe addition to city streets and a viable alternative in
neighborhoods with inadequate public transit service. Likely bidders
include Bird, Lime, Spin and Wheels.

Sean Wiedel, a Chicago Department of Transportation assistant
commissioner, told trade publication Cities Today that Chicago thought
about requiring applicants to show they would still be around in two
years "so that if we want to select them through a competitive RFP,
they'll still be here." But given the COVID upheaval, they lowered
expectations down to "Will they be around to complete this pilot?"


In a statement, the city says it still hasn't "decided if scooters
make sense as a permanent part of Chicago's transportation system,"
but for now, "despite the economic uncertainty brought on by the COVID
pandemic, companies have indicated strong interest in participating in
the second pilot."

The uncertainty has hit major players that attracted heavy VC
investment in the still-young industry.





Lime laid off 13 percent of its workforce—about 80 employees—in late
April (on top of January layoffs pre-COVID). "Almost overnight," Lime
went from the cusp of being "the first next-generation micromobility
company to reach profitability—to one where we had to pause operations
in 99% of our markets worldwide" during lockdowns, then-CEO Brad Bao
wrote to employees.

Uber offloaded its scooter and bike company, Jump, to Lime, taking
roughly 20,000 to 30,000 Jump scooters and bikes off city streets
across the globe. While Lime will use some, many ended up in recycling
yards, to the dismay of sustainability advocates and former employees.

Bird acquired competitors Scoot and Circ and raised $350 million from
investors. But it also laid off 30 percent of its workforce in late
March via a highly publicized mass Zoom call. Bird CEO Travis
VanderZanden wrote in a memo that "given all the uncertainty, we
needed to ensure a cash runway to last through the end of 2021."

Lyft, which offers scooters alongside its ride-hailing services and
bike-share programs, including Divvy in Chicago, laid off close to
1,000 employees in April, about 17 percent of the company. It is
opting out of the Chicago pilot "in order to prioritize our work" on
expanding bike operations here, spokeswoman Kaitlyn Carl says. Carl
adds the company hopes to combine bike and scooter access into one
Divvy membership in the future.









The layoffs come as venture-capital firms that pumped $3.8 billion
into 44 scooter deals in 2019 have invested just $1 billion in the
sector so far this year, according to PitchBook. Money-losing startups
don't last long without steady infusions of outside capital. One
scooter company, Unicorn, already has succumbed.

Spin's Kyle Rowe says being owned by Ford Motor, rather than being
reliant on VCs, plays in its favor. "Ford has made it clear they're
aware of the changing landscape in transportation," he says. "We're
here to stay."

While COVID might have spooked VCs, it has also upended
transportation. That means cities are seeking safe ways for residents
to get around, just as scooter companies are more desperate than ever
for revenues.

Cities know they need to provide other options "when people are very
fearful of using public transit," says Ryan Citron, a senior research
analyst for micromobility at Guidehouse Insights. "There's really a
huge hole in transit at this point. I think that's kind of shifted the
landscape in favor of micromobility companies."

Chicago is the brass ring right now, scooter company officials say. It
has not only expanded the boundaries of where scooters can go in this
pilot, it's let companies boost their fleets from just 250 scooters to
more than 3,000, opening up more customers and longer trips.

Despite a learning curve over the past three years, layoffs and the
immediate COVID scare, Maurice Henderson, Bird's director of
government partnerships, says the company is hopeful—if not
bullish—about the future of the industry. "We've seen longer trip
lengths, nearly double in most cases, across markets," and RFPs for
other cities starting to open back up.









Lime says it's also signing up more users, seeing repeat users (not
joyriders) and steady use post-COVID. Single-user, open-air options
like bikes and scooters are increasingly attractive for commuters
hoping to avoid the virus, says Lime spokesman Russell Murphy. "It all
sort of points to the post-COVID world being micromobility's moment."


**end of article**