Going Beyond the Status Quo

August 24, 2022

A main takeaway from my trip to Amsterdam for the Micromobility Industries Europe conference was that bike and scooter sharing has recovered, and in some cases, exceeded pre-pandemic ridership levels. The problem, however, is that most of these companies are still by and large unprofitable, due to too much competition within specific cities, high operational costs and too frequent replacement of vehicles. We’re seeing companies going bankrupt or consolidating, and dramatic drops from IPO prices. Although the shared micromobility industry is where I personally have spent so much of my time over the past several years, the reality is that there are new business models, new form factors, and many startups tackling the challenge of how to get more people out of their cars and adopt more sustainable options. 

In Amsterdam is where I met Manuel Saez, Founder and CEO of Beyond, a subscription service for e-bikes and e-scooters, based in New York City. After returning to the states, I was compelled to see his store and vehicles in-person, so we scheduled a meeting, and I rode the train from Boston to New York. 

Walking into the Beyond store in TriBeca, Manhattan on a beautiful, August afternoon, it felt like micromobility’s take on a dealership - part showroom, part service center, but with e-scooters, e-bikes, and smart helmets; no cars. Originally from Argentina, Manuel is an industrial design guru, with established global manufacturing relationships. He designed the e-bike that was delivered in a Presidential gift from Argentina to President Obama in his last presidential visit. During my sit down chat with him, I began to understand the breadth of experience he brings to designing, shipping, and delivering on a product. While other established businesses felt the pain of putting all of their eggs in one basket for their supply chain, Manuel told me about how diversifying his partnerships with multiple suppliers proved to be a lifesaver last year.

Not yet a household name in the industry, Beyond, formerly known as Brooklyness, has been working on shifting commuting patterns of New Yorkers for the last 6 years. During this time, Manuel and his team designed and brought to market 4 hardware products, experimented with a new business model, opened a physical store, all while only raising $2M of capital. Then the COVID pandemic hit and disrupted it all. 2020 was a very challenging year for the shared micromobility industry and New York City in general, at the epicenter of it all in March of that year. However, the silver lining of the pandemic in New York City was a citizenry that craved being outside, and with nowhere to go, began to experience the city streets again on a more radical, human scale. Everything slowed down a bit in New York, and the reemergence created an opportunity to take aggressive action in striping bike lanes, closing streets to cars, and carving out more space for people, bikes, and their micromobility vehicles. These converging forces together gave root to a public that wanted their own way of getting around more easily, more freely, replacing the subway train with more enjoyable commutes. 

Sustainability

What attracted me most to Beyond’s business was how important sustainability is for him - not because it’s trendy to market sustainability, but because it’s a part of his creed, company ethos, and the primary consideration in all business decisions made. 

Manuel says he runs a more profitable business while leading in real carbon emission reduction. His team has calculated that their subscription service produces 6x fewer carbon emissions per mile traveled than pay-per ride services, such as Lime, Bird, Spin. It does seem obvious that the shorter lifespan on a shared vehicle as compared to a leased vehicle, makes the shared model very capital intensive and less environmentally friendly.

As the micromobility industry matures, startups are finally acting more responsibly when it comes to reusing, recycling, and repurposing vehicles, but for an industry that preaches sustainability and carbon emission reduction, it hasn’t been enough. Beyond’s Second Life program is one that should be replicated more widely. Their business model drives reuse, meaning that if a customer cancels their monthly subscription, they return their vehicle, and get another rider on it — maximizing utilization of every vehicle. This was very obvious when witnessing how process-oriented the maintenance team was and the extensiveness of the parts repair, reuse, and recycling area. Their office space serves multiple purposes: retail, customer service, operations, and warehousing. 

Everything they do is very intentional about having a minimal carbon footprint - such as quality materials used in the manufacturing processes to maximize a vehicle’s lifespan, to folding into a small footprint during shipping for easy assembly and disassembly. I believe that Manuel’s commitment to sustainability and pushback on overconsumption is a vision that needs to be actualized by more entrepreneurs like himself. 

Shared Model Successes & Challenges

In New York, Citibike has proven to be a stalwart for commuters in a dense, urban environment, with over 150 million rides to date since 2014. The addition of e-bikes to their fleet has been incredibly popular, making up 20% of the fleet, while accounting for 32% of all trips; and the shared e-scooters piloted in the Bronx have been unsurprisingly quickly adopted. 

These micromobility successes should be celebrated; they’ve become an invaluable piece of the public transportation network and a driving force behind the growth of e-bike and e-scooter sales. However, Citibike is somewhat of an anomaly - privately owned with significant corporate sponsorship. The shared micromobility model in New York has its limits; case in point, the growing pains of record ridership. The shared e-scooter pilot in The Bronx may make way for more scooters to be piloted in outer boroughs, but it’s likely going to be some time until shared e-scooters are permitted in Manhattan. I’d bet on congestion pricing getting across the line first. 

The shared market frankly cannot be supported on a broad scale without it being heavily subsidized by the public sector and private foundations/sponsors; and if cities are going to ask the private sector to innovate on safety technology and place restrictions on where vehicles can operate and be parked, there needs to be more public skin in the game. I do believe that more public funding will increase for the shared micromobility industry, but we cannot wait around to reduce carbon emissions, and people want more choices now. Consumers are acting on this; 2020 saw 145% growth in e-bike sales in the US and 2021 saw 240% growth, catapulting e-bikes beyond road bikes in sales. Demand for e-bikes is expected to continue its growth this year and beyond, though the dropping of the e-bike tax incentive in the newly passed federal Inflation Reduction Act, doesn’t make the hefty price of purchasing an e-scooter or e-bike any more affordable for middle income consumers. 

Enter the Subscription Model

As brought to my attention by my friends at Beta Mobility in Norway, Boston Consulting Group (BCG) released a Future of Urban Mobility report this year, which categorized micromobility into 3 models: shared, owned, and subscription. BCG predicted growth in all three categories, but subscription is the only category predicted to see “hyper growth” across all form factors through 2030. The lack of upfront capital needed and the “hassle-free ownership” of maintenance and customer support packaged into the offer, makes the subscription model very compelling from the urban commuter perspective. Though the model is still pretty novel in the US, it has really taken off in Europe, with companies such as Swapfiets, Dance, and Motto.

Think about the subscription model as a short-term lease of a small electric 2-wheeler with less strings attached than an auto lease, though similarly, lease payments can be put towards a purchase of the vehicle. According to the BGC survey, the top 3 reasons that people use micromobility are flexibility, reliability, and price. An e-scooter or e-bike subscription that is always available when you want or need it, and without worry of it being stolen or broken down is certainly more flexible and reliable than owning or using strictly shared services, and a monthly rate that is a fraction of a car payment is also significantly less than a monthly unlimited subway pass.

Vertical Integration

In the micromobility industry, vertical integration is a key to success, as Puneeth Meruva from Trucks VC theorized. He says that there are 3 distinct axes that are a challenge to master: Supply Chain, Distribution, and Maintenance. His hypothesis is that growth-stage companies that vertically integrate across all three of these axes, are the ones that will do best in a post-COVID world, when faced with additional challenges such as higher manufacturing and shipping costs, consistent in-market labor, and quality customer service. 

Although not cited in Meruva’s brief, Beyond has all 3 axes pretty well covered and may be quietly ahead of the curve on some of this. Similar to Van Moof, Beyond handles everything from the supply chain to the customer experience, with a hyper focus on the big city commuter and delivery workers. 

Checking in at only 26 pounds, the Beyond SV1 folding e-scooter has a range of about 15 miles and rapidly charges to 80% within 1 hour. For only $69/month, the scooter is yours, with an integrated GPS smart lock and same day repair/replacement service as needed. The Beyond CMYK folding e-bike is $89/month, with all of the bells and whistles of the e-scooter included. After a $99 one-time activation fee, you can be riding that day, picking up the scooter or bike at their storefront. 

When startup businesses implement new consumer technologies, the service level often does not meet the mark. I was impressed with how Beyond provides continuous value and service to their customers, from their in-house maintenance staff being on-call, to their back-end software that makes servicing each vehicle very predictable. Everything is well thought out and connected, which explains their maintenance costs being a mere $0.70/vehicle/month, a major driver of their positive unit economics. 

Conclusion

In conclusion, I believe that the subscription model is going to continue to grow in the U.S. and with a little bit of funding, Beyond’s approach is one that can be replicated across new markets. Their consumer brand has legs, the turnkey service is scalable, and Manuel’s experience and grit make success inevitable. As they fundraise, I’m excited to see the Beyond business grow, and see how the subscription model takes off in the U.S.