The Issue of Moats Around Electric Scooter Startups
In his most recent article on Stratechery, Ben Thompson explores the rise of scooters and how it relates to his theory of "everything as a service." He compares the scooter trend to how Airbnb and Uber changed their respective industries:
What happens, though, when those transaction costs are removed? Well, then you get Uber or its competitors: simply touch a button and a car that would have otherwise been unused will pick you up and take you where you want to go, for a price that is a tiny fraction of what the car cost to buy in the first place. The same model applies to hotels — instead of buying a house in every city you visit, simply rent a room — and Airbnb has taken the concept to a new level by leveraging unused space.
With electric scooters, you can simply open an app on your phone and jump on the nearest scooter instead of waiting for a car to arrive to pick you up. And consumers love them. Electric scooters are being used on average between 8 and 12 times per day, and the unit economics of scooters is very strong (learn more about the unit economics here). But there's one issue that will determine the fate of these well-capitalized scooter companies.
There is relatively little opportunity for a moat around scooter businesses apart from being the first to market in any geographic area. This explains why Sequoia pumped $150M into Bird for rapid expansion, and why GV invested $250M into Lime. When companies are built and deployed at scale, users are more likely to choose the product with wider availability. This is what gave Uber a massive advantage in the ride-hailing market, which has many similarities to the mobility market occupied by electric scooter companies.