Like many professionals working exterior of tech, Edward Fu was skeptical when he first heard about venture-backed startups targeted on a fairly mundane business: scooter leases. But when one in every of them, an organization referred to as Bird, provided him a job interview at its headquarters in Santa Monica, a metropolis Fu had by no means visited, he was curious sufficient to go see what the fuss was about.
“I decided on my way to the interview that I ought to ride one of these things,” Fu, a former company legal professional with a pc science diploma, advised Fortune. “When you’re in Santa Monica on a nice summer day, that’s an amazing experience. It’s transformational.”
He was offered.
Fu wasn’t alone. Back in 2018, fascinated metropolis dwellers and vacationers from Santa Monica to Dallas have been flocking to a brand new phenomenon of “dockless” electrical scooters. Months earlier, a former Uber and Lyft govt named Travis VanderZanden had launched the Bird scooter firm, with 10 consumer-grade autos available alongside the balmy Pacific coast. Competitors popped up the world over.
Customers have been dazzled by the flexibility to immediately find a two-wheeled experience with a cellphone’s GPS, start up the scooter with an app, and ditch it anyplace afterward. Bird’s pitch of less-traffic-congested streets and extra environmentally pleasant transportation was one other plus. Maybe most necessary, the scooters have been simply darn enjoyable.
Robyn Beck—AFP/Getty Images
Within eight months of Bird’s launch, the startup boasted of surpassing 1 million rides, usually in cities the place authorities officers hadn’t expressly accepted its arrival. No matter. A few months later, enterprise capital buyers valued Bird at $1 billion, marking the quickest valuation ascent for any firm at the moment. Uber for scooters was a unicorn.
By 2019, it had raised tons of of tens of millions of {dollars} at valuations that just about hit $3 billion. With a fleet of scooters that will ultimately surpass 100,000 in additional than 300 cities, the Bird hype was actual.
Unfortunately, so too could be the autumn from grace.
Less than two years after its November 2021 debut on the New York Stock Exchange through a special-purpose acquisition firm, Bird’s stock was delisted as its share worth and business crumbled. Instead of adjusting the world’s transportation and producing oodles of wealth, the scooter startup had racked up $1.6 billion in accrued losses as of September. In December, Bird filed for Chapter 11 chapter safety because it seeks a purchaser. The finish for Bird isn’t but right here, but it surely might be close to.
How did the tech world’s subsequent large factor find yourself on life help?
As in any business postmortem (or close to postmortem), completely different events with completely different views can level to occasions that performed a component in Bird’s trajectory—with classes for startup founders, workers, buyers, and even native authorities officers.
But the rise and fall of Bird additionally says one thing necessary about Silicon Valley’s revered and oft-imitated playbook. It’s a reminder that the celebrated sharing-economy business fashions that propelled new trade titans like Uber and Airbnb to blockbuster success additionally seduced numerous startups with comparable goals however completely different complexities, resulting in sharply diverging outcomes.
From the outset, Bird had all of the markings of being the following sharing-economy sensation. Not solely did Travis VanderZanden have the Uber pedigree, he even had the identical first identify as Uber’s well-known cofounder, Travis Kalanick.
“Having grown up riding a public bus driven by his mother in Appleton, Wisconsin … VanderZanden was inspired to solve the ‘first- and last-mile’ challenge for millions of public transit riders,” Bird would say in its prospectus to go public.
And whereas it took Uber a few years (and a swap from limos to extra reasonably priced shared automobiles) to take off, Bird’s scooters have been a success with shoppers straight out of the gate. For buyers, it was almost unattainable to withstand.
“I would stare out of my 6th floor office while on phone calls and literally watch 5 Birds pass our office every 2–3 minutes,” the distinguished Santa Monica–primarily based enterprise capitalist Mark Suster wrote in a 2018 blog post. Finally, Suster wrote, he scootered straight to Bird’s workplace “and pleaded with Travis to take money from us.”
Silicon Valley heavyweights Sequoia Capital and David Sacks’ funding agency Craft Ventures signed on alongside different keen buyers too, pumping in a staggering $700 million in complete VC funding in Bird’s first two years. (Through a spokesperson, Sacks declined to remark, as did Sequoia. VanderZanden didn’t reply to interview requests for this story. A Bird spokesperson declined an interview request for the corporate’s interim CEO, citing the chapter proceedings.)
Bird initially adopted the aggressive progress technique pioneered by Uber, Airbnb, and different sharing-economy stars, asking for forgiveness from irked native officers solely after having established a presence. “Where there’s no laws, that’s where we go in,” VanderZanden said in 2018.
David Paul Morris—Bloomberg/Getty Images
But cities had been via the Uber expertise; they have been ready. And in contrast to with Uber’s car-based service, it was straightforward to impound scores of scooters if officers deemed them unlawful. Accidents and deaths involving scooter riders additionally had native authorities officers cautious. Bird’s “big miscalculation,” in keeping with Ali Griswold, writer of the Substack newsletter Oversharing, was pondering that it may mobilize its customers in opposition to metropolis restrictions as Uber efficiently did. Bird would ultimately reverse course and take a extra collaborative strategy with native and state officers, however the firm generally struggled to reconcile being a superb citizen with its hardwired progress imperatives.
In Washington, D.C., for instance, the corporate programmed its scooters to journey as much as 12 or 13 mph regardless that the native authorities had applied a 10-mph most, which, in keeping with a former worker, firm officers deemed a poor rider expertise. In a transfer aimed toward inching towards profitability, the startup additionally sometimes unloaded extra scooters onto a metropolis’s streets than its settlement permitted.
“Cities would get upset, threaten to pull our permit, and then the pendulum would swing back and [Bird executives] literally would be like, Do whatever we need to continue to operate,” a former Bird worker advised Fortune. “And then you make all of these promises, then they get worried about profitability, and it starts again. It was just this really nasty cycle that happened a couple times a year.”
For all of the exuberance about Bird’s potential to be one other Uber, the business differed from its position mannequin in a single necessary manner: While Uber was primarily a software program business that relied on utilizing different individuals’s automobiles, Bird was primarily a {hardware} business that needed to spend closely by itself fleet of autos.
The electrical scooters Bird sprinkled all through cities needed to be bought, charged, and repaired (in keeping with one evaluation, the early scooters that Bird purchased lasted less than 30 days on average). Bird started to design and manufacture its personal scooters, hiring an in-house R&D staff with aerospace and automotive expertise. VanderZanden was “obsessed” about automobile design and making a inexperienced experience “better suited for short-term transportation than Tesla cars,” Suster, the Bird investor, advised Fortune, although the transfer would drive up working bills.
To hold its first-mover benefit, Bird spent monumental sums transport scooters across the globe and into the U.S. “The amount of money we spent on airfreighting in 2018 was mind-blowing,” a former Bird govt stated.
Joe Toreno for Fortune
The economies of scale Bird hoped to reap by producing its personal scooters might have been not less than partially offset by questionable design decisions. Unlike a lot of its rivals, Bird resisted adopting swappable scooter batteries. When a Bird scooter ran out of juice, a employee needed to retrieve the automobile and exchange it with a completely charged scooter. While a Bird govt argued in a 2020 blog post that swappable batteries might be harmful and fewer sustainable, former Bird sustainability chief Melinda Hanson advised Fortune the corporate’s resistance “made no sense.”
As a results of needing to drag useless Bird scooters off the highway every day, the corporate was primarily “buying two scooters to get one ride,” a former senior firm official stated.
After initially hiring contract staff to keep up its scooters, Bird outsourced the job to “fleet managers,” a franchise-type mannequin that got here with main tradeoffs. Bird may advocate that fleet managers do issues like put extra scooters in a single metropolis location, but it surely couldn’t compel them to take action. Bird was reducing its mounted prices however ceding management of essential aspects of its operations.
By 2022, Bird’s economics have been nonetheless putrid, with progress coming primarily from producing extra scooters to place in new markets. The firm had recovered considerably from the pandemic, which induced rides to plummet and Bird to lay off hundreds of employees. But Bird was nonetheless averaging solely about one buyer experience per scooter per day, in contrast with roughly three per day earlier than the pandemic. The firm’s web loss had swelled 67% from $215 million in 2021 to $359 million in 2022, whereas income grew simply 28%.
A number of years earlier, Bird might need been capable of persuade buyers that the market alternative was nonetheless so nice as to be definitely worth the danger. But with rising rates of interest and inflation, a money-sucking, difficult business was not a gorgeous funding—particularly one which had gone public through the SPAC course of, a pink flag that many buyers related to low-quality or faulty businesses. Bird was in “a public-company death spiral,” stated Suster: As the inventory worth plummets, it turns into tough to search out versatile financing choices and to retain workers who not see upside of their inventory.
In January 2023, a number of months after warning buyers that it had substantial doubts about its means to proceed as a going concern, Bird secured a capital infusion of $30 million from Bird Canada, a separate e-scooter firm that had licensed Bird’s identify and know-how years earlier. Bird Canada took management of the board and put in its personal management staff, which noticed Bird’s founder VanderZanden, who by then had stepped down as CEO however was nonetheless the chairman of the corporate’s board, exit his firm altogether. Less than a 12 months later, Bird was delisted from the New York Stock Exchange, and its U.S. business filed for chapter.
“This is a great cautionary tale of what went wrong in venture in the last couple of years.”
Bradley Tusk, an early Bird investor
In hindsight, it’s straightforward to marvel what may have been in a world with no pandemic taking the highway out from below Bird’s wheels so early in its journey, or in a world the place cities really valued and supported options to automobiles.
“Most cities in the U.S. did very little to try and make it work in terms of building infrastructure or otherwise putting skin in the game,” stated Hanson, Bird’s former head of sustainability. “In some cases, the company actually paid money to the city, which felt like a requirement to win permits but was never gonna be financially workable.” In some cities, fierce competitors led to unprofitable operations for everybody. In others, tight restrictions on scooter numbers led to low density and thus excessive costs, turning the providers largely into vacationer sights reasonably than the commuter choice Bird wanted for long-term success.
For Bradley Tusk, a political strategist who suggested each Uber and Bird on regulatory points in addition to an early Bird investor who contributed $1 million to the Series A spherical, the stress that some buyers placed on Bird to develop was an excessive amount of: “This is a great cautionary tale of what went wrong in venture in the last couple of years.”
Some of Bird’s scooter opponents are nonetheless rolling: Lime, Bird’s high U.S. rival, just lately teased a future IPO, although it has finished so earlier than. In Europe, the place Bird nonetheless operates via a subsidiary not a part of the chapter, two large players announced plans to merge and type the continent’s largest e-scooter firm.
Many others have collapsed or been swallowed up in fire-sale acquisitions. Even if Bird finally ends up as a loser, these concerned within the startup’s saga nonetheless maintain out hope {that a} clear, short-distance metropolis transportation choice ultimately catches on.
“We didn’t get there,” stated the investor Suster, “but I hope someone does.”
This article seems within the February/March 2024 concern of Fortune with the headline, “Road Kill.”
