Tier Mobility may not have raised the most venture capital in the international electronic scooter wars, but the Berlin-based company could provide a template for building a sustainable business.
From its founding in October 2018, the company decided to focus exclusively on the European market, where it feels it has the home-field advantage. To improve the durability of its scooters, Tier conceived of itself as an operations company, embracing every aspect of managing its scooter fleets rather than outsourcing maintenance to gig workers.
By extending the lifetime of their scooters and reducing their environmental impact, Tier achieved an efficiency that allowed it to expand much more rapidly than originally planned as the electronic scooter market exploded.
“Sometimes I’m very surprised at the speed we are going,” said Lawrence Leuschner, Tier’s CEO and co-founder. “But this is also the fun of it.”
Leuschner spoke to VentureBeat recently as part of a podcasting partnership with Samsung Next at the Slush technology conference in Helsinki, Finland. The full conversation can be heard here:
Sustainability and Mobility
Leuschner co-founded Tier with Matthias Laug (who is now CTO) and Julian Blessin. Before Tier, Leuschner had already established himself in Germany’s startup scene with his previous company, Rebuy. Originally created in 2004 as a platform to buy and sell used video games, Leuschner expanded its vision to resell a variety of electronics after seeing Al Gores’ “An Inconvenient Truth” documentary in 2009.
“It really inspired me how you as an entrepreneur can fight climate change,” he said. “Expanding the lifetime of products through recycling and refurbishment is something that I really care about.”
Needing a break, he stepped down from the company in 2016 and embarked on a global surfing tour for almost two years, living out of a van.
After returning to Berlin, he decided to create a company that could have an impact on climate change, considering something that could reduce emissions from animal farming before choosing to pursue a micro-mobility company. By this time, July 2018, companies like Bird and Lime had already entered the dockless electric scooter in the U.S.
Knowing these U.S. companies had a big head start didn’t deter Leuschner. He figured Tier would have some time before they reached Europe. But he also decided to focus on an aspect that had drawn early criticisms of bike and scooter sharing companies: the durability of their vehicles.
Because versions of the initial scooters only lasted a couple of months, the capital costs made it difficult to see how they would turn a profit if they were losing money on each ride. Both Bird and Lime have introduced subsequent versions last longer and say they are making progress toward breaking even.
Still, Leuschner saw an opportunity to build a micro-mobility company from the start that had a greater focus on long-term sustainability, both in terms of economics and the environment.
“We realized that you can actually build a very successful business just on [the scooter],” he said. “And the only thing that I didn’t like about it was that the lifetime of the scooter was only one month back then. I could not imagine building a sustainable business in the transportation sector with just one-month lifetime. We decided that we’re doing it differently.”
While other companies were using gig workers to round up scooters at night and bring them home to charge them, Tier built out an operations crew that would pick up the scooters, charge them, repair them, and redistribute them throughout a territory.
“We are in the transportation system and we have to take care of those scooters,” he said. “We have to maintain them on a daily basis. That’s the only way we can guarantee safety towards our riders responsibly and to the city and also the sustainability of our business and the scooters. There’s no part of the scooter we can’t repair. And because we operate with own warehouse and own maintenance and repair people, we have complete control of the supply chain.”
That approach still allowed Tier to scale quickly, which it needed to do at a much faster rate than originally planned. Leuschner recalls thinking the company could launch in 10 cities during its first year. Instead, Tier’s service debuted in 45 cities and 12 countries in about 9 months. Tier accelerated as competition increased and as the company saw opportunities.
“When others run fast, you have to run as well,” he said. “We are very ambitious people on the team. If somebody challenges us to run, we run hard.”
Tier’s scooters now last between 18 and 24 months, a lifecycle that is getting another boost as the company introduces scooters that have swappable batteries. Using bikes and electric vehicles, Tier employees carry around charged batteries and replace them without having to carry the scooters in trucks to charging stations elsewhere.
“This is not a software game,” he said. “This is an operations game powered by technology. And the company who wins this is the company who has the highest efficiency.”
That efficiency is essential because Tier is still working with less capital than its rivals. Lime has now raised a total of $765 million in venture capital for its bike and scooter services, while Bird has raised $548 million. Even Swedish scooter competitor Voi has raised $135 million.
In contrast, Tier has raised more than $100 million and has 350 employees. Leuschner hinted that more funding could be coming soon. But he also suggested Tier wants to evolve its funding model away from venture capital toward using debt to finance capital costs.
Venture money means giving away some ownership with each round. Borrowing money would avoid that. Because the company’s scooters can last almost two years, Leuschner believes it makes more economic sense to depreciate that value over time while repaying debt from money that can borrowed against the asset value of the scooters. That also avoids chasing an increasingly high valuation for ongoing VC rounds that puts pressure on management to cut corners to fuel growth.
Fast Track in Europe
Tier’s other major strategic decision to concentrate on the European market also seems to be paying off. The density of cities, availability of public transportation, and lower car ownership rates make micro-mobility options more logical.
“Europe is the best market in the world,” Leuschner said. “We have a very high density of people living within the cities. We have a great infrastructure for bikes, which can be used for scooters. And the European Union and all the cities are really pushing toward being emissions free.”
Still, Europe has seen much of the same micro-mobility backlash that has hit the United States as local governments grapple with an overwhelming crush of new mobility services, from ride hailing to dockless bikes to now scooters. Tier has not been immune to that, even as it tries to position itself as a company that’s doing more to make sure its scooters and riders are not a nuisance.
“It can create a very complex situation,” Leuschner said. “But we are responsible for us. And we need to be responsible to the city, to our customers, to our stakeholders, and investors. And if we are responsible, and acting responsible, we can actually prove that we mean we’re serious and we are taking the recommendations of the city seriously.”
Leuschner added: “If there’s companies who don’t want to do that, that’s their decision. It’s an industry which is very aggressive in terms of my competition.”
For Tier’s part, it still sees its mission as enhancing public transportation options and helping to get as many cars off the roads as possible. Like several other micro-mobility companies in Europe, they have taken their cues from Uber’s bullying approach of local governments and sought to take a more collaborative stance.
“We could just do it like Uber, and just do what we want and then ask for forgiveness,” he said. “But this doesn’t work…When I look at public transportation in the city, that is the main stakeholder. Our goal is not to disrupt that, but to be part of that transportation. We want to be a partner that connects with that. You have to align on a strategy of deployment of routes, of spaces, of certifications, of all kinds of things.”
Despite the short-term controversies over micro-mobility, Leuschner is optimistic that the overall movement is increasingly popular with users and is motivating cities to urgently rethink their transportation planning in ways that are greener, healthier, and safer. That will still take time, but local planners seem catalyzed to move more quickly and think more ambitiously as new transportation options are introduced.
“It’s a marathon and the person who wins the marathon isn’t the one that is the fastest in the beginning,” he said. “I’m very happy to be in this marathon and really change mobility for good. It’s why I chose this industry and that’s the purpose we have.”