Why Scooter Startups Are Worth Billions


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get 20% off their annual premium subscription. You’ve probably seen them around. Electric scooters dumped just about anywhere. Litter bikes. Litter bikes. They’ve been littering the streets lately. And by littering, I mean littering. The scooter invasion. Wheel-mageddon. They’ve got the green ones and the orange ones and it’s basically litter. They are bringing out the worst in some people. Last September, the city of Santa Monica,
California woke up to a surprise: sidewalks everywhere were filled with small, electric
scooters you could rent by the minute. It’s not an entirely new idea, Scooters,
in some form, have been around forever. And you’ve long been able to rent them in
cities like San Fransisco. But this company, called Bird, made it irresistibly
cheap. And simple. All you do is download their app, point your
phone at the scooters’ QR code, I guess we finally found a use for those, and off
you go at about 15 miles an hour. They’re fast, convenient, if I’m honest,
a little bit ridiculous looking, and… a lot of fun. Unless you’re an investor, In which case,
scooters are no laughing matter. Bird became a unicorn, a startup with a billion
dollar valuation, faster than Uber, Airbnb, or Facebook. Actually, faster than any company in history. And today, still just over a year since it
was founded, it’s valued at over two billion dollars, about as much as Reddit or 23AndMe. Remember, we’re talking about scooters. and it’s just one of many, including Spin,
Lime, who is also a unicorn, JUMP, and about a dozen others. Meanwhile, Google, Uber, and Lyft have all
invested millions of dollars. Now, depending on who you ask, these are either: ridiculous numbers for barely 1-year-old startups
in a fad industry, or, smart investments in what’s clearly
the future of transportation. So, which is it? Are scooters a useful means of mobility or
an invasion of our sidewalks? Let’s imagine you live in Seattle, say,
an apartment here in the Queen Anne neighborhood. And you work downtown, here at Amazon corporate
headquarters. You could walk a couple of blocks and take
the bus, but it’ll cost two dollars and seventy-five cents, or five fifty a day. And it’ll take at least 20 minutes, which
is just as slow as walking. Biking would be quick and cheap, but then
you have to store, lock, and maintain it. Plus, no-one wants to arrive at work or school
sweaty. So, scooters are a nice alternative. It’s faster than walking, Cheaper than the
bus, and more convenient than a bike. Maybe not revolutionary, but pretty handy. Now, let’s say, you live here, near Lakewood. In this case, the bus can drop you off right
at work. And the beauty of public transportation is
that it reduces redundancy. Even if nobody commutes the exact same route,
there’s always going to be a lot of overlap in the middle, If we all share 90% of our journeys, it’s
weird that we take 100% of it in… our own separate cars. So, putting people together saves time, space,
and money. Here’s the thing though: Transit is designed
for the average person, but almost no-one is exactly the average person. In other words, it’s mostly convenient for
most people, but totally convenient only for a few. Because, if the bus stopped everywhere, it
would also… stop being useful. In this example, it’s a 24-minute walk from
home. This is The First and Last Mile problem, The hardest and least efficient part of a
trip is the beginning and the end – getting to a transit station, and then, to your final
destination. In most cities, the obvious solution is to
walk or bike. But many people just… don’t. It’s too far away, or too inconvenient,
so, they drive instead. That’s probably what you’d end up doing
here, even though transit is technically available. Now, whether scooters are ultimately good
or bad kinda depends on what exactly they’re replacing. If people scoot instead of walking or biking,
like in the first example, they’ve lost some exercise and gained some convenience. Not a huge win or loss. But if scooters replace cars, that’s a different
story. That would mean less traffic congestion and
fewer carbon emissions. Of course, it sounds ridiculous, Even with
their 20 or 30-mile range, they aren’t really practical for long trips. But, they don’t actually have to be. Not directly. If scooters make it easier to get to and from
the bus station, you’re more likely to take it. All they need to do is make transit a more
desirable option. The effect is fewer cars on the road. That’s especially useful in underserved
and far away neighborhoods. Here, scooters aren’t just a novelty, they’re
a means to greater mobility. Lime showed this in 2017, when it reported
that 40% of riders started or ended their bike rides at public transit stations. All of this is possible because there’s
always a scooter nearby. Instead of docks or stations, you pick them
up and leave them wherever. Problem is… well, people pick them up and
leave them wherever. Technically, you’re required to wear a helmet,
park out of people’s way, and not drive on the sidewalk. In practice, ehh, not so much. I’ve yet to see anyone wear a helmet, and
many streets just… don’t have bike lanes. Companies can explain the rules, but they
can’t enforce them. Sooo… cities aren’t the biggest fans. It doesn’t help that many of these companies
move in to an area before getting permission, hoping that by the time they notice, people
will have already gotten used to them. If this sounds familiar, it’s no coincidence. Bird’s founder previously worked for Lyft
and Uber, who famously used the same strategy. This time, cities were ready. They’ve already been banned in San Francisco,
Beverly Hills, Cambridge, and Columbus. And, like Uber, there isn’t much to set
companies apart. They all cost the same dollar to start plus
15 cents a minute, They even have similar sounding 4-letter names. So, which scooter do people choose? Well, the one that’s in front of them. The first app you download will also likely
be your last. Why bother with several? That’s why everything is happening so quickly:
they saw what happened with Uber. This is their second chance, and nobody wants
to be left out. In China, it happened with bikes. Companies dumped them on every street and
corner until there was more bike than sidewalk. Demand just couldn’t keep up with supply,
and now they sit in trash piles so big they’d impress Wall-E. But with enough market share, the economics
are good: Most companies use the Xiaomi M365, which,
let’s assume they buy in bulk for about $250. Lime says they’re used an average of 8 to
12 times a day, so let’s say, 10 rides, at an average of about $3 each. Of course, there’s also charging. Anyone can sign up to become a charger, or
as Lime calls them, juicers. At night, they pick them up off the streets,
take them home, and plug them in for about $5-10 a scooter. So, we’ll subtract seven fifty. That means the average scooter makes something
like twenty-two fifty a day. And pays for itself in under two weeks. Even accounting for things like maintenance
and theft, which Lime says affects less than 1% of its scooters, there’s money to be
made. But what’s most interesting about The Scooter
Wars, may have nothing to do with the scooters themselves. Companies aren’t just competing for space
on the sidewalk, they’re also competing for this space – a slot on your home screen. This is where Uber starts salivating. Anyone with their app can already ride their
scooters. It’s a built-in advantage. And if you’re already on people’s phones,
why stop there? There’s no reason to be the taxi company
or the scooter company when you can be, as Uber’s new CEO said, “the Amazon of transportation”. Because a smart business sees itself from
the perspective of a customer. People think about outcomes, not business
models. If you want to watch something, you automatically
go to YouTube. If you want to buy something, you go to Amazon. And soon, if you want to go somewhere, you
open Uber. Everything else is unnecessary complexity
companies convince themselves we care about. We’re still in the early days of The Scooter
Wars, but there is good reason to get excited. And the big picture is really about platforms,
the relationship between government and private corporations, and, increasingly, battery technology. The future of everything from cars, to scooters,
and phones depends on how efficiently we can store energy. And the best way to learn the science behind
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