The rise and fall of Bird Scooters: From $2B to Bankruptcy

In 2018, Bird scooters became the fastest startup in history to ever reach a billion dollars in valuation. 6 years later, its assets sold in a fire sale out of bankruptcy for just $145 million. This video is the rise and fall of Bird scooters and the scooter industry in general. If you stick around, I'll explain to you why I'm recording this video in my hometown near the San Antonio River.

Oh, and by the way, thanks to Monarch Money for sponsoring this video. More on them later.

The story of how it all came together starts with a guy named Travis Vander Zanden who grew up in Wisconsin. His mom was a bus driver. He got an MBA from USC, went to go work for Qualcomm for a number of years, and then he got the startup buck and went to go start a car washing app startup called Cherry. Ridesharing app Lyft bought his startup, and at the ripe age of 34, he became CEO of the fast-growing company. He was an ambitious guy. In 2014, he moved on to Uber, and he started to lead their international growth team. Lyft is suing its former COO and Uber's new VP of international growth, Travis van der Zanden. Van der Zanden left the company in August, but Lyft claims when he left, he took the company's most sensitive documents with him. Lyft didn't like this too much. They sued him, and the whole matter was settled out of court. By 2016, he left Uber, and one of the things he'd seen there was that the last mile problem hadn't really been solved. How do you get from the bus back to your home if you're going to be using something like mass transit, or even Uber or Lyft, or, well, the subway? And 3 things have changed in the world over the past decade or so that had made it the perfect time for a micro-mobility startup to come into the market. The first was that lithium ion batteries dropped in price by over 89% from 2010 to 2017. So this meant somebody like Xiaomi could offer an e-scooter on Amazon for just a bit over $500. The second was that smartphones had finally become truly ubiquitous. Uh, 77% of the U.S. population had one. 150 million people plus a month use them for GPS coordinates, and Uber and Lyft had trained people to go to their phone looking for transportation. The last thing was that people were getting tired of congestion. The average American by this point was spending 99 hours a year wasted in traffic, you know, just stuck. And then the second was the insight that the typical journey in the United States is small. Over 60% of journeys that we do from our homes are less than 5 miles. So in September of 2017, Van der Zanden had gone on Amazon and used his credit card to buy 10 Xiaomi scooters, and he just took 'em out to Santa Monica, which is a beach city in Southern California, And he dropped them on the sidewalk, put 10 of them out there, ready for hire. And he led with the pricing model we all know and love today, which was $1 to unlock, 15 cents a mile. And the typical ride, somebody would pay $3.70 on their phone to use a, uh, Bird scooter. But look, one thing you'll learn about doing business, and especially business with governments, is, uh, they don't like it when people tend to do crazy stuff without permission. And in this case, Bird was just like laying their scooters all over the sidewalks, making a mess. So the city of Santa Monica, where he had set up first, well, they went after him and cited him for operating a business in the city without a permit. But Travis, he didn't care. Growth was the priority, and he played the Uber playbook. Just grow as quickly as possible. Damn the regulators. I don't care. And it worked. They expanded like crazy. Within 8 months, the startup hit over 1 million rides done on the platform. And this is exactly the type of growth that venture capitalists love to invest in. They put a little bit of money in now, hoping that it turns into a lot of money at some point in the future when the company continues growing really quickly for a long time. There was a VC in Santa Monica named Mark Souster who is a pretty cool guy on Twitter and talks online and stuff like that. But he would sit in a 6th floor office and he would see 2 or 3 Bird scooters go by every couple minutes. So he did what most VCs did. He dug into it, saw the rapid growth, then he hopped on a scooter and went over to Travis's office and he begged him to take his investment. This kind of growth attracted, uh, big-name VCs as well. Later on, Sequoia Capital put money in. There's a famous VC fund, uh, they are behind a lot of the big names that you know in tech. David Sachs's venture capital fund, Kraft Ventures, uh, put in money. And over the next 2 years, uh, the Bird startup would bring in over $700 million in venture capital. Bird hit a $1 billion valuation in just 10 months. It was the fastest of any startup in history. It was faster than Facebook. They took 3 years. Uber, it took them 2 years. And here was a little mobility startup throwing scooters on the sidewalks, suddenly worth over $1 billion. Investor demand was so hot that Travis had to sell some of his own shares in order to make room for all the investors that wanted to put money in the company. Other people were watching, and by mid-2018, 4 competitors had raised money and also launched: Lime, Skip, something else and Jump. They all have the same dorky names. The VC frenzy continued. By 2019, investors had flooded over $5 billion into micromobility startups like Bird, and they started to reach over 100 cities worldwide, including the one I'm standing in now, San Antonio. The math became pretty interesting. Bird would spend $550 per scooter and they would get $3.70 per ride. But that was just revenue. By the time everything was all said and done, they would have to spend $1.70 or half about of the revenue on charging. They'd have to pay for permits, sales tax, all that kind of stuff. So in the end, they were only netting about 95 cents for each time a scooter was rented. The typical scooter would do about 3.5 rides per day, so that meant your average scooter was generating about $3.50 per day. But this is where things got wacky.

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Just to recoup the cost of the $550 scooter, uh, basically they would have to have them last a couple hundred days. Some guys studied Bird scooters in Louisville, Kentucky, and they found that the average one was lasting just 29 days, which meant that they would bring in only about $96 in revenue, net revenue per scooter before they broke down, meaning they were losing about $450 every time they deployed a scooter. Investors at the time were a little worried as they started to email and understand the economics of how things were really working in the field. They realized that they had radically underestimated how much damage there would be from vandalism, theft and all that kind of stuff and just things breaking. Thousands of scooters ended up in places like this, the San Antonio River, which, by the way, they empty out every single year and drain. And one of the things I remember them draining out each year when they cleaned it up was scooters from the bottom of it. And especially teenagers would vandalize the heck out of these scooters. I mean, they were just left on the sidewalk. In Oakland, there's a famous lake called Lake Merritt. It's an urban lake and it was filled with carcasses of dead scooters that people had thrown in there. But none of this mattered to Bird at the time because they were out to change the world of mobility and So they went to the factories and they said, hey, we need to bring out a new scooter, one that's going to be tougher and more durable. They called it Bird Zero, with the idea that it wouldn't have the same problems as the consumer ones. These were $700 or $800, $200 or $300 more than the Xiaomi's, and they cost more to manufacture. It turned out it was just as much of a loss when somebody threw a scooter in the San Antonio River, whether it was $800 or $500. This still meant Bird lost all their money, but the company kept pushing on. Uh, in 2018, Travis told folks like their strategy is where there's no laws, they go in and deploy scooters. They would just show up, deploy the scooters in a city like San Antonio or San Francisco, not tell anybody from the city they were doing it. They just wake up one morning, go to City Hall and discover there are a bunch of scooters sitting out on the roadside. People don't get into city government because they like things happening without their permission. You can imagine what happened next. San Francisco in particular decided to ban the entirety of Bird City— Bird scooters from the town entirely. Bird was effectively kicked out. Over the coming years, Bird accumulated over $1 million in fines in San Francisco by itself. Santa Monica, where Bird had been founded, was pretty close to kicking them out too. Paris, a city that should love Bird scooters, uh, with 2.1 million people there, held a public referendum and they banned the scooters entirely. Parisians didn't want them either. But while at this time the cities were coming after Bird, something else was happening too. Turned out that the injuries were really bad. I had a friend at the time and I talked to him about scooters and he said, "Man, it's great for business." And I said, "Why?" Well, turned out he was a radiologist and when people broke their wrists on Bird scooters, well, that was another radiology appointment and he got paid for that. E-scooter visits to ERs went up over 400% over 2 years from about 4,500 to 29,000 by 2019. A CDC study at the time in Austin found that 20 out of every 100,000 Bird trips resulted in injuries that required medical intervention. 48% of those were to the head and, uh, 17% of those were serious traumatic brain injuries. Made worse was riding these scooters, less than 1% of people were wearing a helmet. Like, how did that make sense? Where are you going to find a helmet? Well, people just got on them and plowed around towns into cars at 20 miles an hour. A UCLA study found that e-scooters had an injury rate of 115 per 1 million trips. To put that in perspective, that's more dangerous than riding a motorcycle, which was about 104. And so these scooters that had been promised to, you know, fix the mobility crisis and the traffic crisis in the United States, well, suddenly they were presenting a health crisis. And that gave the local authorities all the window they needed to shut down the scooters. But while those two things were coming for the scooter business, something worse was about to come. And in March 2020, we had the very first of the COVID lockdowns. Scooter ridership basically shut down overnight. People were trapped in their houses. March of that year, Bird basically realized what was happening. They invited over 400 employees to a Zoom call called a COVID update. Basically, it was only one of those listen-only, you-can't-talk type deals. They told everybody, well, their jobs were gone. All 406 people had their email and Slack turned off within 10 minutes of the phone call, and HR had basically shut the door on all of them. And some of the folks found out about the layoff from news articles because they had been on vacation. One of them described it as like a Black Mirror episode. The layoff cut 30% of Bird's workforce just, uh, 2 months after raising $75 million in January 2020. By 2021, with the pandemic still going on, Bird Bird was about out of money. They had burned through over $700 million in funding, so they needed to find some cash, like, fast. The good news for Bird was this was the era of easy money in the public markets. There was a thing going on called SPACs, special purpose acquisition corporations. SPACs, or special purpose acquisition companies, are shell companies with no operations. Their sole purpose is to raise capital to acquire an existing private company and bring it to the public markets, basically blank check corporations that rich people put together that would go find companies like Bird and take them public to retail and institutional investors. In May of 2021, they brought the company public via a transaction with a SPAC called Switchback II. And along with that was an investment of over $130 million from Fidelity Investments, the big money manager. They valued the whole company at $2.3 billion. Bird had got its lifeline. So the way SPACs work is the investors who put up the money to create the thing When the deal gets announced, they get to choose if they want to stay in or if they want to get their money back. In this case, in a move of non-confidence in Bird, over half asked for their money back. And so Bird, and after all this hassle, only got $159 million of that money. Van der Zanden, even after raising all that money, still owned 13% of the company, which meant on paper he was worth over $900 million. Not bad for a few years' work. Around that time, he invested $22 million to buy a Miami mansion, one that had been owned by a Venezuelan drug dealer. He also bought a mansion from Travis Noah, the TV star, for a cool $17 million out of Bel Air, California. But it turned out that was the top. Within 12 months of going public, Bird stock would go down over 96%. The market cap would go from over $2 billion to just shy of $70 million. A 96% drop. That's precipitous. And in November of 2022, things got even worse. Bird admitted to the SEC that they had overstated revenue for the previous 2 years. The issue was that in their haste to grow so quickly and make revenue bigger, Bird's accounting team had counted rides as revenue even though those people who were riding the scooters might not have the money in their account to pay. In other words, people were riding for free and Bird had been counting them as paying customers. Restatements for those years would total over $31 million, and it had been increasing 2020, 2021, and 2022. Bird was forced to tell their stockholders that the previous 2 years of financial statements should not relied upon. In the wake of this, in September 2022, Vander Zanden stepped away from the company leadership, and within 6 months, he was out of the company entirely. September 2023, the market cap of the company was less than $7 million. To put that in perspective, it was worth less than one-third the value of Vander Zanden's Miami mansion. In September 2023, the New York Stock Exchange delisted the stock entirely. It was down 99.5%. To less than $0.05 in value. And in December 2023, Bird filed for bankruptcy. Electric scooter company Bird just declared bankruptcy. Bird Scooter, which has motorized conveyances in the city, filed for Chapter 11 bankruptcy on December 20th. Over its lifetime, Bird had burned through over $1 billion in venture funding. From 2021 to 2023, over $650 million. And along the way, they had exactly zero profitable quarters. They'd never made money. It turns out what had killed Bird was a simple math equation. It wasn't COVID, it wasn't the accounting scandal, it wasn't any of that kind of stuff. It's just that they never got their economics right. And as I said before in the video, they were losing $450 every time they put a scooter out on the road. Uh, it wasn't scale that was going to fix this. They just grooved before they had figured out how to do it. You'll see this often where companies just keep growing and scaling, saying, hey, we'll fix the economics later. Meanwhile, they're selling dollars for 90 cents. But it turns out it didn't have to be this way. Uh, micro-mobility startup Lime that I had mentioned before, they made a different bet. They started in June 2017 with a bike share program in Greensboro, North Carolina, and they added scooters just a few months later. Like Bird, over, uh, over their lifetime, they'd raised over $1 billion. But unlike Bird, they decided not to go public during the SPAC craze. And what had helped them was that in 2020, Uber, the mobility startup, the rideshare company, had invested in Lime at a lower valuation, 80% off of its all-time high. The thing this did was basically tell the Lime management, you need to install some financial discipline. And instead of spending money on growth, Lime slowed down and put $50 million into R&D in order to create a scooter that would last 5 years and not 28 days like the Bird ones did. They exited unprofitable cities. They worked with other ones who were against them to get the right licenses. Lime exited unprofitable markets. Uh, they shrunk cities where it didn't work, and if there were permits required, they would try to get them. And one of the things that happened at this time with cities like this one here in San Antonio and other ones would decide to give a monopoly to one micro mobility or scooter operator And Lime got so good at winning those bids and getting that franchise to make a lot of money that they won over 90% of the competitive bidding situations. By just slowing down at the right time in 2022, Lime was already profitable while Bird was still burning cash. In 2024, Lime would have $686 million in revenue and $140 million in profit. They were in 280 cities doing 200 million rides a year. They were in the same industry as Bird with the same situation. And, uh, Bird just tried to outrun the math, whereas Lime slowed down and realized you gotta make money every time you do something. In April 2024, Bird emerged from bankruptcy and it was sold to a new company at a price 94% less than its peak valuation, $145 million. The new owner is a company called Third Lane Mobility, and the first thing they're doing is reducing operating expenses by two-thirds, over 66%. They're trying to do what Lime did just a few years earlier. Bird is still in 350 cities. But, uh, it's emerging off of a wild roller coaster ride. There's the obvious lessons from this story about growth at all costs, the dangers of VC funding, uh, the mania of SPACs being insane. And sometimes when things look insane, it's because they are insane. But I think the most interesting lesson from all this is what Travis did. And Travis saw that he needed to take chips off the table when times were good, and he still kept some risk in. He still kept ownership of the company, but he made himself really well off along the way. And I've seen this before when people have a really hot company that's grown really quickly. Well, they forget to take some chips off the table and then they regret it later. And arguably these accounting missteps that they had in 2022, they, uh, kind of taint that move that he made. But in the end, I think the lesson is one to listen to, which is, you know, make sure you take some chips off the table because the risk is always out there. If you enjoyed this video, check out this one here that I did about NFTs. It turned out to be hugely popular and also a story of people losing a lot of money really fast. All right, thanks for being here. If you enjoyed this video, let me know in the comments below. It encourages me to make more. Catch you later.