European scooter startup Tier says its big advantage over Silicon Valley rivals is a more efficient use of capital and careful scaling

Walk around the streets of many major cities in Europe and the US, and you'll see sidewalks and roads strewn with scooters of different colors and brands.

That's after the emergence of massively funded startups which are vying for the chance to wheel you to your destination — sustainably, they claim. Persuading people onto scooters is potentially big business, with the market for these electric vehicles estimated to be worth $15 billion by 2025.

Lucrative as the market may be, it's also competitive and cash-guzzling.

Two of the best-known firms in the space, Lime and Bird, have raised more than $1 billion between them to fuel a rapid global expansion. Lime is expected to post a $300 million loss this year, per The Information. Bird is also thought to be loss-making, although the firm has never confirmed numbers.

Meanwhile Europe is producing its own rivals, including Voi, Tier, and Wind.

And they say they have a major advantage over their spendthrift peers in the US.

Lawrence Leuschner, the cofounder and CEO of Berlin-based scooter startup Tier, thinks he can beat out the competition because the firm is more efficient.

"The lifetime of our vehicles is higher by multiples than our competitors' and is a driver of efficiency," Leuschner claimed in an interview with Business Insider. "We are profitable in most cities, have strong operations experience, so we can scale faster than anyone else."

Tier scooters

Tier

Tier's current stronghold is in Germany but its expansion across Western Europe — with the exception of its largest city, London — continues with more than 40 cities on its roster since its launch in October 2018.

Much like other scooter companies, Tier works by unlocking an individual scooter through a phone app. How much you pay per ride depends on the city. In Berlin for example you can unlock a scooter for €1 ($1.1) and pay €0.15 (17 cents) per minute of use.

The startup raised a $60 million Series B recently, taking its total funding to $91 million. That's onsiderably smaller than the massive sums raised by Bird ($548 million) and Lime ($765 million), per Crunchbase. Both Bird and Lime are unicorns. Tier declined to comment on valuation but reports in the German press put the company's valuation at $275 million.

Leuschner says Tier is more capital efficient than its rivals and a smarter bet for investors in the long run.

His argument is that investors are looking for long-term, sustainable growth versus the growth-at-all-costs mentality pioneered by Uber, Silicon Valley's original buzzy mobility startup.

Tier is a private company, and doesn't share its financials.

But Leuschner's remarks are part of an emerging narrative that investors need to look beyond endless growth as the key metric for tech startups. The tepid (or cancelled) floats for Uber, Lyft, and office-sharing firm WeWork have signalled that pure growth fuelled by huge amounts of money is a risky strategy. Union Square Ventures investor Fred Wilson wrote on his widely read blog that the hype and valuations around private companies largely hasn't translated into public markets.

Europe's startups have never had the same access to capital as their Silicon Valley rivals, something that has always been perceived by entrepreneurs and investors as a disadvantage. As fears of a bubble grow, the likes of Tier's Leuschner are turning their frugality to their advantage.

Estonia's Bolt (formerly Taxify) is another mobility startup which competes both with Tier and Uber. The firm offers ride-hailing as well as scooters. CEO Markus Villig has previously said the firm is frequently profitable, unlike its cash-burning American competitors.

Tier is using replaceable batteries for its scooters, which the firm says is more climate-friendly

Tier recently announced it would be the first e-scooter startup to use replaceable batteries for its products. Sustainability is key, according to Leuschner, with Tier's ambitions centering on making its transport offering better to prevent climate change.

It's familiar territory for the German entrepreneur. Leuschner says he spent his early years taking excess parts from his stepfather's factory to be sold at a local flea market in Germany from the age of nine onwards. He subsequently founded WeBuy, a company that specialized in refurbishing electrical goods.

He says that replaceable batteries, alongside a claimed lifetime of between 18 and 24 months for each scooter, is fundamental to Tier having lower operating costs than its competition.

Tier's replaceable batteries

Tier

If what Leuschner says is true, Tier does have the upper hand. Bird's latest scooter model, its most durable yet, is intended to last for about a year. Lime's newer scooters are set to last for more than a year of continuous operation, are mostly recycled and are charged from renewable sources, generally.

A spokesman for Bird in the UK disputed the benefits of replaceable batteries and suggested that the environmental impact of the move was not so different to the current process. All scooter companies employ people to go around picking up their scooters, recharge them, and then put them back on the streets. Tier says its shift to replaceable batteries means workers only need to pick up the battery for recharge, while other firms have their whole scooters picked up.

Lime did not respond to a request for comment.

Leuschner says his desire to act on climate change and create a more sustainable company come from his worldwide travels, including seeing forest fires in Chile and mudslides in Peru.

How does this square with the fact that Tier has taken capital from oil-rich UAE's sovereign wealth fund, Mubadala?

"We wanted to go the next phase," explains Leuschner. "To do that we needed investors who shared our vision of expansion and long term ambitions, both firms are used to executing fast growth plans."

Other Tier backers include lead investor and growth fund Goodwater Capital as well as White Star Capital, Northzone, Evil Growth Partners, Indico Capital Partners, AXA, Speedinvest, Point9, and Market One Capital. Formula One racing driver Nico Rosberg has also invested in the company.

The company also announced that it would refurbish old scooters and sell them to private customers so that people outside of major cities can use their hardware through its new myTier service.

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