8 The Sunday Times April 10, 2022
BUSINESS
Early scooters
lasted only about
three months
and the industry
was losing
6% of its fleet
every month
F
or John Schmidt, electric scoot-
ers have one very clear advan-
tage. “I don’t sweat on these
things,” he said, grinning as he
adjusted the straps of his hel-
met near the magistrates’ court
in the City of London. “Also,
they are cheaper and a lot less
hassle than getting a cab for
short distances. It allows you to
be out in the fresh air.”
The 54-year-old solicitor, in his pin-
stripe suit, then silently whizzed away,
his feet pinched together atop the
scooter’s deck.
For the self-labelled “micro-mobility”
industry, Schmidt offers a glimpse of a glo-
rious future. Wind back to 2018 and
e-scooters were hailed as a revolution.
They would catalyse a low-carbon over-
haul of cities around the world, the indus-
try assured us, replacing gridlock and
smog with fleets of cheap, emission-free
two-wheelers.
One investor told The Sunday Times at
the time: “In 100 years, people will look
back at this innovation, these electric
scooters, and see them to be as profound
as the invention of the automobile.”
Start-ups popped up everywhere and
venture capitalists lavished them with
billions of dollars, leading to blitzkrieg
rollouts in which cities from San Fran-
cisco to Madrid were suddenly over-run
with e-scooters. Britain went slower, with
councils rolling out smaller pilots starting
in 2020.
Schmidt’s scooter was part of a Trans-
port for London pilot launched last June
to test “a new and greener form of trans-
port”. The pilots have since been
extended to November 2022 while minis-
ters hammer out legislation.
In stark contrast, countless European
cities flung open their doors — and soon
regretted it. Scooter-related accidents led
to spikes in visits to A&E with chipped
teeth, broken arms, and deaths. Pave-
ments were swamped; traffic rules were
ignored.
E-scooters went from saviour to
scourge. Pictures soon began to circulate
on social media of scooters hanging from
trees, being set on fire, or thrown into riv-
ers. Companies were kicked out or
barred from entering cities. A long winter
ensued. Investors stopped buying in and
the industry set about quietly trying to
repair its reputation and remake the busi-
ness model.
Four years on, the question is now not
whether micro-mobility can spark a revo-
lution, but whether the industry itself is
even viable.
Consider Bird, the California company
founded by former Uber executive Travis
VanderZanden. Bird made history in
2018 when it became — in just a year — the
fastest start-up to become a “unicorn”:
the term for when companies reach a val-
uation of at least $1 billion. At its height,
venture capitalists valued it at $2.5 billion
as it rolled out across the US and Europe.
Since floating on the New York Stock
Exchange in November, however, its
shares have collapsed by more than
70 per cent to $2.25, valuing Bird at just
$620 million (£475 million). As the onlypublicly traded micro-mobility company,
its financial results offer a rare glimpse of
the industry’s financial machinery. Last
year Bird lost $115m, excluding $82 mil-
lion in one-off costs related to its float, on
$205 million annual sales. Disappointing
growth projections last month sent its
shares to new lows.
However, Shane Torchiana, Bird’s
operating chief, claimed that the com-
pany has finally worked out the kinks and
that it is gliding toward profitability. He
highlighted its 20 per cent gross margin,
which means that for every $5 ride, it
makes $1 in profit. It has also leaned heav-
ily into electric bikes, as have most of its
peers; people tend to opt for them on
longer journeys and they are, broadly,
more popular among women.
That still leaves the problem for Bird
that profits are swamped by head-office
costs and research and development, asas Uber and Airbnb, which barrelled into
cities with little forethought, leaving
authorities to install regulations retroact-
ively to roll back the worst excesses.
The reality, however, is that compa-
nies have only themselves to blame.
David Spielfogel, policy chief at San Fran-
cisco-based Lime, remembers when the
company launched in Paris in 2018.
“There were 16 other services,” he said.
“It was awful.” Paris, like many other cit-
ies, has since whittled down to just three
operators, which pay a per-ride fee to the
city authority.
But the safety concerns have not
ceased. In the UK, the Department for
Transport revealed in October that three
people had died and more than 900 were
injured in e-scooter accidents in a year.
Guide Dogs, the charity for the visually
impaired, recently commissioned a crash
test that found an accident at 15mph
could cause fatal head injuries. The char-
ity has complained that visually impaired
people are vulnerable because scooters
are silent and fast, raising the probability
of collisions.
The industry argues that it has come a
long way on safety and technology. In the
early days, most companies relied on
cheap, Chinese-made scooters that were
never meant for commercial operation.
Bird said those models lasted an average
of just three months and that it was losing
about 6 per cent of its entire fleet every
month, mostly to theft and vandalism.
Torchiana said: “You could go on You-
Tube, watch a video on how to hack into
it, buy a kit from China to replace the
‘brain’, and that was it.”
Both Bird and Lime design their own
scooters, which have been fitted with
technology — such as pavement detectionElectric scooters are
making a big comeback
after the pandemicILLUSTRATION: JAMES COWENSEASON FOUR OF
DANNY IN THE VALLEYKRAKEN’S JESSE POWELL:
‘CURRENCIES
HAVE A
FINITE LIFE’
THESUNDAYTIMES.CO.UK/DANNYINTHEVALLEYTECH TALK
They’ve been blamed for over-running cities and clogging up A&E, but the sector claims it can still unleash a transport revolution
E-scooter evangelists yearn to
break free of global legal limbo
DANNY FORTSON IN SAN FRANCISCO
ming, executives are convinced that the
wind is finally at their backs. The soaring
price of petrol is one factor. The pan-
demic, after an initial period when use
dropped close to zero, has also been a
boon, because it has led cities to pedestri-
anise streets and reshape areas in ways
more friendly to two-wheeled transport.
“We were designated as an essential
service by a lot of the cities,” Spin’s Bear
said. “That was a mindset shift for us,
because at that point you stop thinking
about yourself as a sort of a silly start-up
innovation.”
Indeed, the notion that scooters may
one day rival the invention of the car —
ludicrous though it may sound to some —
remains unbowed within the industry.I
n this rose-coloured vision, scooters
and electric bikes, which most compa-
nies have incorporated into their
fleets, typically become part of an eco-
system along with automobile ride-
sharing.
Once these various modes become
plentiful, the theory goes, people can
finally get rid of their car for ever. The
Estonia-based ride-hailing giant Bolt
raised $700 million in January from
investors including Sequoia Capital to
bring that very vision to fruition. And it is
not alone. Uber, an investor in Lime, has
integrated its bikes and scooters into its
app, and Spin recently announced a simi-
lar partnership with the ride-hailing giant
Lyft. Lime’s Spielfogel said: “Scooters are
a gateway drug to get into the shared-fleet
ecosystem.”
He added: “It’s fun to be part of an
industry that’s maturing and actually see-
ing the light at the end of the tunnel.”
Additional reporting: Laith Al-Khalafrestaurants. “We’re launching
a glass-bottle version ... and
we’re also going to add some
very traditional products in
the next two to three months
as generic as apple, orange
and pineapple; the people at
the five-star chains we spoke
to ... [said] you need that.”
El-Yafi, who owns 45 per
cent of the business, with the
rest held by friends and
family, keeps a tight leash on
costs, recently downsizing
the office to save money.
He said he watches aghast
when young firms “burn
through” millions of pounds
of investment on “silly stuff
like massive office space or
hiring too many people”.
He added: “It’s amazing
how many people do it
because they’ve got, say,
£5 million of equity and think
it’s got to go somewhere. But
no, it doesn’t, because you
might need it for a rainy day.”very different when you factor
in transport, warehousing,
logistics, overheads and
salaries.” The Berry Company
now has a staff of five.
Another challenge has
been product development.
“I’ve launched something like
60 over the years and I would
say only 20 of them are in the
portfolio today... There have
been a lot more flops than
successes,” he said.
“But ... once you establish
a strong enough sales base,
you can launch products, test
them and then decide if you
should keep them.”
El-Yafi was recently joined
in the business by his brother,
Tarek, whose London
restaurant closed down in the
pandemic. The pair are now
focusing on new launches
targeting the hospitality
sector; El-Yafi hopes to
become the “Fever-Tree of
juices” for high-end bars andaccounting,” he admitted. “I
launched the very, very best
product, which was very
expensive to make, and sold it
for quite a low margin. I didn’t
realise that ... your gross
profit and your net profit arebecome popular in the UK
quickly thereafter.”
The existing pomegranate
juice in his father’s range was
rejected by most of the
supermarkets, and El-Yafi set
to work creating a new,
better-tasting version that
was also lower in sugar.
But he missed the boat: by
the time the juice was ready, a
new brand called Pomegreat
was dominating the market.
Undeterred, he researched
the health benefits of other
berries, and this led to him
starting The Berry Company
in 2007 with a £25,000
investment from his father.
The firm launched with
three juices — blueberry,
blackberry and raspberry —
and in an early partnership
with Heart Research UK, the
charity endorsed the message
that berries are rich in
antioxidants, which are good
for heart health. This helpedK
haled El-Yafi has the
Whole Foods store in
Kensington, west
London, to thank for
giving his juice business
its big break. “They gave us a
full row in the main [drinks]
aisle from end to end ... and
distributors from all over the
world were going to Whole
Foods on a scouting mission,”
said El-Yafi, now 43.
Soon afterwards, he signed
distribution deals for The
Berry Company in Iceland
and Malta and it now exports
to 40 countries, with salesabroad accounting for 85 per
cent of the company’s annual
turnover of £5 million. It made
a £500,000 profit in 2021.
It is fitting that the British-
Lebanese entrepreneur has
built an international
business. Born and raised in
London, he spent
Christmases and summers in
New York with his maternal
grandparents as a child and
studied at the American
School in London.
After completing his
degree at the European
Business School at London’s
Regent’s College, he worked
for his father’s ethnic-food
distribution business. It
wasn’t his first choice ofI was a bit of a dunce with budgets, but now my juices are flowing
career. “It’s not a sexy or
attractive industry to be in.
You’re dealing with a lot of
individual shops and it’s
difficult to get paid on time.
It’s not very exciting to
launch a new range of Halal
sausage or pastries,” he said.
“I tried it for about three
years and hated it.”
However, El-Yafi found the
drinks part of the business
more to his taste: “They were
the thick nectar juices that ...
were popular among ethnic
minority communities —
mango, guava, passion fruit,”
In his final year at his
father’s firm, he sold the
juices into retailers, securing
a deal with Safeway, which
was acquired by Morrisons in
2004.
Around the same time, he
noticed the popularity of
pomegranate as a health food
in the US. “What I’ve learnt is
that trends in AmericaHOW I MADE IT
KHALED EL YAFI
FOUNDER OF THE BERRY COMPANYHannah Prevett
Deputy editor, Times
Enterprise NetworkKhaled El-Yafi hated working in his father’s food businessEl-Yafi gain listings in Holland
& Barrett and Waitrose.
The company had sales of
£350,000 in its first year, but it
took El-Yafi a while to master
the finances. “I was a bit of a
dunce in commercials andit seeks to build ever more durable scoot-
ers. The goal, then, is to expand to
enough cities where those profits eventu-
ally overtake the cost base. Bird’s rivals
find themselves in a similar predicament.
So the race is on to get big as quickly as
possible, with e-scooter companies fran-
tically topping up their war chests ahead
of an expected wave of takeovers and
mergers. Last year, Lime raised $523 mil-
lion, Stockholm-based Voi nabbed
$115 million in December, and Dott of
Amsterdam picked up $70 million in Jan-
uary. Torchiana said: “When you think
big picture — what is this industry going
to turn into? — it has to be two or three
really large global operators at scale.”
Ben Bear, chief executive of Spin,
added: “The free-for-all age is behind us.”S
pin, which has operated under sev-
eral British pilot programmes since
2020, laid off a quarter of its work-
force in January and pulled out of
several jurisdictions, including Ger-
many and Portugal. Bear complained
that these “free-for-all” markets, where
the number of operators was not capped,
led to “race-to-the-bottom pricing”.
Ford Motor Company, which snapped
up Spin back in 2018 as part of a grand
plan to expand its “mobility portfolio”,
sold it last month to Berlin’s Tier Mobility,
which itself had raised $200 million in
October. Tier is one of three companies,
along with Lime and Dott, that is partici-
pating in the London pilot.
Bear’s gripes hint at a key obstacle to
the micro-mobility revolution: city
authorities. Industry insiders claim that
the troubled early years were due largely
to having to work through the “scar tis-
sue” left by other tech companies, suchand “geo-fencing” — that disables the
vehicles if they go into prohibited areas.
Industry-wide, scooters have broadly
been upgraded and “ruggedised”, mini-
mising exposed wires and using more
heavy-duty materials The upshot: the
typical life of a scooter has gone from
weeks to several years for companies — a
critical improvement in the quest for
profitability.
Cities have also raised their game.
They have begun to hone their regula-
tions, making it clearer to riders what is
allowed and what is not, and they are
building out infrastructure such as
clearly marked parking areas and more
cycle lanes.
Taken together, and despite the sea of
red ink in which the industry is swim-