SoftBank jumps into e-scooters with $250m Tier Mobility deal
Latest investment values Berlin-based electric scooter start-up just below $1bn
SoftBank’s Vision Fund has made its first investment into the fast-growing but volatile electric scooter-sharing market, backing Berlin-based Tier Mobility in the largest funding round for a European e-scooter company to date.
Tier on Tuesday said SoftBank’s second Vision Fund had led a $250m investment in the company, which has pioneered a novel model of swappable batteries and local charging networks that investors say has enabled it to operate profitably, even when usage was hit by lockdowns.
The investment valued the start-up just below $1bn, including the new funds raised, said people briefed on the terms, allowing it to overtake Lime to become the second-most valuable e-scooter company after Bird.
Lawrence Leuschner, Tier’s chief executive and co-founder, said the company has been profitable, excluding interest and tax payments, since the summer.
Mr Leuschner said that as a result, Tier has been able to use debt financing to pay for new e-scooters, instead of burning through venture capital. The new equity from SoftBank and others will be used to expand into new kinds of so-called “micromobility” vehicles, which are smaller and less polluting than traditional cars, and build out its charging network.
“If we all switch from diesel cars to electric cars, we are going to save CO2 and other emissions but we are not solving the problem of congestion and parking,” he said. “The vision here is to build an energy network and different [vehicle] solutions in one app, so that you can leave your car at home.”
Scooters with swappable batteries can be topped up more easily and cheaply, because the vehicles do not have to be pulled off the streets and shuttled to warehouses for recharging. Tier also has a growing network of automated charging stations inside cafés and retailers.
Investors have ploughed hundreds of millions of dollars into e-scooters since 2017, when Bird first pioneered the model of on-street rentals that can be picked up and dropped off anywhere via a smartphone app.
But many of those funds were spent on buying vehicles that lasted only a few months before being stolen, vandalised or scrapped — and that was before the coronavirus pandemic forced several operators to suspend operations in many cities.
Bird laid off hundreds of employees in March and Lime’s valuation was cut from more than $2bn to about $500m in May, when Uber led a $170m investment.
Paul Murphy, general partner at Northzone Ventures, said later-stage investors who had “previously been on the sidelines” of e-scooter investing got more interested when they saw how Tier’s charging network changed the economics of the business.
Tier’s existing investors, including Abu Dhabi’s Mubadala investment arm, Goodwater Capital, Northzone, and White Star Capital, also participated in the funding round.
“Tier’s response during the pandemic showed how much better its operating model was than every other micromobility operator,” Mr Murphy said. “This is Mubadala and SoftBank stepping in to say, ‘This is the winner’.”
As commuters seek Covid-friendly alternatives to trains and buses, scooter operators believe they have a new opportunity to prove that they are not simply a Segway-style fad. The UK accelerated its plans to legalise rented e-scooters this summer, in response to the pandemic.
Tier operates in more than 80 cities in 10 countries across Europe and the Middle East. After winning an operating licence in Paris earlier this year, Mr Leuschner said he was “evaluating” applying for a permit in New York City, which plans to allow scooters for the first time next year.
SoftBank’s investment is the first European deal from its second Vision Fund, which is backed by the company’s balance sheet rather than outside investors.
The Japanese company backed Tier after determining Europe is a more attractive market for e-scooters than the US and Asia, one person familiar with its thinking said.
The Vision Fund recovered slightly in the third quarter after suffering from a series of underwater bets on start-ups such as the property group WeWork, reporting gains from mark ups and exited investments.
