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VC-backed electric-scooter providers zip along despite regulatory roadblocks

First, it was the on-demand car services that launched big and were reined in by the regulators. Now, it’s the electric-scooter providers.

And like Uber and Lyft, a trio of VC-backed companies that provide dockless short-term rental scooters in mostly urban centers are confident they can smooth out the bumps in the road.

In recent months, San Francisco and a few other markets nationally have been inundated with battery-charged rental scooters.

To rent one of the short-range vehicles, a rider downloads a smartphone app and enters credit-card info. Using GPS locators in an app, the rider finds an unrented parked scooter, scans its QR code to unlock it, hops on and goes.

Rides via LimeBike, Bird and Spin cost an initial $1 to unlock and 15 cents a minute.

Proponents say the scooters, as well as the related dockless bike-sharing programs, help solve the problem of last-mile transportation.

A Bird spokesperson noted that 40 percent of car trips are less than two miles and that the company seeks to replace as many of those car trips as possible, reduce congestion and cut down on vehicle emissions.

Scooter Sharing Venture
A Spin user unlocks an electric scooter by accessing the QR code. Photo courtesy of Spin.

In San Francisco, however, pedestrians are tripping over scooters parked on sidewalks. Scooters are being left haphazardly in front of office buildings and retail-store doors.

What’s more, many users are zipping around people on sidewalks, and riders are not wearing helmets.

One Twitter user said she witnessed an electric scooter user in San Francisco going against traffic, without a helmet and while talking on a cellphone.

A spokeswoman for the San Francisco Municipal Transportation Agency, which oversees transit, streets and taxis, told VCJ that the city broadly has laws about obstructing the right of way of others.

Regarding electric scooters, she cited the California Vehicle Code, which says a rider of an electric-powered vehicle must have a valid driver’s license, wear a helmet while operating it, and is  prohibited from riding on the sidewalk.

She added that the city is working on a permit program to hold the companies and scooter riders accountable.

In mid-April, after receiving numerous complaints from the public of parked scooters obstructing sidewalks, the city’s Department of Public Works began confiscating the vehicles.

Following that effort, City Attorney Dennis Herrera issued a cease-and-desist order to the three companies for operating prohibited motorized-scooter-rental programs, “creating a public nuisance on the City’s streets and sidewalks and endangering public health and safety.”

Bird, based in Venice, California, has raised about $110 million in funding from Valor Equity Partners, Index Ventures, Craft Ventures, Tusk Ventures and Upfront Ventures. It has encountered similar legal issues in nearby Santa Monica, where it launched last fall.

In March, the Santa Monica City Council voted in favor of an emergency ordinance through January 2019 that allows officials to impound any shared mobility device that obstructs the public’s right of way.

Sheel Mohnot, a 500 Startups partner in San Francisco, has used the dockless bikes and scooters and noted they have gained a lot of traction. He has not invested in any of the companies and says a part of that is his concern over regulatory issues.

“But that will change,” he says. “People will learn to not ride on the sidewalks.”

The regulatory battles the scooter providers are undergoing is reminiscent of how the car-hailing apps Uber, Lyft and others have had to work with various cities and government agencies.

A couple of the scooter companies are well-versed in the clashes Lyft and Uber had over regulatory issues. Bird Founder and CEO Travis VanderZanden is a onetime executive with both those companies. Spin Co-Founder and CEO Derrick Ko is formerly with Lyft.

In the wake of the scooter impounding in San Francisco, the Bird spokesperson said that any vehicle that blocked a pedestrian’s right of way should be removed.

She noted that because the electric vehicles are such new technology, “we’re working with cities on the regulatory framework. This is not unanticipated.”

Bird, LimeBike and Spin are each trying to better educate their users. They provide in-app instructions on wearing a helmet and how to ride in bike lanes and with the flow of traffic, though users often ignore these rules.

Bird, which also operates in San Jose, California, and Washington, launched a “Save Our Sidewalks” pledge, which includes daily pickup of the vehicles, a focus on responsible growth and a donation of $1 per vehicle per day to cities, earmarked for transportation infrastructure.

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Riders on LimeBike bicycles and scooter. Photo courtesy of LimeBike.

LimeBike has similarly held educational campaigns and helmet giveaways. Otherwise, it’s up to each rider to provide his or her own helmet and to follow the rules of the road.

LimeBike offers its scooters in San Diego, San Jose, Oakland and Washington, and in March it began rolling out a limited launch in San Francisco. (New York bars motorized scooters within the city limits.)

Caen Contee, who heads marketing for LimeBike in San Francisco, says the company operates its fleet of bicycles and scooters in 50 markets nationwide.

Despite regulatory troubles like those in San Francisco, he anticipates more growth for the company. The company is well-capitalized to do so, having raised about $132 million in funding from Fifth Wall Ventures, Coatue Management, DCM Ventures, Andreessen Horowitz, AME Cloud Ventures, GGV Capital and Section 32, among others.

Contee expects the company to enter partnerships with more cities and companies to help provide traffic relief.

He added he wouldn’t be surprised to see more mergers in the shared-bike and -scooter industries, referencing how Uber in early April acquired e-bike company Jump for reportedly between $100 million and $200 million. New York-based Jump raised slightly more than $11 million in funding from Menlo Ventures and others.

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Euwyn Poon, president and co-founder of Spin. Photo courtesy of the company.

Euwyn Poon, co-founder and president of Spin, expects the scooter market’s growth trajectory to be steep. The industry is “heading toward a strong period of growth,” he said.

The company launched in 2016 and operates in 68 cities and college campuses nationwide. Its scooters are currently operating only in San Francisco, which it entered beginning in March.

The company has raised $8 million in funding from Grishin Robotics and others. Poon said the company has been approached about raising more funding. He declined to go into detail or discuss plans.

As for the regulatory issues, he said he and the other companies needed to step up their efforts and work with the many government departments to avoid impounds and similar situations.

“We’ll work it out,” he said. “We’re all headed in the same direction of solving [the] last-mile transportation problem.”

Download an Excel spreadsheet of the three electric scooter companies here: Top venture-backed electric scooter sharing companies

A user riding an electric Bird scooter on Market Street in San Francisco passes another Bird parked on the sidewalk. Photo by Alastair Goldfisher.

Correction: The story above was corrected to reflect the cost of riding the scooters. Each scooter provider charges $1 to unlock and 15 cents a mile.