|Jun 20, 2018|
Are Scooters are the new frontier? Recent valuations seem to reflect that sentiment among some very deep pockets. What is interesting about this is that UBER and LYFT, barely more than a decade old in the public consciousness, are jockeying for relevance at the “last mile”. And until recently, the operating environment for both ride-share and scooters was closer to “asking for forgiveness” instead of “permission”. What may be seen in years to come is either that China’s greatest export to the U.S. was the notion of this “last mile” business or that it was one of the more interesting imploding vessels of VC animal spirits.
The San Francisco Chronicle reported on how there were 12 applications for 5 permits with the San Francisco Municipal Transportation Authority (SFMTA) for the Powered Scooter Ride Share Program, a 1 year pilot program as SF dips its toe in official belated fashion in these transportation waters. And both Uber and Lyft are applicants as well, seen as among the ultimate operators and acquirers for much of the “last mile”.
(ht to @michalnaka for a tweet-storm referencing the S.F. Chronicle story.)
When confronted with the recent valuation news and total capital invested in these budding platforms (which in the case of Bird Rides, includes $265M USD already raised but with more anticipated at a desired next round private valuation rumored at $2B USD) and what appears to be the partial liquidation of founder shares for tens of millions (“founders preferred stock” has been reported to be reduced from 11.25M shares to 7.5M shares as of June 2018, with proceeds of about $40+M USD), one might ask about what’s going on? Andrew Chen wrote a very good explanation to help readers make sense of it. His letter from June 18, 2018 was entitled “The Scooter Platform Play: Why scooter startups are important and strategic to the future of transportation“.
Chen begins with a helpful starting point, with Chris Dixon’s Jan 2010 piece, “The Next Big Thing Will Start Out Looking Like A Toy“. I’ll start here and then jump back to Chen’s application to scooters.
“Disruptive technologies are dismissed as toys because when they are first launched they “undershoot” user needs. The first telephone could only carry voices a mile or two. The leading telco of the time, Western Union, passed on acquiring the phone because they didn’t see how it could possibly be useful to businesses and railroads — their primary customers. What they failed to anticipate was how rapidly telephone technology and infrastructure would improve (technology adoption is usually non-linear due to so-called complementary network effects).”
“To distinguish toys that are disruptive from toys that will remain just toys, you need to look at products as processes. Obviously, products get better inasmuch as the designer adds features, but this is a relatively weak force.”
“Much more powerful are external forces: microchips getting cheaper, bandwidth becoming ubiquitous, mobile devices getting smarter, etc. For a product to be disruptive it needs to be designed to ride these changes up the utility curve.”
(I will say this last passage by Dixon about external forces and toys becoming tools as they journey upward this “utility curve” does such a great job of explaining why I started The Big Stack.)
Back to Chen’s analysis:
“Like a toy, a scooter seems under-powered vs other transportation options. It only takes you on short trips — a few blocks at a time. It’s cheap and makes less money than a highly profitable Uber trip to the airport. They are placed all over the place in cities, annoying many.”
“These all seem like weaknesses, but in fact they’re strengths. Because scooters are cheap, short-range, and ubiquitous, it means consumers are adopting them as an alternative to walking. SCOOTERS COMPETE WITH WALKING!”
(That analogy reminds me of Netflix’s biggest enemy (or rival) being sleep.)
“These scooter trips are short, frequent, and cheap, driving high engagement in the app… a home screen app.”
“So what, so what’s up with that?” some might wonder.
“When you’re the first look and the highest frequency place to start your trip, it’s the pole position in consumers’ minds. Everything else is downstream”
That’s what’s up, everything. Everything is up for grabs from the word go. Suddenly, the moment you step foot outside the door, your feet might land on one of these platforms — and that’s a very choice position to capture daily “IRL” activity.
Let’s tie this back to the dozen applicants competing for those 5 S.F. permits. With Dixon and Chen’s thoughts in mind, it begins to be apparent why Uber and Lyft are involved. They are hedging against being blocked by investing in access to this “pole position” and riding the utility curve for daily engagement for millions of people going about their daily business in hundreds of cities.
Let’s consider what happens in urban markets going forward.
There was a relevant Medium piece by Phil Levin, a writer who was involved with Facebook’s Internet.org initiative, who cited the academic research of Cesare Marchetti (“Anthropological Variants In Travel Behavior”, Technological Forecasting and Social Change 47, 75–88(1994)) about urban footprints. (Marchetti’s day job was as a physicist.) He also cited charts from Seth Dixon a geography professor who shared an analysis of his colleague Matthew Hartzell , who has written on urban (sprawl) footprints.
Levin summarized Marchetti’s work and shared a fascinating chart from Marchetti’s paper.
“Marchetti makes two core claims:
1-Across cultures, time, and transit modality, people spend on average 1 hour traveling per day 2-The footprint of a city is determined by how far an hour can get you
in the dominant mode of transit”
Levin has updated this model by positing that modern transportation can change the contour of urban footprints. What he hypothesizes is that cities will spread larger because of autonomous vehicles. “Land use and mobility are inexorably interlinked. And as mobility improves, we should expect sprawl.” I think a theoretical unit of urban size which Levin creatively named “the Marchetti”, at 3.1 miles, could be impacted if Chen/Dixon’s toy rides the utility curve. No wonder Uber and Lyft and some deep private pockets are betting fast and big.
A very speculative side-thought on Uber (but it applies to all its competitors).
My thought, is someday perhaps UBER merges with a manufacturer. UBER has its “AOL Time Warner” moment, the manufacturer gets its customer list, and the platform evolves into a directory of users, a different kind of network of users or members (like Amazon Prime). A fin-de-siecle market moment.
There may be hints of the layers of this mobility “stack” which survives afterwards. Along with making the devices that move people and things along. ML driven logistics will support all the various layers of one tremendous sandwich of a platform, from the scooter, AV-motel-on-wheels, delivery service,drone-drop-ship,urban Bladerunner-spinner-inspired ride,”BFR” sub-orbital transport and back again. Lots of toys grow up.
“UBER-Manufacturer, Inc” could be a robot(car) maker with a customer list, moving along 24/7, at the behest of a machine core. Perhaps it licenses that list to other makers across the globe (but what happens to Facebook in the long run may direct privacy policies). It connects with(or buys) UPS and other delivery cos. Perhaps it competes with Amazon (I mean who doesn’t eventually have a date wtih destiny, with the Beast of the Stack?) since both are focused on fulfillment.
End of one futuristic ride-along. More on AV and batteries in future posts.
A random news addition: Volvo recently demo’d self-parking… yachts. May our scooters end up taking us to one sweet ocean adventure someday.