Bird and Government Regulation

What is the most pressing obstacle facing the success of Bird and other scooter companies?

The ability of Bird to work with municipal and state governments to gain access to new markets should be seen at the ultimate challenge facing the long-term success of Bird. Launching a new mobility company requires delivering a product that operates in the public arena. Operating in the public arena requires government approval, approval that is hard won, ongoing, and susceptible to the whims of political as well as civic priorities.

To say that bird is operating differently in the arena of seeking government approval versus its ride sharing cousins Uber and Lyft (and to some extend Airbnb) should be discredited. Hiring Tusk Ventures, a firm made famous from its actions in helping Uber enter the New York market, and other lobbying groups, is not an innovative strategy to secure regulatory approval, it’s rather a tried and tested method. Further, the company launched in Santa Monica without the approval of local officials, proving that it has no problem with a ‘launch first apologize later’ modus operandi. Bird’s government affairs strategy should be viewed as akin to Uber and Airbnb vs. being distinct and more government friendly. This should give pause to any forecaster, investor, or potential partner that views Bird’s upcoming, and eventually ongoing, adversarial dance with government to be any less intense and costly than that of Uber, Lyft or Airbnb.

For example, Airbnb, after years of being in the New York is still facing considerable pressure to change it’s business model, share its data, and ultimately curb its expansionary efforts in the City. To think Bird won’t face similar challenges across markets for the long term is shortsighted.

Ultimately, it is the government that controls when, how and under what circumstances a product can enter and operate in the public arena. It is the biggest wild card for a startup that operates in a regulatory grey zone due to both the expensive nature of winning regulatory approval on a market-by-market basis, and two because sound policy might not always comport with political realities. It can be argued that Uber’s ascent in New York City was slowed by crony ‘medallion politics’ that pitted politicians that received substantial political contributions from medallion owners against a company that threatened the economic bounty of a core fundraising group. The recent driver cap is the fruition of such efforts by politicians sympathetic to medallion holders. In the future, Bird may face mobilization and opposition from its own flavor of special interest groups.

Other obstacles

Unit Economics

Beyond government approval, other challenges still face Bird. For instance, some calculations say that Bird scooters need to be utilized for 258 rides before breaking even and generating profit. While this seems to necessitate a significant life span for an asset that can be easily damage, and sometimes purposefully destroyed, these unit economics are ultimately controlled by the company. Bird could raise the price of its rides after it captures significant market share. Further, Bird could invest in more durable scooters and allocate the necessary R&D to improve the longevity and minimize the maintenance needs of its vehicles.

Safety Concerns

While safety concerns are real, the company, after it receives regulatory approval, can transfer a lot of the liability to the customer. There’s no reason why Bird cannot require that customers read and sign a type of indemnification contract, stating that users use Bird at their own risk. This would leave Bird susceptible to lawsuits only when its product malfunctions or due to other abhorrent circumstances.

Weather

While it may be hard pressed for Bird to generate significant utilization during winter months in seasonal climates this seems to be accounted for in the company’s forecasting plan. As David Sacks, an investor states, while it is a reduction of ‘total addressable market, it’s still a huge market’. There are enough seasonally friendly markets, and weather abiding months in seasonal cities to make the economic opportunity vast.

Government is still the biggest obstacle

While other logistical and operational challenges face Bird and other scooter companies, the most challenging obstacle remains securing broad regulatory approval. Bird will need to build a vast national staff of government affairs experts, including lobbyists and consultants, to secure approval in a city by city context, a significant financial burden. Further, if approval is ultimately achieved the concessions that cities will require – such as data sharing, speed limits, docking restrictions, may further impact Bird’s bottom line. Since working with government, in many ways, remains unpredictable and because government ultimately controls access to markets, securing regulatory approval should be the seen as the most prominent challenge facing Bird.