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Investors are going wild for Europe’s e-scooter start-ups after U.S. players stumbled

pxid 2020-12-14 208 times

LONDON — Europe's electric scooter rental start-ups have been raking in the cash from investors this year, even as their American counterparts were hit hard by the coronavirus pandemic.

German operator Tier last month said it had raised $250 million in a funding round led by SoftBank, lifting the firm's valuation close to $1 billion. It's overtaken U.S. rival Lime to become the second-most valuable e-scooter company after Bird.

Then, Swedish firm Voi on Thursday said it had raised $160 million in a mix of equity and debt financing. The company didn't disclose its valuation, but it is thought to be in the hundreds of millions of dollars.

"U.S. players raised a lot of capital back in 2017 and 2018 at the hype peak for the industry," Fredrik Hjelm, Voi's CEO and founder told CNBC. "All companies and founders were unproven in running this business back then."

"We now understand the business better and what's important: collaborating with cities and winning contracts, operational efficiency and unit economics."

Bird and Lime were the talk of Silicon Valley in 2018, when they raised sizable sums from investors at eye-popping valuations.

But U.S. operators faltered earlier this year after the outbreak of Covid-19. Bird and Lime were forced to suspend operations in several markets and laid off hundreds of employees between them to cut costs.

Investors are going wild for Europe's e-scooter start-ups after U.S. players stumbled

In May, Lime saw its valuation plummet 79% to $510 million in a $170 million funding deal with Uber. An investor in Bird, meanwhile, is reportedly looking to sell shares in the $2.5 billion scooter-sharing giant at a loss.

"First mover advantage and top line revenue might command a frothy valuation for a period of time," Paul Murphy, general partner at venture capital firm Northzone and an investor in Tier, told CNBC.

"But eventually growth investors will value the underlying health of a business and how efficiently they'll be able to grow."

Europe outperforms the U.S.

Venture capitalists appear to be more confident about Europe's micromobility market than that of the U.SMicromobility refers to small forms of urban transport, such as electric kick scooters and bikes.

Pitchbook data shows investors have injected $371 million into U.S. micromobility firms since the start of the year, while European rivals have raised $687 million.

Compared to the U.S. and Asia, Europe is the only region to show growth in venture investment in the sector so far in 2020, up around 64% from 2019 levels.

"We are seeing European e-scooter startups doing much better than their American counterparts," Asad Hussain, mobility analyst at Pitchbook, told CNBC.

The business model of U.S. e-scooter firms is more operations-heavy than European rivals, Hussain said. He added that the Europeans' relationship with regulators and government spending on bike lanes and other infrastructure makes the region "a much better market for micromobility than the U.S."