Top investors are betting the crazy $US3 billion US scooter trend will go global

LimeLime is one of the new scooter startups that’s exploded in the US in the last 9 months.

  • The buzziest startup idea in the US right now involves dumping hundreds of dockless scooters in a city and then hiring them out to people who want to make short trips.
  • Scooter rental startups Lime and Bird were only founded last year but have raised million of dollars in funding and racked up a collective valuation of $US3 billion.
  • Two big-name European investors, Index and Atomico, jumped on funding rounds just as the trend is set to hit Europe.
  • Index partner Martin Mignot said taking scooters and other light electronic vehicles for short trips could be as common as taking public transport.
  • Bird registered a UK company in May, showing it’s preparing for a European launch.
  • The development comes after three startups with a similar business but for bicycles started pulling out of operations in Australian cities, thanks to regulatory problems and community backlash.

Top European investors Atomico and Index Ventures have separately made bets on two US electric scooter startups, hoping to win big on the buzzy trend before it takes off globally.

Atomico has invested an undisclosed amount in Lime, while Index Ventures led Bird’s $US100 million Series B round earlier this year.

Bird and Lime are both headquartered in California and may be worth a collective $US3 billion. Bird is reportedly seeking a $US2 billion valuation for its latest funding round, while Lime is worth $US1 billion after raising millions of dollars in funding. The two companies are both planning on a European expansion, with Lime launching in Paris in June, and Bird hiring executives in Europe ahead of a launch.

Both firms offer hundreds of electric scooters for hire in US cities that you can pick up and leave anywhere. You can read a full breakdown of what it’s like to hire a Bird scooter here, but the idea is that you locate a scooter, “unlock” it using an app and your login details, and then pay 15 cents per minute to ride it around.

Bird scooter raisingFacebook/BirdBird’s scooters.

It’s an idea that’s exploded in the US over the last few months. Bird and Lime are the two main players in this nascent industry.

Both companies were only founded in 2017, and have racked up astonishing valuations before they have even gone global.

Electric scooters are considered the preserve of middle-aged men in the UK rather than the future of transport. It’s unclear how one scooter hire company will gain any advantage over another, given the similarities in their business models.

In Australia over recent weeks, a range of bike-sharing startups with similar operating models started shutting down their operations in Australian cities. Local councils had started to draw up new regulations that allowed impounding of the bikes because they were being vandalised and sometimes left in large piles in public areas, often in parks.

Niall Wass, partner at Atomico, dismissed questions about over-valuation.

“Lime has achieved revenue growth that is amongst the fastest we have ever seen, and the valuation reflects that,” he told Business Insider in an email. “They’re also seizing a giant opportunity in a growing market.”

Martin Mignot, a partner at Index Ventures, felt similarly. “In terms of their whole fundraising history and the hype around them, if you look at where they are today then it’s a very high valuation in a short period of time, there is no denying that,” he said. “But I think it would be a mistake to look at it today and say that’s why it’s worth that.”

Lime and Bird are about more than dumping lots of scooters in a city, according to their backers

Sceptics might look at the oversupply of scooters that are blocking city footpaths and the billion-dollar valuations and say ‘Bubble’. But venture capitalists say they’re thinking more laterally.

Mignot says the average trip in a city is around 3km, though he didn’t specify transport type. According to Transport for London, a third of car trips in London are less than 2km.

The reasoning is that something like a scooter is much better for such trips than an Uber or even public transport. “The potential market is very large,” said Mignot.

“We believe scooters will be an important component of what transport looks like in the future, meeting the need when ride-hailing, public transport or even walking isn’t quite right for short, frequent trips,” said Wass.

Mignot added that there’s no reason this should stop at scooters either.

“There is a real revolution happening because components are becoming cheaper, batteries are becoming cheaper, and inventors are coming up with a range of new form factors – e-bikes, skateboards,” he said. “I don’t think the scooter is the only one that will work… Do we believe very light electronic vehicles will be a very important part of the way people move around the city, probably as important as the subway? Yes, I think that’s our bet.”

Filings and new hires show the scooter trend is headed to Europe

Bird, founded by ex-Lyft and Uber executive Travis VanderZanden, hired its first European executive at the beginning of this year, Patrick Studener. He is also a former Uber employee and based in the Netherlands, according to his LinkedIn profile.

Business Insider also found financial filings showing Bird registered a UK-based company in May, suggesting it’s preparing for a European launch. The company declined to comment on its international ambitions.

Travis VanderZandenBirdBird founder Travis VanderZanden.

Lime has already chosen Paris as its first European launch city in June after expanding across the US.

One issue both players will be overcoming European city regulations about electric scooters. It’s not currently legal to ride them in the UK on public streets and pavements, for example.

Wass is optimistic. He believes that startups which work “intelligently” with cities will persuade regulators to take a sensible approach and permit electric scooters on their streets.

“Reduced congestion and greener, more affordable travel benefits everyone – the public, local authorities and business alike,” he said. “Getting there might take time but that’s OK because there’s an appetite for change from all.”

Wass pointed to San Francisco, which couldn’t cope with the flood of scooters but dealt with the issue by saying it would only licence five companies for 500 scooters in a year-long pilot.

Wass added: “You can see by looking at San Francisco or Los Angeles examples of how local authorities can put in place a framework that allows both innovation but with oversight – [for example] by licensing companies, ensuring safety and controlling the supply of scooters so that it balances consumer demand. We believe that Europe will take a similarly sensible approach with time.”

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.