E-scooter startups feel brunt of lockdowns but anticipate future upside

E-scooters have taken Europe by storm in recent years, with 21 deals in EMEA since 2017, according to Unquote Data. The surge in deals has been helped by changes in the regulatory landscape, with e-scooters now allowed to operate in 11 European countries.

Some of the more well-funded e-scooter businesses in Europe include Swedish company Voi Technology, which has raised $168m in less than two years since being founded; German startup Tier Mobility, which has raised $127m; and Barcelona-based Wind Mobility, which has raised more than $70m. They are, however, dwarfed by their US rivals Lime and Bird, which have so far raised $765m and $623m respectively, according to Crunchbase.

But just as challenges like legislation and well-funded US competitors were becoming manageable issues, European e-scooter startups now face another challenge in the form of the coronavirus outbreak.

The issue is particularly acute for non-public-transport companies, given that most cities across Europe have banned non-essential travel and usually restrict outdoor movement to physical exercise. Tier Mobility, which in February 2020 raised $40m in a series-B extension round, saw revenues decline by 70% at the beginning of April this year, according to CEO Lawrence Leuschner. The company's backers include SpeedInvest, Point Nine Capital, RTP Global, Novator, Mubadala Capital, Goodwater Capital, Axa Germany, Evli Growth Partners, Northzone and Kibo Ventures.

Dutch startup Dott saw declines in demand of between 65% and 90% across its regional markets in the first few weeks of the pandemic, according to a spokesperson for the company. Dott has so far raised €50m in venture capital from VCs including EQT Ventures, Naspers Ventures, Axel Springer Digital Ventures, Felix Capital, FJ Labs, U-Start Club and other angel investors.

Maintaining runway
Consequently, e-scooter companies have taken measures to preserve capital and mitigate the effects of the outbreak on their businesses. The initial response of many companies has been to reduce their fleets or pause operations entirely. Plans to expand into new countries have also been shelved.

Swedish startup Voi, which operates in 40 cities and has so far raised around $138m from VCs, recently announced that the company had a "solid financial foundation long into 2021" but that it "must take steps to preserve that position". The company's backers include Vostok Capital, Balderton Capital, Creandum, Project A, JME Ventures, Raine Ventures, Kreos Capital, Inbox Capital, Rider Global, Black Ice Capital and angel investors.

Voi, along with counterparts Tier and Dott, has paused operations in most cities, only remaining open in a select few.

Some startups have also revealed they have had to lay off staff or seek government assistance to furlough them. Voi recently announced it had decided to lay off some of its 525 members of staff across various departments and is seeking government help to furlough them.

Tier CEO Lawrence Leuschner revealed in a webinar that the company has used Germany's Kurzarbeit scheme – the equivalent of the UK's furlough scheme – for people who had been working on the company's expansion to new cities and markets, with those plans now shelved.

US-based Bird, which in January this year acquired German e-scooter company Circ and has operations in Europe as well, has laid off 30% of its 1,387 employees, making 406 staff redundant, according to TechCrunch.

For the time being, e-scooter startup managers and investors contacted by Unquote are putting on a brave face despite the hits their businesses have taken.

VC firm Evli's portfolio, except for Tier Mobility, mostly consists of software companies. Riku Asikainen, managing partner at Evli, says Tier, in comparison to the firm's other portfolio companies, has been severely hit. However, he is optimistic about the future, especially as the company is still running around 70% of its operations while others in the sector have pulled out of some cities almost entirely, he says. "While it would be silly to say we're expecting the same revenues for 2020 as we did before Covid-19, we've invested in Tier with the long term in mind and we intend to support the company for years to come."

Dott investor Lars Jurnow, a co-founder at EQT Ventures, whose portfolio otherwise mainly consists of B2B software companies, has a similar outlook. "Right now, it is software companies that are actually weathering the storm. So, in my personal portfolio, in the short term, Dott has been affected the most but I'm very positive about the future."

The seasonality of the e-scooter rental business could be one reason VCs are not overly concerned. Says Asikainen: "Even in normal times, the demand for scooters is affected in the months we've been in a lockdown, and usually summer until November in Europe is when the demand peaks. So, if the lockdown continues through the year, yes it will be horrible and we lose one summer, but even then, just one summer. But we don't think it will go on for that long, and it looks like in Europe things could go back to normal by summer of this year."

Opportunity in crisis
With social distancing likely to become a lasting fixture across Europe, which would have notable ramifications for public transport, these businesses could also seize on an opportunity to press their advantage home.

There is evidence that, in cities where they are still operating, e-scooters are proving useful for essential journeys to work, shops and hospitals. Dott, which is still operating a reduced fleet in all its cities, has reported a 200% rise in journeys to and from hospitals in French city Lyon since the lockdown started. It also found that 33% of riders in Paris were doing more than four rides per week, an increase of 300% compared to the weeks prior to the crisis.

Says Jurnow: "Before, it was sustainability that was driving e-scooter startups forward. Now it's not just that, but also social distancing that will accelerate the uptake of e-scooters in urban areas."

The increased demand for alternative options while public transport is affected by the Covid-19 pandemic is a silver lining for the sector. But it remains to be seen if the majority of players will be resilient enough to absorb the initial shock until normality resumes.

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