Lime's new CEO on the Uber deal, absorbing Jump and socially distant scooters
Lime is receiving a much-need cash infusion from Uber and other investors as the scooter company attempts to reset its business amid the coronavirus pandemic. The move announced Thursday was a "down round," Lime's new CEO acknowledged in a morning interview with Protocol, but gives the battered company "a chance to fight back" — and perhaps benefit from the new need for social distancing.
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Lime revealed it has raised $170 million in a funding round led by Uber and with backing from investors including Alphabet, Bain Capital Ventures and GV. It's also swallowing Jump, acquiring the assets and some employees from Uber's bike and scooter business.
Lime's new CEO — its third in as many years — is former global head of operations and ex-Uber employee Wayne Ting. He replaces co-founder Brad Bao, who will remain as chairman of the board. Joe Kraus, who once was COO and Ting's boss, continues on as president.
The funding deal "reaffirms that not only Uber but major investors believe in this industry and believe in Lime," Ting said. "This funding is going to be sufficient for us to weather the downturn and come back and compete and bring micromobility to more cities, which, especially because of COVID-19, is more needed today and more necessary today than ever before."
But the new funding is effectively a bailout for what was an already cash-strapped business going into the pandemic, and there's still no guarantee that any micromobility business will survive what is a crowded and hard-hit market.
The deal comes with a massive valuation cut, dropping the startup's valuation from $2.4 billion to around $510 million, according to The Information, which first reported details of the negotiations. According to its report, Uber will get preferred shares and have an option to buy Lime in the future.
Lime declined to comment on such details, but Ting told Protocol that "it's a down round." The company also expects to re-price some employees' shares to account for the valuation shift.
"What matters for me, Lime and all of our shareholders and employees is that we're going to weather this," he said. "We're going to come out of this on the other side because of the investments being made today. This gives us a chance to fight back to whatever valuation happened before."
With the Jump acquisition, Lime will continue to operate both scooter brands in the short term, but Ting expects that it will consolidate under the Lime brand in the future. Ting prefers Jump's bikes, though, so Lime will be adopting that hardware moving forward.
The agreement could buoy Uber, which gets to move a money-losing business off its balance sheet and onto Lime's books instead. Wall Street liked the deal, with investors driving up Uber's stock more than 10% after it was announced. More details of the transaction could be announced when Uber reports earnings after Thursday's market close.
The scooter segment has been a notorious cash-burner, and both Bird and Lime have been under pressure to move toward profitability. When Bird raised $275 million in October, founder and CEO Travis VanderZanden acknowledged that industry and investor sentiment had shifted.
"Positive unit economics is the new goal line," he said at the time. That wasn't enough to inoculate Bird's business from the effects of the pandemic; it laid off around 30% of its workforce, or 400 people, in March.
Lime laid off about 100 people and exited 12 markets in January. Just before the pandemic hit, Ting said Lime was on the brink of being cashflow positive. He told Protocol on Thursday that his goal is to get Lime back to being cashflow positive by 2021, but that he's not going to pull back on the growth throttle.
"We're gonna double down on being international," he said. "The need for safe, healthy, open-air, single-passenger modes of transportation is not just an American need — it's a global need, especially when we look at the global impact of COVID-19."
Ting's bet is that people are going to emerge from the pandemic wanting more socially distanced transit options, like bikes and scooters, instead of opting for crowded transit options, a stance echoed by rival Bird.
Already in some of its restarted cities, like Berlin and Columbus, Ohio, Lime is seeing average trip fares go up as people ride scooters for longer distances. Seoul is back to nearly all-time highs, Ting said.
Moreover, consolidation in the market could help Lime. Already, Lyft has started pulling back from some markets, though Ford-owned Spin told Protocol's David Pierce that it's ready to restart its markets when the time is right.
"We've seen historically a lot of brands being funded over the last couple years. And I think that's a great thing," Ting said. "But as we go through one of these downturns, there's a question of what doesn't make sense in the future, and I think we're going to see some level of consolidation."
For now, Lime is staying in the fight, despite the onerous deal terms it had to stomach to get there.