Los Angeles Is Set For a Summer of Scooter-geddon

Bike-share chaos in China (courtesy of BeijingKids)

2018 saw the micromobility explosion, with electric scooters and bikes popping up all over the West Coast, billions of dollars invested into companies like Lime, Bird, Scoot, Spin and others, acquisitions by Uber (Jump), Lyft (Motivate) and Ford (Spin), and the San Francisco Electric Scooter Saga which led the city to ban the big players and award 2 licenses to smaller players — seen widely as a retaliatory response to the big players’ operating without / around the city’s permissions.

Seeking to embrace the new technology, so appropriate for the city’s weather, style and traffic jams, The City of Los Angeles attempted to learn from these experiences and introduce e-scooters and e-bikes into LA this summer in a regulated, licensed fashion. However, the process of design-by-committee and an apparent attempt to not play favorites has ended in a licensing solution that creates the worst possible experience for both consumers and licensees. No fewer than 8 companies have been licensed to put 3,000 scooters and bikes on the streets each, and more are still being considered. This compromise, while virtually guaranteeing fewer court hearings, also guarantees fewer rides, fewer happy riders — and a setback for the budding micromobility economy.

The Best Consumer Experience for Micromobility is a Regulated Monopoly

Let’s look at the well-understood (car) ride-hailing experience. You go out on the street and you need a ride. You open the Uber / Lyft app and look for one. If it’s not going to be there in a few minutes, you try the other one to see if they have a car closer. What you care about the most is how quickly can you be on your way. Brand, loyalty etc. are secondary for the vast majority of riders. Now — what if there were 8 different apps, and each had its own driver-base? You’d be opening one app, seeing that it’s a 15-minute wait, going to the next one, maybe only 10 minutes, the 3rd one would be 7 minutes… when do you stop? How many different apps would you need to download and put your credit card details into? And when does it stop being better than simply raising your hand and hailing a cab?

With micromobility, the experience is similar, but the bike / scooter is owned by just one company (unlike drivers that may drive for both), so it’s only going to be in one app, and you actually have to walk a few blocks to find it. The resulting customer experience with 8 companies of similar sized fleets? Either get 8 apps, open each one of them until you figure out which one has the closest ride to you, or just walk the street until you find a scooter, then download the right app, register etc. This is the e-scooter equivalent of old-school taxi hailing, but you can’t even pay with cash or credit card when you get in the taxi…

Evidently for the consumer, all other things being equal, the fewer ride-hailing fleets the better — it’s quicker to find, book and pay for your ride. Of course that comes with the standard risks of monopolies around pricing and service, which can be solved with a duopoly (as in the Uber/Lyft case), or with smart regulatory supervision, but not a free-for-all market with 8 competitors.

Cut-throat Micromobility Economics Will Kill The Good Guys

Unlike car ride-hailing, bike-share is a capital intensive business, where you have to buy equipment, put it on the street, service and charge it. A lot has been written about Bird’s and Lime’s unit economics and the obvious question whether this will ever be a profitable business is highlighted by the very public crashes of Chinese unicorns like Ofo and Mobike. Suffice to say this is a cut-throat business where the ability to price some margin in AND get enough rides per unit is critical to breaking even. With 8 players competing for the same riders, both these factors are in jeopardy. When the losses mount, guess who’ll be out of the game first? It’s going to be the little guys, who’ve raised “only” dozens of millions of dollars. Furthermore, in a jungle war environment like that, players who cut corners in quality or in adhering to regulations have the advantage.

The last men standing will be the deep pocketed players — Uber, Lyft, Lime and Bird — exactly the same companies that San Francisco banned from its streets because of their disregard for the city’s concerns. Los Angeles is virtually guaranteeing that these are the companies it will have to deal with in the future.

A Different Approach For City Regulation of e-Bikes

Micromobility has the potential to positively revolutionize densely populated cities, especially ones with great weather like Los Angeles. No congestion, no parking issues, no emissions, and often a quicker point-to-point trip than a car. The scale of the opportunity and the potential effect on car use is mindblowing.

Car-based ride-hailing has little positive impact on non-users. As a city resident, I don’t care if you take your car, ride in a yellow cab or a silver Toyota. You’re going to be using the road, polluting the air, and eventually that car will park somewhere. If you bike or scoot however, there is a positive effect for everyone. This is not simply a transaction between a rider and a company, that happens to occur on the city street, but a transaction that benefits the rest of the citizens, bringing this closer to being a public good. Cities should strive to provide it — not necessarily by owning and operating fleets, but by partnering closely with operators who can balance their economic needs and the needs of the residents and the city broadly.

The consumer experience needs to be managed so as to optimize both use (maximize riding) and impact on non-users (safety, convenience). Infrastructure for both bikeshare and personally owned bikes / scooters needs to be provided (bike lanes, bike parking) and regulation needs to be enforced.

It’s Local, not Global

The innate assumption that bigger is better does not apply to local micromobility operations. These companies provide local rides. As a user I want them to provide good service locally . I don’t care whether they provide service in some other faraway city, I don’t care how good their service is there. I want them to have a quality bike or scooter on my street-corner when I need it at a good price. If a company has a bigger national footprint, but can’t provide the level of service I need, or can’t partner with my local government in a way that benefits the city, it doesn’t matter how big it is and how much money it’s raised. Just like public transportation, which tends to be regional rather than national, the best bike-share partner for a city is the one that caters best to its needs while getting the unit economics it needs to survive and thrive so it can improve service over time.

City managers should strive to find the best partners, not the biggest names, work with as few of them as possible, and help them succeed in improving the livability of their cities.

Despite The Uproar — Rahm Emmanuel’s Chicago Got it Right

Chicago is a city that seems to get it, despite the public outcry (raised by Uber’s lobbyists, of course). It’s just awarded Lyft exclusive rights to operate its Divvy bike-share program, allowing it to focus on expanding it and creating a single-brand experience for consumers. In Chicago’s point of view, “The public is best served when cities retain control over their transit systems, rather than turning management over to private companies and allowing them to decide where, when and how to operate.” By having a single operator the city is actually retaining control.

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I help startup CEOs be 10% better. Founder / CEO of WorldMate (acquired by CWT), Desti (acquired by Nokia). Did time at a VC, and a startup studio. Opinionated.

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Nadav Gur

Nadav Gur

I help startup CEOs be 10% better. Founder / CEO of WorldMate (acquired by CWT), Desti (acquired by Nokia). Did time at a VC, and a startup studio. Opinionated.

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