Micromobility Subscriptions: The Future for Startups & Investors?

The Rise of Micromobility Subscriptions

The COVID-19 pandemic and the challenges in achieving profitability within the shared electric micromobility sector have prompted a growing number of companies to explore subscription-based services. This business model is increasingly viewed by founders and investors as a pathway to financial success.

It appeals to customers who are hesitant about shared transportation options, while simultaneously offering the benefits of ownership – such as a scooter or e-bike – through an upfront payment plan. Furthermore, subscriptions can help minimize operational costs and asset depreciation.

Expanding Across Geographies

Currently, existing micromobility companies are integrating subscription services into their offerings across the United States, Europe, parts of Canada, and at least eight cities in the Middle East. New businesses are also emerging, built entirely around the hardware-as-a-service concept.

However, a key question remains: will this shift towards subscriptions genuinely improve the unit economics of micromobility? And what factors will determine which companies will thrive in this evolving landscape?

The Broader Subscription Trend

The increasing popularity of subscriptions extends beyond micromobility, encompassing a wide range of goods and services. From groceries and streaming entertainment to fitness equipment and apparel, subscription models are experiencing significant growth.

A 2021 study conducted by Telecoming, a digital services monetization company, projected a 30% growth rate for subscription businesses this year.

Key Factors for Success

Micromobility vendors adopting this model are concentrating on several crucial elements, according to industry analysts. These include the ease of scaling operations, the return on investment, and the cost-per-mile for operation.

“Subscriptions for individual vehicles present a more compelling and scalable opportunity compared to the shared mobility subscription trials of the past,” explains Oliver Bruce, an angel investor and co-host of the Micromobility Podcast. “The operational costs per kilometer are substantially lower, and they aren’t limited by city-imposed restrictions.”

Consumer Preference and Friction Reduction

Shawn Carolan, managing director at Menlo Ventures, also expresses optimism regarding the micromobility subscription model. He believes it aligns better with consumer preferences, as many individuals favor a predictable monthly fee over a larger upfront investment.

“The most valuable customers are those who use the service frequently – commuters or those making local trips,” Carolan states. “Paying for each ride individually can be both costly and mentally draining. Transportation should be seamless and require minimal effort.”

People desire a transportation solution that is convenient and doesn’t demand extensive consideration.

The Leading Contenders: Electric Bikes

While Bird and Lime currently hold a dominant position in the shared micromobility sector, they aren't spearheading the subscription market. This is primarily due to the construction of their bikes and scooters, which prioritize durability and robustness for urban environments.

Their operating systems are also specifically engineered for fleet management and geographical restriction within cities. Although both Bird and Spin have expressed plans to introduce subscription options, access remains limited to a waitlist at this time.

Conversely, subscription-based services generally feature lighter-weight vehicles designed for portability, allowing users to easily carry them upstairs or even fold them for storage.

The Rise of Subscription Models

Swapfiets, easily recognized by its signature blue front wheel, stands as a pioneering force in bike-sharing. Founded in 2015 by Richard Burger, Martijn Obers, and Dirk de Bruijn, the Dutch company originated from the founders’ experiences as university students in Delft.

They identified the inconveniences associated with traditional bike ownership, including purchasing, selling, and ongoing maintenance, particularly given the often-high costs at bike shops.

“Our goal was to redefine bike usage, focusing solely on the benefits of transportation from point A to point B, while eliminating the associated hassles,” Burger explained to TechCrunch. “The subscription model emerged as the ideal solution to achieve this.”

Expanding Operations and New Entrants

Swapfiets now operates across nine countries and approximately 60 cities throughout Europe. The company has broadened its offerings beyond standard bicycles to include e-bikes, and is even piloting e-scooters and e-mopeds in select locations.

Revel, a dockless shared e-moped company, announced in February its expansion into the e-bike subscription market with its WING bikes. However, high demand currently exceeds supply, resulting in a waitlist for potential subscribers.

Currently, Revel’s e-bike service is confined to New York City, excluding Staten Island.

A Growing Landscape of Subscription Services

Several other companies are making significant strides in the subscription space. These include BuzzBike in London, specializing in traditional pushbikes; Dance in Berlin; Bive in Madrid, Valencia, and Sevilla; and Zygg in Toronto.

Zoomo, an Australian company that recently secured $12 million in funding, initially focused its subscriptions on gig economy workers and enterprise delivery fleets. The company is now actively working to broaden its consumer-facing offerings with these new resources.

Leading Companies in the E-Scooter Market

Within the growing e-scooter subscription sector, Unagi has established itself as a prominent player. The company originated in 2018, founded by David Hyman, previously the CEO of Beats Music and a co-founder of MOG.

Hyman explained their initial strategy: “We examined other ‘hardware-as-a-service’ models, questioning whether a subscription market existed for e-scooters.” The concept began as a belief that consumers desired a commitment-free experience, akin to a service like Netflix.

In March 2021, Unagi secured $10.5 million in funding. These funds were allocated to broaden its subscription service to cities including Austin, Miami, Nashville, Phoenix, San Francisco, and Seattle. The company also strengthened its presence in the New York and Los Angeles areas. Unagi also directly sells its uniquely foldable scooters.

Beyond, initially known as Brooklyness, secured $1.8 million in seed funding the previous year. Like Unagi, Beyond prioritizes design and the use of high-quality components to create durable vehicles with extended lifespans. Both companies maintain complete control over their vehicle design and assembly processes.

Manuel Saez, founder and CEO of Beyond, stated, “Our vehicles are engineered for simple maintenance; all parts prone to wear are easily accessible, and we’ve minimized the total component count.” This approach aims to ensure efficient and cost-effective service and maintenance operations.

Beyond also offers direct scooter sales. Saez noted that subscription payments can be applied towards the purchase price should a subscriber decide to own their scooter.

Wire Rides, established in 2018, similarly provides both subscription options and direct sales of its Ohm e-scooter. Notably, it is one of the few companies offering delivery services across 48 states.

Co-founder Nick Drombosky mentioned, “We actually serve a larger customer base outside of major metropolitan areas than within them.” He also added that prior to the COVID-19 pandemic, they catered to college students seeking semester-long scooter subscriptions.

Grover, a German consumer tech subscription service, launched GroverGo in 2019, a monthly e-scooter subscription. Currently, GroverGo features its own branded scooter, the Grover Rush, but also provides access to models from leading brands like Segway-Ninebot, Xiaomi, and iconBIT.

Fenix, an e-scooter operator based in Abu Dhabi, recently introduced a 10-minute food delivery service utilizing its shared scooters. The company also operates a subscription service, MyFENIX, which is available in eight cities across three countries.

Investment in Micromobility Subscriptions

The number of venture capital firms investing in the concept – and the business model – of micromobility subscriptions remains limited, though it is expanding.

Maniv Mobility, an Israeli VC firm focused on early-stage mobility companies, demonstrates significant optimism regarding subscription services. They have participated in funding rounds for companies such as Zoomo, Revel, and Fenix.

Challenges and Potential

“A multitude of factors contribute to complexity, stemming from variations in hardware and diverse pricing structures,” explained Michael Granoff, founder and managing partner at Maniv Mobility. “While the financial viability is demonstrable, particularly when considered alongside free-floating vehicles and ownership models, large-scale success remains unproven.”

Granoff further stated that whether a subscription model can thrive as an independent business is yet to be determined.

Key Investors and Funding Rounds

Narrative Fund and Brooklyn Bridge Ventures jointly led Beyond’s seed funding round, announced in December 2020. Additional participants included Social Capital, SOSV, and Spacestation, a New York-based multimedia company.

Menlo Ventures, known for successful investments in companies like Uber, Poshmark, and Betterment, spearheaded Unagi’s seed round. The firm hypothesized that customers would exhibit greater care for a high-quality scooter under a temporary “ownership” arrangement.

Lifetime Value and Cost Considerations

According to Unagi’s leadership, this approach is expected to extend the hardware’s lifespan, Carolan explained to TechCrunch. “This directly impacts and increases the lifetime value (LTV) per scooter.”

This contrasts with the shared-scooter model, which typically incorporates the costs associated with damage and theft into the pricing structure. These costs are often passed on to consumers through higher per-mile fees, potentially discouraging riders, and also reduce the LTV per scooter.

The SaaS Comparison

A prevailing belief among many investors is that the subscription model will expand the micromobility market. It effectively positions the business as a software-as-a-service (SaaS) operation, which generally commands a higher valuation multiple, as Carolan noted.

Additional Investment Activity

Other investors have also allocated capital to startups focused on subscriptions. These include HV Capital and BlueYard, backers of Dance, who participated in the company’s €15 million Series A funding round last October. Ponooc, holding a majority stake in Swapfiets, has also invested in this space, though specific funding amounts remain undisclosed.

The Future of Micromobility Subscriptions

The market for micromobility subscriptions is relatively new, coinciding with the increasing adoption of electric scooters and bicycles. Industry forecasts predict substantial growth in both areas. A collaborative study conducted by Unagi and UC Berkeley’s Haas School of Business suggests subscriptions could represent a third of the total micromobility market.

The remaining market share will likely be divided between direct sales and ridesharing services. Furthermore, the outright purchase of e-bikes is also anticipated to increase, prompting some companies to explore a combined sales and subscription model.

Growth in E-Bike Sales

From 2019 to 2020, electric bike sales in the U.S. experienced a significant surge of 145%. European market analysts predict an even more dramatic increase, forecasting a rise from 3.7 million e-bikes sold annually in 2018 to 17 million by 2030.

Challenges and Strategies for Success

Merely offering subscription services doesn't automatically ensure profitability. Founders within the industry have emphasized the importance of diversification, robust data analytics, and effective customer retention strategies as key priorities.

Saez of Beyond highlighted the need for targeted marketing, stating, “To achieve the scale we envision, we must refine our ability to identify and reach specific customer segments.” He noted that initial growth was largely driven by referrals, and the company is now focused on developing tools to facilitate this process.

Understanding Customer Usage

Beyond gathers valuable insights by directly inquiring about customer activities and scooter usage patterns. This data informs their understanding of how the service is being utilized.

“A substantial 70% of our customer base falls into what we categorize as ‘blue collar’ workers,” Saez explained. “These individuals primarily use the scooters for commuting purposes.” He further elaborated that the scooters are reducing commute times for those previously reliant on walking, providing them with additional free time.

The Role of Software and Service

Opportunities are emerging for software companies specializing in scooter and e-bike support services, particularly in areas like customer service and maintenance plans. These services are crucial for retaining subscribers. Some companies, like Beyond, are choosing to develop these capabilities internally.

Carolan echoed this sentiment, emphasizing the importance of sound unit economics for any subscription service involving expensive assets. This necessitates minimizing fraud, preventing theft, and efficiently managing repairs and servicing.

Reliability and Accessibility

Bruce underscored the importance of reliability, stating, “The core requirement is dependability.” He noted that the maintenance and repair sector is still developing, but offers a valuable solution for individuals who prefer not to handle tasks like brake or gear maintenance themselves.

“Effective servicing will broaden the appeal of micromobility, particularly when combined with safe infrastructure and supportive transportation policies,” Bruce concluded. This will make these options accessible to a much wider audience.