As Lyft continues to prepare for its IPO, the on-demand transportation startup is trimming staff to cut costs ahead of another wave of expansion.
TechCrunch has learned and confirmed that Lyft has laid off around 50 staff in its bike and scooter division, mainly people who had joined the company when it acquired the electric bike sharing startup Motivate a deal that closed about three months ago. The cuts range from managers and through to technical people and those holding less senior roles, and have been made across a number of cities, including Boston, San Francisco and New York.
A spokesperson for the company told TechCrunch that Lyft is continuing to hire in its scooter and bike division. “This was part of our performance management process,” she said in a statement. “We are actively hiring for this part of the business with hundreds of hires planned this year.”
Given that Lyft currently employs around 5,000 people, the cuts work out to a small percentage of that, around one percent to be exact. But it’s notable because of where the cuts were made, and because they are coming as the company gears up for a public listing, after which it will be subject to more public scrutiny.
Lyft has made a big move in the last year to expand its transportation options beyond private cars. This has been done partly to meet consumer demand in different scenarios (for example, shorter routes that might otherwise be clogged with traffic, or options that let the rider get a little exercise in during the journey); partly because its competitors are also presenting alternatives, which could drive business away from Lyft if it doesn’t offer the same options; and — now that there is a public offering in sight — partly to present a more diversified business to the market. The Motivate acquisition was likely made for at least all of those reasons.
Before Lyft acquired it, Motivate had made its name in bikes alone. In fact, it had grown to be the biggest bike sharing company in the US, with its network including CitiBike in New York; Capital Bikeshare in Washington; Ford GoBike in San Francisco and many others.
Under Lyft, Motivate became part of Lyft’s bigger strategy to expand beyond private car services, which also included its scooter business. While Lyft is continuing to develop business for both transportation mediums — for example, it added 4,000 electric bikes recently to the New York City bike sharing operation — scooter sharing has most definitely had the bigger surge of industry interest in recent months.
One person who tipped us about these layoffs believes that they were made with a specific strategy in mind, to cut costs on the bike operation, which is a more established business, to help channel resources into the costly scooter business. “Lyft is going big on scooters and cutting bike people,” said the tipster. To be clear, though, Lyft itself did not characterise it that way.
Whether the two are directly related, it is true that in the next couple of weeks, the company will be kicking off a big scooter launch in multiple cities, with its SXSW presence this year all about the two-wheeled, electric-powered vehicles.
Other companies and investors are certainly putting their money on scooters right now. Lime is now valued at $2.4 billion after raising $310 million last month. Bird is also reportedly raising at a similar valuation. Uber, meanwhile, acquired Jump last year to spearhead its own scooter and bike strategy.
All that is despite what has been a very uneven path for scooters. Some of the issues have included controversy around safety (for example, Lime appears to have a persistent safety problem with some of its fleet; the after-effect of having gluts of them cluttering the streets and the regulatory issues that surround this; and the tough unit economics.
On the last of those, this essay outlines how difficult it is to make money right now on a scooter business, when you calculate the average price for a ride, the average lifespan of a scooter, and the average price to get one on the street. And that’s before you consider marketing and other costs, and before you have seen the basic premise proven out: that a critical mass of people will use hired electric scooters on a regular basis.
Our tipster estimated that a typical scooter rollout is making a loss of about $23 per scooter per ride ($2 per ride, versus $25 per ride cost). “Better design durability and more scale to get to operational efficiency will address that in theory,” the tipster said, which is likely why hires are still being made, and services are still being rolled out.