Electric-scooter company Bird said today it has raised $275 million in fresh funding at a $2.5 billion valuation, bringing its total financing to about $700 million.
The funding, led by Canadian asset manager CDPQ and Silicon Valley venture firm Sequoia Capital, gives Bird a much-needed vote of confidence and some equally needed cash. Tech news site The Information reported (paywall) in July that Bird burned through nearly $100 million in the first quarter of 2019 while its revenue shrank to about $15 million, and that the company had only about $100 million left in the bank as of the spring.
Bird CEO Travis VanderZanden at the time attributed that $100 million loss to a “one-time accounting write-off from old retail scooters.” Bird launched in the US with off-the-shelf consumer hardware from Xiaomi and some of those devices lasted less than a month with shared use. VanderZanden also cited Bird data from June 10 through July 7 that showed the company making a roughly 30% margin on rides on newer scooter models.
“Positive unit economics is the new goal line,” VanderZanden said in an emailed statement accompanying the funding news. “As a result, we pivoted from growth to unit economics as the top priority for the company. Now with the best unit economics in the industry, new Bird investors such as CDPQ see that we are paving the road for a long term sustainable and healthy business.”
“Unit economics” is the term used to describe the costs and revenues associated with a business on a per-unit basis, such as a single scooter ride. For most companies, it’s crucial that this number is or will become positive, otherwise growth simply means incurring bigger losses. Bird said the claim that its unit economics are the best in the industry is based on what investors have told it.
Investors have soured on cash-burning firms after the poor performances of ride-hail companies Uber and Lyft on the public markets, and the disastrous IPO attempt by WeWork.
Founded in September 2017 in Santa Monica, Bird initially rolled out with a growth-at-all-costs playbook. VanderZanden, the company’s co-founder, was previously an executive at Uber and Lyft, and he embraced many Uber tactics in blanketing US cities with scooters before either the hardware or the local communities were ready.
By one metric the blitzscale worked: Bird currently operates in over 100 cities across several countries. It was the fastest company ever at the time to reach a $1 billion valuation.
But the costs to achieve that growth, and the short lifespan of early scooters, raised doubts about the sustainability of the shared-scooters business. Investors who in 2018 poured money into micromobility—industry jargon for light transit modes like bikes and scooters—have cooled on the space this year, with both the number and value of deals dropping sharply in the first three quarters.
“I think there was too much capital too early in the space, and that pushed people to scale prematurely,” Martin Mignot, a partner at Index Ventures, a venture firm that invested in Bird’s series B and C funding rounds, said at a conference on micromobility in Berlin on Oct. 1. “There has been some painful lessons.”
Bird late last year began investing in scooters designed for shared use. VanderZander said in July that the Bird Zero, the company’s first custom scooter, made up 75% of its fleet and had an average lifespan of 13 months. (VanderZanden’s claim has yet to be proven, as Bird only introduced the Bird Zero in October 2018.)
Bird has also raised the price of its scooter rentals. The company originally charged $1 to unlock a scooter plus $0.15 per minute to ride it. Earlier this year it increased per-minute rates to as much as $0.33 in some cities, a move that most other companies offering shared scooters, including Lime, Lyft, and Uber-owned Jump, have since copied.