Europe’s VCs have recently been afflicted by a terrible case of FOMO: Fear Of Missing Out on the Next Big Thing — which may, or may not, be scooters.

Since 2017, investors have been chucking cash at a flock of scooter startups which have sprung up across the continent — from Voi in Stockholm to Tier in Vienna. All of these companies are only a few years old, yet have raised enormous rounds, as they race to flood markets. Plenty of big name VCs have been snubbed at the last minute, missing out on deals when another investor puts a more enticing offer on the table.

And yet, at the same time, suggestions keep cropping up that scooters are a dodgy bet — they have a short shelf-life (especially in the snow), there’s been little defensible hardware innovation so far (most startups buy scooters from third parties), and they could even be dangerous. There’s also the pesky issue of regulation to contend with: just this month, Paris announced plans to tax scooters, while they remain banned in cities like London.

We dive into the numbers, speak to some of the scooter startups, and the VCs brave (or bonkers) enough to back them.

Scooters from the States have the most dollar

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US startups Bird and Lime, both founded in 2017, have raised the most cash to date. Of their European competitors, Stockholm-based Voi and Berlin-based Flash — both founded less than a year ago — have attracted the most investment. In total five European headquartered scooter startups have raised funding; a handful more European scooter companies, such as Troty (Brussels), have not announced funding rounds. Tallinn-based Bolt (previously known as Taxify) is also eyeing up the scooter market, with vehicles in Paris and — launching today — Madrid. Meanwhile one Spanish startup, Ufo, already appears to have gone out of business.

Companies seem to have barely announced one round of funding before they’re announcing another — this is because many expect this to be a winner-takes-all market. The startup which can “win” the most cities will likely be the one to win out over all — and launching in a new city takes considerable capital investment.

Who’s in which European cities so far?

Lime has staged a land grab — it has scooters in more than 20 cities, from Wroclaw in Poland to Zaragoza in Spain. Lisbon, Zurich, Brussels and Paris are all popular spots for scooters.

There are some notable gaps on the map — scooters are banned on the streets of London (although Bird wriggled its way around the rule by running a trial on private land, at the Olympic Park in Stratford). They’re also currently illegal in Germany, although this is set to change soon, and Bird is already running trials in Bamberg.  

It’s likely that city rules will remain in flux for some time; Stockholm, for example, was once reported to be considering banning scooters but now seems happy with them on its streets. Many other European cities are reassessing rules (or creating them) for light vehicles.

Lime scooters on the streets of Paris.

“I don’t think that governments are trying to prevent the use of this mode of transport because they don’t like it or are fundamentally against it,” says Alex Frolov, an investor at Target Global (which backs Flash). “It’s more about how to regulate and use them in a responsible manner; about the players providing the right tools — like software to verify that the hardware is not used on vehicles routes or pedestrian [routes].”

In February, Madrid authorised 18 companies to run scooter services on its streets — after banning scooters four months earlier following the death of a pedestrian in a collision with a scooter. Voi, Scoot, Flash, Tier and Wind are among the companies selected, although all must contend with a limit of 8,600 on the total number of scooters.

More regulation will help scooter companies, says Mar Pallas Poy, VP of European market development at US mobility startup Scoot. It’s better to have rules to abide by, rather than no rules and other players behaving badly: “When there are no regulations everything can happen — on the good side or the bad side.”

Home turf advantage

It’s a sign that cosying up to the local authorities will become essential for scooter startups. In Stockholm, Voi has produced a code of conduct which it hopes will help the various scooter companies work together, with the local authorities. (It did not, however, share with Sifted any specific details on what this code entails.)

“We will only work with cities that want us.”

When Scoot picked Barcelona as its European HQ, it began speaking to city hall, local government and the police months in advance, says Pallas Poy. Scoot’s approach is the same of that as Flash, which says: “We will only work with cities that want us.”

Flash says it plans to share the information it’s currently collecting on how customers are using its scooters, such as which locations are proving popular, with city councils. The vision is that then scooter firms and cities will work together to plan out how best to manage scooter distribution, numbers and more. “[Our] exact number of scooters changes all the time,” Flash tells Sifted. “We are working on quality not quantity.”

In Portugal, Flash says it is also “testing specific incentives for responsible use”, such as a half price discount on the unlock fee for users who park correctly. Scoot already penalises its e-moped customers who don’t abide by parking rules.

How to win a market

But even if scooter startups do get politicians and civil servants on side, how much of their cash will they have to spend on acquiring customers?

“Put scooters on the street — and they start advertising themselves,” says Frolov. “People come out of the tube, see it, are entertained, and willing to use it.”

France only allows scooters up to 25 kph / 15 mph
Belgium caps scooter speed at 18 kph / 11 mph (but is apparently mulling a reform that would raise e-scooter speed limits to 25 kph)
Spain limits scooter speed to 25 kph / 15 mph

Yet there’s little to differentiate between scooter startups at the moment — or gain customer loyalty. Bird, Lime, Voi, Flash and Tier all charge a €1 unlocking fee plus €0.15 per minute.

Home-made hardware

Flash and Voi are hoping to set themselves apart from the pack by building their own hardware — rather than buying off the shelf from the likes of Chinese manufacturer Xiaomi.

Voi scooters spotted in snowy Stockholm.

Transitioning to scooters with removable batteries will make fleets easier to maintain logistically. At the moment, many of the companies have to collect scooters when they run out of steam and take to a charging facility.

Both Voi and Flash are unsure of the lifespan of their scooters. “We don’t know yet; we haven’t been operating for long enough,” says Fredrik Hjelm, Voi chief executive.

“Whoever can produce better devices — long lasting on the roads — will have a huge advantage,” says Frolov. Flash says its hardware may be tailored to different cities to reflect, for example, local weather conditions, speed restrictions or terrain.

“In a year from now, the vast majority of devices on the road will be different. It’s much more a consumer toy right now, one you can use every weekend to play with, but not a proper transportation vehicle,” adds Frolov. “That will absolutely have to change.”

Why do VCs care so much?

Scooter hype is, in large part, thanks to another “proper transportation vehicle” craze: that of the taxi firms. With ride-hailing company Lyft listing on the public market last week and Uber soon to list at a mega valuation, VCs who missed out on taxis don’t want to make the same mistake again.

“If a micro mobility is a tenth of what has happened in the taxi world, it would be a meaningful play,” says Frolov. “[And there are] a lot of reasons why it could be comparable by size.”

“Will cities regulate the size of this market such that it’s a lot less interesting than it seems?”

Some VCs, however, aren’t totally convinced. “Is this doing a job cities want doing?” says James Nettleton, an investor at Jaguar Landrover’s VC fund InMotion. Many scooter startups bill themselves as an alternative to cars clogging up city streets — yet at the moment, he says, most scooter rides are being used for very short trips. “The use of scooters is focused on trips currently done by foot or on public transport; that’s not a problem any city in the world wants to solve.”

Regulation could also pose big problems, especially if it prohibits or severely limits scooter startups’ expansion.

“Will cities regulate the size of this market such that it’s a lot less interesting than it seems?” That, Nettleton says, is an especially important consideration because these companies’ “valuations are so incredibly high, so early”: scooter startups will need to reach extremely big valuations to give early investors decent returns.

Who will survive?

“One hesitation for any investor in this space in Europe is: Am I betting on the right horse here?” says Frolov. “The jury is still out on this one.”

“Am I betting on the right horse here?”

Frolov expects to see some mergers — and some casualties — soon. Mergers would bring economies of scale: joining forces would enable European startups to get better deals on hardware orders (or share IP over in-house designs), cut down on marketing costs, and share the load of negotiating with local authorities.

“One thing I’m certain of: we’ll see less players in Europe by the end of this year.”

A Tier scooter in Lisbon.

 

With additional reporting from Max Traeger.

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