Venture capital funds pour yet more money into e-mobility revolution
A new scooter-sharing start-up led by the former founder of Delivery Hero has raised €55m in one of Europe’s largest ever “Series A” funding rounds, as capital continues to flood into the scooter market. Berlin-based Flash was co-founded six months ago by Lukasz Gadowski alongside veterans of Uber and McKinsey.
It is betting that its large financing, led by Target Global, will help it to design and build vehicles that can set Flash apart from its many rivals. “What we see with scooter sharing is this is just the very beginning,” Mr Gadowski said.
“The whole e-mobility revolution that we are seeing and that everybody is talking about is really a micro mobility revolution . . . Scooter sharing is part of it and how we intend to enter the market but it’s going way beyond that.”
Flash plans to launch tens of thousands of scooters in France, Italy and Spain in the spring, and the rest of Europe by the summer. However, despite raising its large war chest, the company has only launched two limited tests in Zurich and Lisbon.
“So far we’ve been focused on building the product — vehicle and software design, so we are not starting with off-the-shelf products,” Mr Gadowski said. “The amount of financing shows our determination to play in this market and de-risks the whole endeavour.”
Flash will be joining an increasingly crowded market in Europe for e-scooters. Bird and Lime, US players which have together raised almost $1bn and are both currently closing on new rounds that are said to add hundreds of millions more, have expanded aggressively across the continent in the past six months.
Several local operators, including Tier, Voi and Dott, have each raised tens of millions of euros in the hopes of winning a home-team advantage. Flash’s financing comes just two months after Swedish electric start-up Voi raised $50m in one of the three largest Series A European funding rounds of 2018.
Maxim Romain, co-founder of Dott, which raised €20m late last year, said he worried that too much money was going into European scooter start-ups.
What we see with scooter sharing is this is just the very beginning Lukasz Gadowski, Flash co-founder “In one way I think it is good because the more capital, the more scooters there will be on the street and the more chance that users will try it and start to use it on a regular basis,” he said.
“The risk is that it becomes too competitive and it transforms into a price war or a war for density as happened in China between ofo and Mobike, with the consequences that we have seen.”
Lars Jörnow at EQT Ventures, which invested in Dott, believes that scooters are a “unique situation”, as their popularity in the US has convinced investors to bet on teams with little direct operational experience in this sector.
“There is seemingly enormous consumer demand for micro mobility and in this case e-scooters,” Mr Jörnow said. “It’s probably the fastest growing consumer service that’s been seen. That has helped people like us and other VCs get comfortable with making big investments before the launch of a service — it’s already demonstrated there is outsized demand.” For Voi’s investors, the thesis is that US-based Bird and Lime will be beaten in Europe by a local company with closer relationships to city authorities.
“They will win because they are focusing just on Europe,” said Lars Fjeldsoe-Nielsen, general partner at Balderton Capital, which led the round in Voi. But with Flash on the scene, the question is whether electric scooter businesses will be forced into the kind of price competition and subsidies that eroded the sustainability of Asian bicycle sharing companies. These were lured to European cities by the promise of large populations of commuters, smaller cities and lower levels of car ownership than the US.
But companies including ofo, GoBee and Mobike, which rolled on to the streets of London, Paris, Brussels, Manchester and Madrid, have been forced into retreat by mass vandalism, financial pressure and a backlash from authorities as bikes from competing businesses flooded pavements. Ofo shut its overseas department this month. Mr Romain was an executive at ofo before starting Dott. “Where we had bikes, we could see that people were using them,” he said.
“But ofo’s business model was not sustainable.” Recommended Electric vehicles Global rise of scooter use sparks safety fears Alexander Frolov, founder of Berlin-based Target Global, believes that scooters are fundamentally different to bikes. “I think the economics of bike sharing was always a big disaster,” he said. “But the economics of scooter sharing is right now pretty good.” He added that the biggest challenge for businesses was to encourage the development of hardier scooters. He said that Bird and Lime had found that they only had a short time to make money from their scooters “because the overall lifetime of the electric scooters is relatively short”.
“The challenge for Flash is to come up with a device that is more durable than the current ones,” he said. Mr Gadowski acknowledged that there was no “silver bullet” for differentiation in the scooter sharing market. “To be successful in this very exciting and competitive market you have to excel on everything,” he said. “I don’t expect this to be a monopoly in the end.” But unlike his rival Mr Romain, he is not concerned about overfunding.
“When I look at how much money is flowing into this space, it fosters innovation,” he said. “Some of the players might survive, some might not, some might be consolidated. But each and everyone will contribute something to the progress in the field — educate the user and mechanics, drive the vehicle design forward, drive safety forward.” He added: “I don’t care about the current hype or if there are 10 or 12 or 15 start-ups right now. It’s just day one.”