Bird’s Nest: The Unraveling of a VC Hype Cycle
For decades, Venice Beach’s surfers, roller-bladers, beach bums, and free spirits peacefully coexisted along its beachside promenade. But in the summer of 2018, flocks of electric scooter riders emerged — transforming the promenade into a beach befitting the Grand Theft Auto universe. Ensembles of road-raging scooterists swerved past pedestrians and bikers, leaving behind a trail of discarded scooters and sunglasses.
Little did local officials realize, their promenade was being “disrupted” by Silicon Valley. While popular with residents and tourists, local officials failed to understand that their promenades and sidewalks were destined to become electric scooter highways. Pedestrians and cyclists had far too long hogged the sidewalks and bike paths for their leisurely last-mile excursions. The luddites resisting the modern scooter convenience of scooters were impeding societal progress. In the spirit of techno-altruism, Silicon Valley had no choice but to intervene.
Abiding by the Silicon Valley adage, “ask for forgiveness, not permission”, electric scooter pioneer Bird, dropped e-scooters across West LA in early 2017. With a product that purportedly would “remove cars from the road, reduce traffic, [and] reduce carbon emissions”, LA officials were expected to be grateful. The private sector was resolving itself to fix the woefully inadequate public infrastructure of the nation’s second largest city.
Soon, investors learned that Bird had discovered the panacea to traffic. Their enthusiasm propelled Bird to a billion-dollar valuation faster than any previous company. The pain the Bird addressed was real and localized. In Bird’s hometown, Angelanos spent 53 minutes each workday commuting, much due to traffic. With $400 million in new funding, Bird was ready to bring its solution for LA to the world.
The broader business community lauded its efforts. Bird was a company of the year, green innovator, and micro-ability activist. Yet, under the veil, Bird instead resembled Icarus. Tethered to its growth-at-all-costs philosophy and lofty mission was a highly subsidized loss-leader. E-commerce dot-com-boom failures sold goods to a non-existent online consumer. Similarly, scooter companies developed products for a city that did not exist. Eventually, the pandemic deflated Scooter-mania’s bubble. It was revealed to be a venture hype cycle failure visible from the ground-level.
In the summer of 2018, I lived in Bird’s Venice Beach. For fun and a little extra cash, my roommates and I decided to become members of Bird charging network. The process was simple and within days we were sent 12 charging blocks (similar to laptop chargers) and given special access to the in-app charging map. The game was simple. Each night at 9pm PST, Bird would annotate its map of scooters with dollar figures. The dollar figures represented how much a charger would earn for charging that specific scooter. After restoring the scooter, in the morning chargers would relocate the scooters to geotagged “nests” in their area.
As a charger, I had first-hand visibility to the impracticability of Bird’s business model. Bird paid chargers typically $5 per scooter. For a charger, it was a winning proposition. A mere 15-minute scavenger hunt would yield $20 for the charger. For Bird, even simple napkin math showed the system was flawed. The average Bird scooter generated $18 per day. After paying us, they had $13 dollars in profit left. While the scooter would at least be a cash cow in theory, its median lifespan was 26 days. The wear and tear, even in sunny Los Angeles, was seen across the scooters we retrieved. Given Bird’s purchase price of $551 per scooter, to recoup the unit cost alone, Bird would need to generate $21 in profit per day. At the time, angsty investors had already seen the widespread collapse of the Chinese shareable bike market due to similar reasons.
Beyond the financials, the charging program disclosed the amateurish operational side of a heavily VC-backed startup. With venture helicopter money, the Bird team could lavish its charger network with limitless charging kits, lax charging standards, and generous charging bounties. Meanwhile, it would manage its stretched network for chargers by 1:1 SMS texts. Little was the charger network assessed on its performance or reliability. It was a program built purely on trust and venture-indulged idealism.
The charging program emulated the gig-economy’s decentralized model of supply similar to ride-sharing companies. However, it fell short due to lack of quality control. An Uber driver is rated every time that he or she drops off a rider. In contrast, a Bird charger has no incentives nor culpability for playing by the rules. Emboldened by unenforced guidelines and minimal quality controls, chargers devolved into the worst elements of humanity.
Our charging consortium discovered many of these surprising exploits. As chargers, if we ever wanted to go to the beach, we could pick up Birds that required charging, use their residual battery, and get there for free. To get back, we could find a new set of chargeable Birds. We could even sequester our own Birds for up to a week and use them as personal scooters. In a fragile system, once a few start to cheat, the system falls apart quickly.
My roommate, Yordi, recognized one shortcut that would differentiate our own charging collective. Traditionally, at 9PM, we would venture into the streets around our bungalow and search for scooters on the map. Soon enough, Yordi realized that instead of searching for a few scooters, he could simply head to the Venice Boardwalk before the scooters were released and load up his car with unused active scooters. After unloading the scooters onto our patio, he would “capture” the wild Birds that immediately appeared on our property.
Yordi was not alone. The local charger competitive landscape encouraged this behavior. Picking up scooters at 9PM was a disadvantage to competing charger gangs. With Yordi’s work, we developed a consistent charging program that took minimal time. It even paid for our monthly rent. The widespread charging bugs were neglected and we reaped the venture benefits. It would be months after we retired as chargers that Bird resolved the intrinsic issues with its program.
Our behavior went unnoticed a few blocks away from Bird’s HQ as the company raised 9-figure round-after-round. Investor interest continued despite CEO Travis VanderZenden selling $44 million of his own shares, a venture faux pas. VanderZenden realized the risk of his operation, while hype cycle investors blindly piled in. They preached that Bird could be as revolutionary as “the invention of the automobile”. In their view, the last-mile held the key to solving transportation.
Unfortunately, e-scooters are not the right vehicle for the last mile. With their average speed of 15 mph, sidewalks and bike lanes are too slow for them. On the other end, roads with city speeds of 25 mph are too dangerous. Scooters at scale result in cluttered sidewalks and dangerous roads. Investors that embrace it as the transportation of the future are forgetting that the city of today has yet to support it..
The “last mile” is a problem already solved by human evolution: walking. For those who are time-crunched, bikes, roller blades, and skateboards have presented pleasurable, affordable, and healthier alternatives to the e-scooter. If something is a mile away from my 90-year-old grandmother in NYC, she’s having us walk with her to it. Bird claimed to be part of the green revolution, but rarely did it replace commuting in most markets. Instead it became a relic of rider diversion and lazy investors.
