By Ross Douglas, Founder of Autonomy
There has been a lot of activity in the mobility startup space recently. The EU startup prize for mobility, initiated by Karima Delli (President of the Transport and Tourism Committee of the European Parliament), attracted 500 startups last month and Paris-based Cityscoot secured a 40 million Euro investment from RATP. But the big story is the sale of Mobike to Meituan-Dianping, a privately held Chinese online food delivery company backed by Tencent which values the bike share startup at $3.7 billion.
Who would have imagined that a bike share operation would secure such a massive valuation? Bike sharing has always been a European success story. It started in 1965 in Amsterdam with ‘White Bikes’, gained popularity in Paris with ‘Velib’ in 2007 and rapidly spread to every major European city after that. In the 40 years that bike share has been operating in Europe it has always required city subsidies to cover the expensive docking infrastructure. While European bike-share companies waited for foreign cities to publish public tenders before going abroad, China’s Ofo and Mobike disrupted the business model by deploying cheap bikes on mass that do not need docking infrastructure and therefore do not rely on city budgets. This disruptive business model is neatly articulated by Ofo’s co-founder Austine Zhang – “spread rapidly – yellow will cover the world”.
This strategy of mobility companies spreading rapidly is not unique to Ofo and Mobike. Uber has raised $12 billion which it has used to provide on-demand mobility in more than 600 cities in less than 10 years. Uber’s biggest rival, Didi Chuxing of China, has raised $15 billion and recently entered Europe by making a major investment into Estonian ride-hailing startup Taxify.
Mobility companies use disruptive technology and business models to move commuters at low cost without the need for government subsidies. It’s about scaling up quickly so as to justify the massive startup costs. The quicker the company can scale, the better their chance of surviving the competition.
Startups must continually raise funds to stay in business and therefore startups in countries with high investment activity have an advantage.
McKinsey’s recently published ‘Analyzing startup and investment trends in the mobility ecosystem’ gives good insight into funding. Their ‘Start-up and Investment Landscape Analysis’ (SILA) tool reveals that $111 billion was invested in more than 1,000 mobility companies across ten technology clusters between 2010 and 2017. Less than a third of these relate to shared-mobility companies; the rest focus on the trends of automation and connectivity. Out of the $111 billion, more than 60 percent was from large investments greater than $1 billion, and the rest from small investments. Half the funding is out of the US, 25% from China and Israel features third thanks to Intel buying Mobileye for $15 billion. The only European country to feature in the top ten is Germany with a modest $1.1 billion investment, a mere 1% of total funds invested.
But it is the recent rise of Asia that has caught everyone by surprise. According to the Lufthansa Innovation Hub, which tracks investment on mobility and travel startups, in 2017 “China and India-based companies claimed 70 percent of global VC funding value; and 12 out of the world’s 22 most valuable Travel & Mobility startups are currently from the East”. By comparison the same publication claims that “the European share of global funding value has been declining over the years from over 20 percent in 2013 to a mere 3 percent in 2017”.
What is painfully clear is that while Europe is a leader in today’s transport and automotive sector, it is not giving European startups sufficient funds to be leaders of tomorrow’s mobility solutions. Autonomy understands startups’ need for funding. We too are a startup created by an entrepreneur and funded by investors. For this reason, Funding the Movement, our startup program at Autonomy, is focused on helping mobility startups secure investment from around the globe. To achieve this, we will have a selection process to choose the best 100 startups to exhibit and demonstrate at Autonomy. From this group, there will be a further selection process to select the 25 startups that have the greatest chance of securing funding to pitch to international VCs, incubators and heads of innovation. This level of selection is necessary to ensure that startups have the greatest chance of securing investment.