Scooter Startups: The New Modes of Transportation
Private Transportation Industry Analysis
Transportation is vital to the US economy. Up until recently, transportation other than someone’s personal car was typically run by either the government (public transport like buses or trains) or by a select few private entities (airlines, taxis). In this article, I want to focus on private transportation because that industry is currently being disrupted by Uber, Lime, and others. Within these industries, I believe there are some companies that are being ignored, and I am going to examine them in this article: Spin, Skip, and Scoot.
For the purpose of this article, I am going to split transportation into three simple categories: long distance (250+ miles), medium distance (two miles to 250 miles), and short distance (less than two miles). Granted there is some overlap, but for analytical purposes, these are the categories or segments I have chosen.
As highlighted by this chart, there were previously few private transportation options, and most of them were controlled by a small number of companies. Out of all these options, however, the three that seemed most exclusive and ready to be disrupted were Plane, Car Rental, and Taxi. Some characteristics that indicate industries are ready to be disrupted are when they have high prices, low competition, and low barriers to entry. Hence, when ride-sharing companies broke onto the scene, disrupting the Taxi industry, it was no surprise they were successful because the Taxi industry exhibits the aforementioned characteristics. The Air Travel industry probably would have been disrupted by now too, if not for the high barriers to entry due to the laws surrounding that form of travel.
This chart illustrates the change in private transportation. In fact, the first industry to be disrupted, Car Rental, was back in the dot-com bubble by Zipcar. But, Zipcar didn’t have the impact ridesharing services have had. Still, all these companies paved the way for new companies to focus on transportation for short distances, with electronic bikes and scooters.
Bikes and Scooters Analysis
The value proposition of Bikes and Scooter startups is pretty simple. People need to traverse crowded, short distances quickly, so walking isn’t the best option because it is too slow, and not as fun. Enter scooters. They are cheaper than an Uber/Taxi and more fun than walking. Plus, they save a lot of time. For these aforementioned reasons, people have been flocking to these apps.
Bird recently became the fastest unicorn ever, proving both investors and customers see this as a good concept. Despite their skyrocketing valuation, Bird may be in some trouble. Recently, San Francisco capped the number of scooters allowed in the City. Instead of picking well-known companies like Bird, Lime, Spin, Lyft, or Uber, they went with some lesser known companies: Scoot and Skip. According to the San Francisco Chronicle, one of the reasons these companies were selected is because the application examined “past experience, including compliance with applicable laws and its efforts to ensure compliance by its users with applicable laws.” These aforementioned companies have decided that they didn’t need the regulations because they were creating a market (ridesharing). Whether that works out for them, we will see, but now governments are more aware of these types of markets and are more likely to impose regulation.
In contrast to the companies that ignored regulation, Scoot, one of the companies awarded a permit, collaborated with the San Francisco government when Scoot first rolled out its business before permits were even in the equation. Skip, the other company awarded a permit, has never received a cease and desist order, unlike Lime and Bird.
San Francisco’s government is imposing regulation. That is troublesome for the companies that weren’t awarded the licenses for two reasons. First, all of these companies are headquartered in San Francisco, and if the San Francisco government doesn’t trust them, other governments will most likely follow suit. Second, San Francisco is considered the technology leader, so it usually is at the forefront of innovation and innovation regulation. Clearly, the strategy of collaborating with the government, and obeying the law, has helped Spin and Scoot. If they continue to follow this strategy, they certainly have a competitive advantage over the other companies.
Spin, Skip, and Scoot: Undervalued
For the evaluation of what scooter companies to invest in, I decided to omit Uber and Lyft because their ridesharing business has a driven a lot of funding to them. Their scooter division is part of the company, so there is no way to just analyze that part of the business. Unfortunately, Scoot Networks don’t have the amount of funding they received on Crunchbase.
The apps that work with the government, Skip and Scoot, are seemingly underrated, especially Scoot. The Crunchbase Rank measures the prominence of a company, and Scoot is significantly lower than the rest of them. For a company that just received a permit to operate in the tech capital of the United States, they are ranked very low. In addition, Spin hasn’t had much funding yet, so they potentially could grow. But, they lack that valuable San Francisco permit, which is problematic.
Final Thoughts
If I could invest in one scooter startup, I would pick Scoot because of their growth potential. They have more room to grow then Skip. Plus, they hold the valuable San Francisco permit, which Bird, Lime, and Spin all lack. San Francisco is so valuable because of the influence it has in the tech world. I believe that most bigger cities would follow San Francisco’s lead in terms of tech regulation, instead of coming up with their own. Also, in the application process for permits in other cities, having the approval of San Francisco should carry a lot of weight. Regardless of the company, the scooter market will certainly see a lot more funding, and regulation, because consumers are flocking to this high growth product.
