
The scooter company that raised 400M in 4 months is what is wrong with SV - rburhum
http://www.businessinsider.com/birds-400-million-in-4-months-is-the-poster-child-for-silicon-valley-2018-6
======
wuunderbar
Sure, there's a lot wrong with Silicon Valley, but this article (I understand
it's an opinion piece) is "an example of everything that's wrong" with
Business Insider.

> And what about winter? Not much of a consideration in Santa Monica. But
> riding scooters in Chicago in February? Seems like a hazard.

> How about using a scooter to get anywhere that is more than a short distance
> away? An hour's commute? In the rain? Traveling with one or more friends?
> Carrying groceries? Taking your kids to soccer practice?

> Those considerations make scooters more of a novelty and a niche than
> something that every person will use regularly, like a car.

Aside from carrying groceries, all of these points are completely fruitless
when talking about how these scooters could take of. All of the same can be
said of bicycles yet bicycle commuting is growing year over year in metro
hubs:
[https://bikeleague.org/commutingdata](https://bikeleague.org/commutingdata)

~~~
amarkov
Sure, I can imagine a world where scooters are as common as bikes. But is that
enough to justify a $2B valuation for a scooter-sharing startup?

~~~
JumpCrisscross
> _is that enough to justify a $2B valuation for a scooter-sharing startup?_

For a 5% earnings yield, they would eventually need $100 million in income.
There are probably $100 million in profits in New York and San Francisco
alone. So yes, if this works that valuation seems appropriate.

~~~
gaius
A 5% yield is only reasonable for low-risk blue-chip equities. No one will
settle for 5% with that much risk to their capital.

~~~
JumpCrisscross
> _A 5% yield is only reasonable for low-risk blue-chip equities_

Emphasis on “eventually”. A basic test for valuation sanity is “are the
earnings this company would need for a zero-growth valuation possible?”

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notafraudster
There are two main points in the article: 1) incredulity that the company is
attracting investment, 2) incredulity that anyone thinks it's a good idea.

I don't know anything about the former, but I would think the right way to
analyze it would be to do napkin math on what revenue yield might be.

I do know something about the latter. Bird positions itself as a last mile
type opportunity; you take a bird two miles to get the train or bus you were
always going to get; you take Bird if you're a college student and you need to
get around campus. This dismissal of Bird is a little bit like "I own a car
and I'm not a big drinker and I don't travel, why would I ever call an Uber?"
No one gives half a shit if you'd call an Uber. The question is whether you
have the imagination to suppose there is someone else who might call one. Then
it ends with the laughable idea that "Scooters are cheap so if there actually
is any use for them, which there isn't, people should just buy some". The
whole point with Bird is that you don't need to worry about the scooter being
stolen or parked. Most of the controversy around Bird is cities complaining
that what's convenient for Bird users is inconvenient for anyone else -- it's
hard to observe that while simultaneously complaining that Bird offers no
convenience.

Disclaimer: I've only ridden a Bird once and I crashed it badly and got cuts
up and down my leg and arm and ripped my pants. Apparently I don't have very
good balance. Either way, Bird isn't for me. But I'm not an idiot watching
dozens of people go by me on Birds and yelling at clouds about how they're
making the wrong decision.

~~~
justboxing
> I've only ridden a Bird once and I crashed it badly

Hope you rode it on the road and not the sidewalk like over 80% of these
scooter riders in San Francisco were....

I've been on the receiving end, walking on the side-walk in downtown San
Francisco and getting crashed-into by Bird and Lime riders routinely.

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maym86
I think large companies and industries outside of Silicon Valley waste money
internally on projects that never see the light of day. I think one of the big
differences with SV is it's all on show for the world to see exactly how the
money is being bet.

~~~
bartread
This comment is spot on.

A scooter sharing startup? Yeah, I'm pretty sceptical. But I too have seen
projects at least as ridiculous funded by various companies I've worked for -
honestly, I think it happens all the time. There's one in particular that I
really want to name but sadly _I just can 't_.

The difference, as you've said is that these things are not shown in the full
light of day, and the amounts involved (particularly with respect to revenue
and worth of companies) are often hard to determine at best for outsiders even
for projects that are known about[1].

 _[1]There are, of course, exceptions. This, recently posted by LGR, is a
particularly bizarre example in many
ways:[https://www.youtube.com/watch?v=dv6UaHZxUys.*](https://www.youtube.com/watch?v=dv6UaHZxUys.*)

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raverbashing
> The VCs have an answer to all of these obvious drawbacks. "Genius is the
> only way I would describe it," Jordan Nof, an investment partner at Tusk
> Ventures who flew to Santa Monica, California, to convince Bird to take his
> money

Sounds like an over-the-top scene on a comedy show. Really

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chiefalchemist
> "It has the opportunity to fundamentally change the way people get from
> point A to point B," Nof said.

Perhaps I'm showing my age, but wasn't the same said about Segway?

That aside, $2 B for a hardly new and hardly original idea / model?

Yeah. Something has gone sideways.

~~~
mjamesaustin
The difference is the entry point for a Segway is several thousand dollars,
while the entry point for a Bird ride is $1.

Segway is a great product, and they're very popular for city tours and other
niche markets that can afford such a high price point.

~~~
chiefalchemist
Right. A buck. How does that translate to $2 B?

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freewilly1040
Writing from Oakland, where I have a suspicion that many of the scooters taken
off San Francisco streets for their permit monitoriom have ended up.

Point being that there’s a LOT of these scooters around. I think they’re
great. I keep wondering where the people complaining about the carelessly left
scooters are living, because the majority of the scooters in town are dropped
off considerately, and don’t take up more space than bikes.

I think the backlash against the scooters is driven by people who don’t like
tech, and by people who believe transit solutions should be driven (and owned)
by the government. The scooters solve a problem, are dirt cheap to use, are
available to anyone with a phone, and are environmentally friendly. The
externalities are nonzero but not larger than bikes. There’s a lot to like.

~~~
r00fus
Lots of scooters in SJ also. They seem to attract a disparately minority crowd
- which is great except for the normal distribution of assholes who decide
it's cool to nearly run down your kids in a pedestrian only area or do stunts
right in front of your face.

Given the lack of accountability in policing good behavior I can understand
why people are against scooters.

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wjnc
A company's value is still the present value of expected future cash flows to
investors, right? For 2 billion and 15 yrs horizon, that's about 130 million
in dividends a year. Profits still a bit higher to account for capital needs
of the firm. That's quite the trajectory.

Another thought: are VCs and funds transparent about in what round they invest
their own and the funds money? Can they sell their own series A investment in
subsequent rounds with / without disclosure?

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trendoid
I personally would love to see more such companies (more innovation) but
unfortunately Bird scooters seem to be having legal trouble in my city
Milwaukee:

[https://www.cbs58.com/news/bird-scooters-in-milwaukee-are-
il...](https://www.cbs58.com/news/bird-scooters-in-milwaukee-are-illegal-to-
use-says-city-attorney)

------
foobarbazetc
Gotta say, it’s been amazing not having these all over the place in SF.

Hope they don’t come back. Or if they do, they’re confined to the GoBike areas
or a very limited number per company.

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FartyMcFarter
I'm not a "capitalism is always the best" guy, but in this case I think
capitalism can handle it just fine.

If it's a stupid idea the VCs lose money. If a VC invests too often on stupid
ideas they might go bust. Why should anyone else worry or care?

~~~
danharaj
They should care if stupid VCs going bust is correlated with other leveraged
positions in unrelated sectors.

~~~
dfee
Mind going further? I read “leveraged” as “debt-funded”, but VCs get their
funds from LPs (or from cash on company balance sheets). Where does leverage
come into play?

~~~
joejerryronnie
One underlying reason for VCs making bad investments could be recent fiscal
policies pushing interest rates way down. This causes large investors (e.g.
pension funds) to look for returns in historically riskier investments,
leading to much more money than usual being invested in VC funds. This leaves
VCs with a huge pile of cash and looking for companies to fund which means
they will make riskier investments than usual (including investing larger
dollar amounts than normal). All of this, in turn, leads to a potential bubble
with all the negative impacts we've experienced in past bubbles.

This may not be a huge deal if it's confined to the tech startup space. But
these large investors are not putting all their eggs in one basket, they're
spreading money out into many other industries like housing, financials,
emerging markets, etc. If this large amount of money chasing returns has the
same effect in these other industries, then we have the beginnings of systemic
risk. This is now a very big deal for everyone.

~~~
dfee
The premise makes sense (per industry), but how are the bubbles potentially
connected to make systemic risk?

I’m kinda looking at it like this: per-industry, there is a local-minimum
solution which is being exploited

For transportation, let’s call that “cars”. Scooters are a bet that if we
climb out of that hole we might be able to get to an even lower minimum (but
investor dollars are the fuel that’s burned on the search path).

So despite these walkabouts in the solution space (ie companies), there
remains the local-minima solutions.

Now, for pension funds and what not other LPs that invest in VC firms, they
have made commitments for returns to their share holders (eg retirees). I
think it’s disingenuous to guarantee returns for 30 years (effectively what
these fin products are), which also kinda sucks, but I don’t understand the
problem outside of helping previous investors keep promises they weren’t able
to make in the first place. That feels like a pyramid scheme.

------
arisAlexis
then they blame crypto

