Investors in Lime were surprised this spring that the startup already had spent much of the $70 million it had raised only a few months earlier. The company was trying to shift quickly from running a bike-share business to one focused on electric scooters, and needed to buy thousands of the vehicles, according to people familiar with the matter. It lost an average of $6 million a month the first six months of the year, one of the people said.
It then raised hundreds of millions of dollars more from venture capital firms, but by October its net loss that month had swelled to $23 million, one of the people said, as it sought to expand to more cities and gain an upper hand on Bird, its leading rival. The monthly loss was expected to fall to $11 million in January, the person said. The extent of Lime’s losses hasn’t previously been reported.
• Lime’s losses grew in pursuit of market share
• Scooter operator expected to raise new funding
• Stock-market drop, cold weather seen damping investor frenzy
Lime’s scooters remain popular—the company has pulled in around $20 million a month in revenue recently. But the business has proved expensive to operate, especially as the company was forced to replace scooters that broke down after a few months and spend money to improve its hardware.
In addition to hundreds of millions in venture funding, the two-year-old company has raised tens of millions in debt to pay for new scooters. Lime already is going back to investors in the U.S. and Asia for more equity financing, at the same time as Bird.
Lime has been trying to demonstrate to investors that it has made progress in its market-share fight with Bird, and is promising to get its cash burn under control, a top goal of new chief operating officer Joe Kraus, people close to the company said. But if it kept up its current pace of spending and didn’t raise more funds, Lime would run out of money in around six months, a person briefed on the matter said.
Raising new funds has proven more difficult than executives hoped. Lime’s round of financing under discussion likely would be funded primarily by existing investors, potentially doubling the scooter rental startup’s valuation to $2.5 billion, a person close to the company said.
Previously, Lime had asked for a $3.5 billion valuation from investors and sought money from SoftBank’s giant tech fund. SoftBank isn’t expected to invest in either Lime or Bird, the person close to Lime said. The more difficult fundraising environment was first reported by the Wall Street Journal.
Lime still may attract new investors. General Atlantic and Temasek Holdings recently have discussed investing in the company, the person said, talks that haven’t previously been reported. The company also has had discussions with Uber about an acquisition, which people close to Lime said is still a possibility but unlikely.
Big losses have been common for transportation technology startups in recent years. Lyft had a loss of nearly $700 million in 2017, and Uber lost $4.5 billion, as they sought to rapidly expand their businesses.
Getting costs under control could be a challenge for Lime, which has talked ambitiously about blanketing cities with scooters, bikes and golf cart-size cars. Lime is trying to cut expenses by reducing scooter breakdowns, and curbing expansion in cities where it faces high rates of scooter vandalism, the person said. Lime already has increased its average per-ride revenue through changes to its pricing strategy and improving battery life, the person added.
A Lime spokeswoman said: “We are focused on building an independent company that is the leading global provider of last-mile mobility solutions.”
Bird’s cash situation is unclear, but it also has faced challenges closing a new financing round just six months after raising $300 million at $2 billion valuation. It has discussed with investors the prospect of doubling its valuation in these latest talks, but more recently expected to raise funds at its existing $2 billion valuation or slightly higher, two people close to the company said. Last week, the company reopened its fundraising to bring in new investors, said two people familiar with the matter.
It isn’t clear whether those new discussions will mean a higher valuation. Bird CEO Travis VanderZanden said Saturday in an emailed statement that it wasn’t discussing a sale with Uber. The company had been in discussions with the ride-hailing giant at points over the last several months, The Information previously reported.
Stock-market turmoil may have diminished investors’ appetite to take on scooter companies, while cold weather and regulation has dented ridership numbers in some cities. Investors’ growing caution stands in stark contrast to the companies’ position just months ago, when prospective backers were flocking to Bird, Lime and some of their newer rivals. In October, Bird and Lime boasted they each had amassed 10 million trips on scooter or bike rentals, a faster pace of early growth than Uber or Lyft’s ride-hailing businesses.
“Both companies got greedy in terms of valuation. That becomes a problem when markets contract,” a Lime investor said.
Investors and executives in transportation companies on several continents now are trying to determine whether fleets of bike and scooter rentals can survive as standalone businesses.
Uber and Lyft, which are planning to devote hundreds of millions of dollars each to their own bike and scooter operations, have come to believe that while the services won’t necessarily pay for themselves in the near term, they could help build the brands of the ride-hailing firms and complement their other services.
While Bird, Lime and other scooter operators have been able to build on their initial success with consumers in many places, the arrival of colder, wetter weather appears to be weighing on demand in some East Coast markets. Baltimore, where Bird and Lime have operated fleets of roughly 1,400 scooters combined, saw the number of rides per week drop by one-third from October to November, according to city data. The number of e-scooter rides in Charlotte, N.C., fell by about 28% from the first week of October to the last week of October, the city reported.
As scooter firms try to make it through the winter, several potential lucrative U.S. markets could be up for grabs in the spring. In cities like New York, Boston, Philadelphia and Chicago—where electric scooter rentals are now banned under city or state laws—legislators or transportation officials are discussing running pilot projects for scooter companies to operate.
—Amir Efrati contributed to this article.