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Responding solely to the 'moat' question: think railroad price wars in the late 1800s in the US.

Industries with capital expenses relatively large compared to contribution margin tend towards local monopolies. When faced with a potential new entrant the incumbent can lower prices to where the entrant's assets can't return their cost of capital. The incumbent's capital is already sunk so they can afford to bring prices close to the marginal cost of providing the service. This threat of a price war is usually enough to deter entry.

This also leads to agglomeration in local markets both to avoid duplicative assets and to add credence to the price war threat.

(Hi Jerry!) That is a good point. A few thoughts here:

1) Bundling could help new entrants with existing platforms. E.g. if Uber comes into a local market and offers a free scooter ride for every car ride, that could really hurt a company like Bird -- even if Bird is the incumbent when it comes to scooters.

2) I view these capital expenses as being relatively small. If it's $1m-$2m to cover SF in scooters, and if scooter costs are similar across players, then I don't see why a new entrant couldn't also offer services at cost until the incumbent gets tired of running at break even.

3) The price points are so low here -- often $2-$3 for a ride. If that's the case, I wonder if consumers will care about someone shaving 30 or 50 cents off their price to provide scooters at their marginal cost, or if they will care more about scooter proximity or safety or comfort or something else.

You forgot the $10m advertising campaign to get folks to install the app and register.

That’s the other beauty of the business, the scooters sitting everywhere ARE the ad campaign.

This. Was in Venice beach this past May and the Birds were everywhere, to the point where we almost felt compelled to give them a try, even though we had no need. Both wife and myself signed up and spent 30 minutes riding to Santa Monica. Great advertisement, cool factor and high word of mouth marketing.

Have they done any advertising? I saw a dozen people riding them before asking someone, never seen an ad for them.

They don't exist in my city, yet I've heard about them. Maybe a PR team?

Is $3/ride really that low ?

On my personal ebike, i do 2-4 rides a day and it has almost entirely replaced my car.

So really, anyone in SF or NY who spends $50/month will surely consider getting his own?

3$ and even 2$ seems in fact un-sustain-ably high for mass market adoption (I live in a small European country. Salaries about 2/3 of US).

At some income level, there isn’t any difference between 1 penny and $3. It’s like getting a coffee, people can spend a lot of money on them thoughtlessly. And many people wouldn’t want to own their own scooter. I would rather not have to carry it or store it anywhere. Ride it to a store and just ditch it. If it breaks just get off and find another one.

I tried out the Bird scooters, liked them, and then bought my own. I use it to speed up the Caltrain commute from San Mateo to FiDi in San Francisco. The trip is: 0.6 mile scoot to Caltrain -> 2.0 mile scoot to FiDi -> 2.0 mile scoot to Caltrain -> 0.6 mile scoot home. If I were to use Bird, and Bird were available in San Mateo, it would cost about $12 a day for Bird, plus I would have to fire up the app and hunt down a scooter four times a day. The scooter cost $300, folds up in seconds, is easy to take on the Caltrain, and takes up very little space at home or at work.

What scooter did you buy? Where? (I've tried briefly to find the model Bird uses but couldn't)

This is the one bird uses: https://www.amazon.com/Xiaomi-Electric-Long-range-Fold-n-Car...

Looks almost as big as a foldable bike

I got the Ninebot/Segway ES1. Frys had them on sale for $300 about a month ago. Bird uses the Xiaomi/Ninebot m365, which is similar in many ways. The Xiaomi is faster, but if you want the faster speed, you can get the ES2, which Bird is also starting to use. The fold on the ES1/ES2 is superior -- it's simpler and faster, and the scooter folds up smaller, so it's more practical to put on the luggage rack on the train. It's a single lever and literally 3 seconds to fold or unfold. The ES1/ES2 also has an optional second battery pack which doubles the range and increases the speed. The ES2 has rear suspension, is 3 mph faster, and has rear and underside lighting. The extra speed and lights are nice, but the rear suspension adds weight and people say it rattles.

Overall, it's a really well designed product. I'm pretty concerned about the durability though. I've ridden it about 100 miles, and so far so good, but there have been several small issues with rubber coming unglued, it's starting to creak a bit, the caps on the handlebars pop out. The advertised range is also wildly overstated. It's rated at 15 miles but I had mine run out of juice at about 8.5 miles.

My hope is that the big rental companies will push Ninebot to make durability improvements, and the next version will last longer. Based on my experience so far, and what I've read online, I'm expecting maybe a 3-400 mile lifetime for this one.

If you get one, do your best not to go over any significant bumps at speed. The wheels are small, the tires are solid rubber, and the suspension has very little travel. The motor is in the front wheel. If you bottom out the suspension, the motor is going to take the hit, and it's small, high performance, and built to a low price point in China.

There aren't any network effects a la Uber and Lyft because the scooter doesn't come to you, you go to it. And the scooters do not go fast/long enough to stitch different catchement areas together.

Every sign points to commodification here. The way car and bike rentals are commodified.

The economics leaks in many places:

1) people buy their own scooters

2) with rising scooter usage, scooters get way cheaper (see 1)

3) multiple competitors bid down rental prices

4) people figure theft/secondary part market out

5) a scooter inventory uniting meta app (a la Kayak) takes all the margin

6) turns out teenagers were only bird hunting as a novelty, gotta pay expensive 25 year olds to do it

So many issues. It's easier to see a world where electric scooters are neat novelties for tourists sometimes (as long as it's warm! with no kids! and no rain! and we're going more than 0.7 but less than 2 miles! and my wife doesn't say they're dangerous!) than a world where any one of these companies is a serious $1b technology company.

I mean: doesn't it just feel natural?: these are little novelty tourist scoot rental companies.

> turns out teenagers were only bird hunting as a novelty

If a teenager can grab 20 bucks with minimal effort they're definitely going to be doing it. One big leaky part of the plan is that it doesn't seem scale to non-big-cities like Uber can/did.

Regulatory moat is a possibility, where an established player can coerce a city to impose an expensive compliance guideline that prevents upstarts from entering.

Yeah, I foresee cities picking a winner through a competitive process. What city wants 40 different scooter companies to deal with?

A city that values the free market!

Sounds like a recipe to create the Comcast of electric scooters.

The right way to solve the problem of too many electric vehicles on the sidewalks is to charge owners rent.

Have painted parking spaces in appropriate areas and charge for access via audit of scooters in a given zone (city, state, etc).

A suburb of Columbus Ohio is starting a review process with Lime Bike. Depending on the outcome of a trial process, they'll announce a bidding process where the winner gets exclusive access to the city.

Is it a reverse auction or one where the company agrees to gouge the user with high fees that is passes a fraction of to the municipality?

I personally wish there were more regulations on these. They are a complete nuisance. Santa Monica has tried to create more laws surrounding these, but the cops never enforce the rules.

Walking around sidewalks with younger kids is now dangerous from the groups of teenagers riding on these with little concern. In the same afternoon I saw a young kid get hit by a car for not following traffic rules. While its required to wear a helmet in SM no one was. These things are littered everywhere in paths just lying on the ground.

I get they are great and if we could rely on the people or the company to enforce the laws and make it a better experience I'd be in favor of them because they are convenient. I just don't believe that will happen.

Wait, you saw a young kid get hit by a car and you're worried about scooters littering the sidewalks? How are those related?

these are both hazards that are brought from the lack of user policing done by Bird who doesn't care about the city or users as long as they can profit.

The sentiment of this argument parallels arguments made against cars when they started becoming common (suddenly over the place, dangerous, a nuisance). These complaints about scooters are a bit humerous because cars are still a nuisance, dangerous, littered all over. The difference is cars are a bigger danger, bigger nuisance, and if you think scooters are littered all over the place, have a look around at how much space all these cars are taking up! :-)

We can get through this transition period and put in place reasonable rules that yes will eventually become commonly complied with. License scooter drivers and or the scooters themselves. Reserve one street parking space per block for scooters and you probably could cram 20 of them in there. Lots of things can be done.

I think it depends on the culture of the area. For places where people are basically law-abiding, that might happen. Where I live in Oakland, CA, there's not a chance. I get run over by cyclists on the sidewalk almost daily and the scooters is just making it worse.

Which isn't to say I want to regulate them more. It's just sort of pointless in a city where the populace doesn't follow the existing rules, and there's no political will for law enforcement to do anything about it.

"I get run over by cyclists on the sidewalk almost daily"

Are you seriously saying that multiple times per week, you are knocked over by a bike?

Do you seriously think someone would exaggerate or use hyperbole here??!

This isn't even remotely close. The only way your car analogy would be relateable is if car drivers didn't follow the rules of the road and were free to drive on sidewalks and dump them in the front lawn of companies and personal homes.

They do this today along with a whole other host of bad behaviors. The difference is an enforcement regime.

I think you are suffering from a bit of car blindness: https://blog.sfgate.com/bicycle/2018/04/27/invisible-cars/

When cars first became available, the rules didn't exist and things like that did happen. That was my point. Here's an article I found with a bit of info and which makes the same analogy.

https://qz.com/1257151/this-electric-scooter-mayhem-sounds-j...

Also Bird has no intention to police their own users or help cities participate in the upside of their mess.

Have you ever tried one of these apps & scooters? They do tell you to drive well and give free helmets to users. They entirely have these intentions.

And should Hertz or Enterprise be required to operate a police force for their rental cars that their rental drivers can leave any 'ole place?

Couldn't you say the same thing about teenagers on skateboards, bikes or roller skates?

If you ever visit santa monica you will know exactly what I mean. The fact that anyone can pick one up and drop it off anywhere is much different. Skateboards and roller skates are anywhere near what these electric scooters are.

>- the economics of scooters are great (very quick payback periods for the scooters). At a few bucks per ride and maybe a dozen rides per day, it doesn't take that long to pay off a $300 or $500 scooter.

I bought my own for this reason. The scooters you are renting cost $500, already if you are using it twice per day to get to work you are losing money.

> Maybe one moat could be scooter durability.

There's also the option of more efficient support & operations, which is arguably the approach that Lyft took.

Uber chose to raise a ton of money and outspend their competitors in the hopes that they bleed them out via spending in acquisition and creating new products via R&D (maybe express pool is an example of this).

Lyft, however, seems to aim for profitability and stability. I assume this means investing in internal tools & processes so that they can be more efficient.

I'm not sure who wins in this situation. But I imagine Lyft isn't going away, and Uber may, truly, run the well dry at some point.

As an investor, I would be seriously concerned with FOMO. Not on actually missing out on the next best thing - I would be worried that this phenomenon would lead me into bad investments because everyone else is doing it. In the current environment of overfunding, everyone looks like they are the next hot company. You need to look beyond the current trends and find something which matches your strategic vision of the future but has not received a huge amount of attention yet. It feels like the scooter space opportunity has already passed for seed investors.

I definitely see this from inside the VC industry: half of the investors I meet think this category is dumb and doesn't have moats, and the other half have FOMO and want to bet on the space in case an Uber- or Lyft-sized company emerges from it. A 3% chance at a $50b company makes an investment decision rational even at crazy early stage valuations.

The entire industry has FOMO. Look at valuations.

The top investors will be fine because they get right of first refusal on all good deals. It's the lower ranks of angel investing/VC that's going to suffer.

I think to be a great investor you have to be in it for the long term. Guys like Fred Wilson, they've been doing this 20-30 years and are reaping the rewards just now.

Ben Thompson just released a great post that talks about exactly this issue, including moats in the space.[0] Essentially, there is no two-sided marketplace advantage here like there is with Uber or Lyft (the drivers -> customers -> more drivers flywheel).

I like the idea of this playing out with 1-2 companies offering several different transportation verticals in each city. Rather than checking Uber, Lyft, Via, Bird, Lime, etc. to try to get from point A to point B, I can check an app that gives me the prices for ridesharing, scooters, e-bikes, whatever...and then I choose one of those options from the given company.

The moat here is to be the best aggregator for the entire network. Netflix has enough good shows for me that I don't pay for Hulu to watch the one show there that I'd like to see. The same idea exists here, just in the physical world.

[0] https://stratechery.com/2018/the-scooter-economy/ HN Discussion of the post: https://news.ycombinator.com/item?id=17284094

worth noting that the Transit app already aggregates all the options you mentioned, although it redirects to each respective app for payment.

Re: moat- it's gotta be price and accessibility.

Since there's no ownership, reliability and durability don't matter as long as it can complete the ride, although it does matter that it's not so crappy a scooter that it's falling apart while riding.

After that, it's just about ease of accessibility and price. I'll walk a block to use a service that is dead simple and painless to use compared to a more complicated app, but I'm not walking a block for something that's slightly nicer, or 10% cheaper.

I'm sure government will be providing more than plenty of moats to prevent any new entrants into this market as soon as this industry is developed.

Santa Monica is already planning on enacting a sort of moat law that would seemingly protect Bird (conveniently HQed next door in Venice).

I would be skeptical of new entrants to scooter / bike sharing. In China, ofo and mobike together captured about 95% of the market. If it were possible to challenge the companies that have reached scale, one would think one of the many dozens of failing competitors in China would have figured out it by now.

If there's no moat, there's no reason to challenge the current companies until it's proven that profit is possible.

Just looked through my apps and I’ve spent $40 riding these scooters in SF. And that’s just for fun, no commuting.

The dockless approach doesn't work. People rightfully hate the race-to-the-bottom that leads to bikes/scooters being dumped everywhere. Once you accept the dockless approach doesn't work there's three interesting possibilities:

1) The city picks a winner. This could be done fairly by auctioning off a five year contract or it could be done via corruption. Either way the scooter companies should be taking the millions they've raised and greasing officials.

2) Establish a market for docks. There's an interesting opportunity here in that scooter "stations" don't need to be the sort of big official stations that have beeen deployed for bikes where each station holds 30+ bikes. You could imagine a lot of small business, stores, etc. offering to host small stations that hold 4-5 scooters on their own private property. The scooter companies would then either race to lease as many of these stations as possible or would be forced to pay each time a scooter of theirs gets docked at the station. The winner is the company that owns the most stations. That's a real moat and the stations become real assets.

3) The simplest solution is probably to just to give people scooters. Let people "lease" a scooter and trade in these "leased" scooters at any time 24/7. Trade ins need not be a big centralized, complicated thing; you could imagine something like a scooter delivery service. In <20 minutes an Uber shows up and drops off a new scooter and collects an old one. Don't charge people if the scooter is stolen or breaks but do charge people if their scooter is left on the sidewalk and gets seized by the city. Then it would be up to individuals to make sure their scooter doesn't get left on public property. Scooters are so small -- and only getting smaller and more portable -- that you could imagine that most people won't mind stashing them under their desk/in their office.

All three of these possibilities btw lead to a single winner. At the end of the day, like with most transportation plays, you're looking at powerful economies of scale where the big guys only get bigger. It's a market to invest in if you think you can pick the winner cuz that winner probably will take all.

The entire dockless business model started in China and they're way ahead with the backlash. Shanghai has cracked down hard [1] but it's still a huge problem with bikes being dumped all over the place [2].

If people can move past the dockless approach and realize it doesn't scale then we might get more efficient business models that could be defended without gobs of VC money.

[1] http://www.wri.org/blog/2018/01/chinese-cities-aim-rein-bike...

[2] https://news.sky.com/story/in-china-rental-bikes-have-become...

But scooters are _much_ smaller than bikes, and Americans are _much_ less likely to ride scooters or bikes than the Chinese are. I haven't seen anything close to those Chinese scenes in San Francisco while they had scooters. In fact, I haven't really seen anything that looked like much of a problem, in terms of parking.

Anyway, cities could make parking rules and require the scooter companies to help with enforcement. E.g., to lock the scooter you have to park it properly and take a picture with the app. The city's parking enforcement gets access to the pictures and can fine people without even having to get off their chairs.

The real problem with scooters, from what I've heard, is that boomers hate them because they're new and because some people ride them on the sidewalks. But the dock solution does not help at all with that.

>Either way the scooter companies should be taking the millions they've raised and greasing officials.

Refreshingly honest.

> Establish a market for docks.

Fascinating idea, thanks for that analysis.

I don't think the docked approach works well either, because the heavyweight docks are never close enough to where you want them to be.

It's really just a parking problem. We don't want another cable company / taxis v2 and 'pick' a winner with horrible service. You mandate that these things need to be locked to something and most of the problem resolves itself.

Businesses that want it to be easier to shop where they are will install bike racks. The city will fund new bike racks with scooter permits. You could even allow scooter companies to install and pay for new bike racks themselves as they probably understand demand dynamics far better than random cities. If the scooter companies install the racks, you just have to say they can be used by everyone and are owned by the city.

We don't need heavy duty docking systems that are exclusionary to one docking company. A simple cheap metal bike rack that everyone can use will be plenty enough and more economically efficient.

You can also detect if the renter rider puts the scooter in the right area or if someone is screwing with the scooters after the fact with accelerometers. You could even detect if they are in a tipped over state or not.

  You can also detect if... someone is screwing with the scooters after the fact with accelerometers

How does that help you? You can't do anything about it.

It's how you attribute parking tickets. If you can tell the renter did the action, then you can pass the ticket to them, which incentives them to keep it upright. It also lets you put them back up with workers:

https://www.limebike.com/blog/new-tech-helping-lime-keep-bik...

Also by locking the devices the likelihood of them falling or being in the way is low.

  If you can tell the renter did the action

But you can't, without onboard video, anyway. Anybody wanting to steal or vandalize a scooter won't do so on one for which they are (or just were) an active renter.

  by locking the devices the likelihood of them falling or being in the way is low

I don't get that at all. All locking does is prevents unpaid usage as a scooter; it doesn't prevent theft, vandalism, or bad acts with it (e.g. piling a bunch of them in the CEO's driveway as a protest).

But why as a renter would you want to only vandalize / steal the scooter that you just used, vs just stealing / vandalizing the hundreds of other scooters out there? It lets the companies collect statistics on who is more likely the doing the bad behavior, careless customers or random assholes?

The biggest complaint with these scooters is they are in the middle of the right of the public right of way and laying down on the street in an inefficient manner.

If they are locked to something, they would be outside of the right of way since lock points tend to be on the edges of sidewalks. If you put the lock on the correct point on the scooter, it will be fairly difficult to knock them over, vs the light tap you need today.

Locking also reduces the instances of impulsive bad acts, since now you need some sort of specialized power machinery to remove the items. And barriers to impulsiveness is a big factor in reducing crime. Did you know for example crime tends to happen more at the bottom of a hill vs the top of a hill? Because people don't want to walk up hills because it's extra effort.

On top of that, nobody has been complaining about personal bike ownership, which today follows a model of being locked to things.

JUMP bikes in SF for example follows this model, has been around before the scooter boom. I haven't heard a single complaint about them other than positive complaints such as 'why aren't there more?', and 'why are they restricted to an area?' The scooters on the other hand have had a bunch of negative complaints.

4) It creates a larger market for scooters. Nobody wants to deal with docks.

It's worth noting that docks can be virtual now - as simple as a few painted lines and a rugged Bluetooth device without a screen, that shakes hands with hardware installed in the scooter.

Probably that they aren't really useful in a long-term sense. They can't be used for transporting much, can't be used easily when sick, won't be able to transport young children, and become useless in cold/hot/rainy/and snowy weather. Same moat as any other fad that targets the single young urban knowledge worker; their needs will eventually grow beyond it.

I mean, skateboards do what these do as well.

I think the biggest threat to these businesses is municipal. Maybe they don't go dock-less but this might be cheaper than supporting under utilized bus lines at the same cost for consumer without all the waiting. Obviously this is much more applicable to warm weather climates but it seems these will put the bike shares out of business. Interesting to see how it pans out...

Demographics, geography..

I bet the number of people riding scooters drops sharply at age 30. Heat dissipation for the mechanism and comfort for the rider are two big factors.

Try it in Dallas. It has notoriously low walkability scores and is regarded as pedestrian-hostile. The three months over 100F would make or break.

Just let us get through one winter season. Is anyone trying this in an area other that those with mild weather. Northern cities will have days if not weeks worth of time where the roads won't be safe.

plus have any of these startups had issues with injury lawsuits?

> I'm stuck on is what the moats could be in this business

San Francisco seems to be solving this problem for the industry. At last glance, their regulatory framework grandfathers in existing providers with a medallion.

Do you think eGolfCarts on demand might be better? >1 passenger, protection from rain and sun, safe, less likely to be stolen, cheap, ecofriendly

are you stratechery?