The Fuse

Venture Capitalists Pour Money Into Urban Mobility to Solve ‘Last-Mile’ Issue

by Matt Piotrowski | May 18, 2018

Sometimes the last mile of a trip in an urban area is the most difficult. While trying to reach your destination after exiting public transit, options dwindle or become less convenient. Why hail and Uber or Lyft for just a mile? Walking may take too long or is unappealing because of the weather or other factors, and there aren’t any buses or traditional taxis nearby. It may be the point at which frustration sets in.

With the “last-mile” problem having vexed urban dwellers for decades, venture capitalists are seizing the opportunity to fund projects that could fill in gaps that public transit cannot meet. Bikesharing and electric scooters are two common methods used to help commuters snake through city streets when other options have been exhausted or are inconvenient.

With the “last-mile” problem having vexed urban dwellers for decades, venture capitalists are seizing the opportunity to fund projects that could fill in gaps that public transit cannot meet.

Bikesharing—whether with traditional bikes or with e-bikes—and electric scooters complement other forms of mobility, including public subways and buses, carsharing, and ride-hailing, helping cities reduce congestion and vehicle ownership. For instance, car2go has seen a decline in private vehicles in cities as carsharing has become more popular.

Bikesharing in cities has been growing for some time, with Washington, D.C. the first to launch a program back in 2010. The electric scooter is a new phenomenon and has seen measurable success. A number of new companies are now operating in this space. A firm called Bird, started by a former executive at Uber and Lyft, has raised more than $100 million in venture capital funding, with a lion’s share coming from Valor Equity Partners and Index Ventures. Estimates say that Bird—which rents electric scooters to users through an app—has a valuation of $400 million.

Bikesharing companies such as Spin and LimeBike, the main competitors of Bird, have included scooters in their services. Altogether, these three startups have raised some $255 million in funding from investors banking on electric scooters turning into a revolutionary technology. Bird has expanded to about a half dozen cities, while LimeBike and Spin are so far more widespread throughout the United States, having also made inroads on a number of college campuses.

Startups with electric scooters have raised some $255 million in funding from investors banking on electric scooters turning into a revolutionary technology.

Scooters have some distinct advantages that make them attractive to urban professionals. For one, unlike most city bikes, scooters are not docked and are light in weight. This makes them easy to use. Riders can unlock the scooters through their apps, and then drop them off at their destination. Secondly, they can be utilized at a low cost. For instance, most users are charged $1 per half hour with costs on a per-minute basis thereafter—typically cheaper than ride-hailing or public transit. New gadgets such as electric scooters are made viable by advances in consumer electronics which have driven down battery costs and facilitated the development of the types of apps that underpin them.

Lastly, users find electric scooters more conducive than having to pedal a bike in work attire, particularly suits. When asked why he uses electric scooters on a daily basis, one commuter told The Fuse: “Because it’s fun, and without the sweat of a bike.” He added: “I have the app for all three companies and use whichever one is available and closest. There are a lot downtown around lunchtime, so I hop on one, head home, walk my dog, and scooter back to the office.”

Downsides to scooters

Despite the benefits, scooters and bikeshares will not resolve all mobility challenges urban areas currently face. Scooters will only likely work in cities with high density and in those where the sharing economy has already thrived. And with the cost of renting a scooter so low, it will take some time for companies to break even. There is also the potential for backlash from city officials and residents who grow tired of scooters on left in the middle of sidewalks and disrupting pedestrians. Companies offering these types of services will need to find ways to communicate the value of their product in reducing urban congestion. Furthermore, the scope of the impact is unclear. Some say that scooter use simply displaces riding on public transit or bikes, which does not change the calculus regarding congestion and fuel use.

Despite the benefits, scooters and bikeshares will not resolve all the mobility challenges urban areas currently face.

Scooters making sufficient penetration among urban transportation is difficult given the competing options. Even though the different modes of transit complement each other, increased competition from a variety of sources could limit growth. The bike market is evolving as more startups are competing with city bikeshares. JUMP Bike—which has a partnership with Uber—is a popular e-bike service, along with Spin and LimeBike. Mobike, a Chinese firm that was acquired last month for almost $3 billion by Meituan-Dianping (China’s version of Yelp), has expanded to approximately 200 cities globally, including Washington, D.C. Another China-based company—ofo—is the world’s largest, and is valued at $3 billion—and may be acquired because it needs fresh capital.

Electric bikes, or e-bikes, are growing in popularity, providing some of the same benefits as scooters. Users don’t have to pedal, and therefore needn’t worry about spending too much energy or becoming uncomfortable from sweating. Also, e-bikes don’t have to be docked, they are typically available near public transit, and they are useful when navigating through hilly areas. Another added advantage: Users of e-bikes can carry more—such as groceries, shopping bags, and even children—than those on traditional bikes or scooters. “Now I have multiple children, I don’t have the physical capacity to bike uphill with that amount of weight. The e-bike changes that situation,” one user told The Washington Post.

Autonomous taxis, when they arrive on public roads, will also provide solutions for many commuters for the last-mile problem.

Autonomous taxis, when they arrive on public roads, will also provide solutions for many commuters for the last-mile problem. The use of automated, electric taxis will likely further cut costs, making them attractive for urban mobility, perhaps shifting some users from current modes such as electric scooters and e-bikes. “The most common anticipated role for AVs is bridging existing gaps at the edges of transit systems, a crucial link that planners call the last mile,” researchers at Bloomberg Philanthropies and The Aspen Institute said.

App-based services, from electric scooters to rides in Uber and Lyft, are not yet a panacea for congestion, petroleum use, and limited access to mobility for underserved communities. But they are providing optionality for consumers and helping cities assist commuters—particularly in the last mile—until autonomous technology is widespread enough to contribute to solving longstanding transportation problems.

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