IF the spectacular rise and fall of the bike-sharing market has raised uncertainty for e-scooter startups, early-stage venture firm SeedPlus isn’t daunted.
SeedPlus, which focuses on seed-stage opportunities, led a S$5 million seed funding round into e-scooter startup Neuron Mobility in December. 500 Startups, Enterprise Singapore investment arm SEEDS Capital, ACE Capital and other angel investors and family offices tagged along.
Neuron is producing its own scooters and eyeing further Asia-Pacific expansion with the fresh capital. The startup currently owns more than 1,000 scooters and operates in Singapore, Thailand and Malaysia.
Neuron, which was founded in 2016, is also among the handful of startups seeking a sandbox licence from Singapore’s transport regulator, which could grant full licences to outfits that adequately comply with regulations.
SeedPlus partner Chirayu Wadke tells BT why Neuron can avoid the potholes that put the brakes on its bike-sharing counterparts.
How did you come across Neuron and its co-founders Zachary Wang and Harry Yu? What convinced you to invest?
Neuron was brought to us by the government agency Enterprise Singapore (ESG), which is a close partner of ours. ESG was showcasing Neuron in one of its forums and that’s how I got to know the founders. I met them in April 2018.
One of the obvious things is the quality of this deal. Being in the business for longer than most e-scooter sharing companies globally, thinking about the problem and designing their own scooters and controlling their own destiny in terms of the supply chain – these are some unique advantages of Neuron.
They have learnt some hard lessons over more than two years, and I think the others who started after them are only now learning the same lessons. There’s a lot that they have been able to get done because of that experience. I would say the team is critical.
What are some of these hard lessons?
They have learned that controlling their own destiny by manufacturing their own scooters is a critical differentiator.
They have also learned that the business model works in certain ways that was not possible with bike-sharing – the economics are better.
The operations team also makes use of certain recommendation systems to figure out how to optimise the placement of bikes and how to recharge them. They don’t collect the scooter back, but swap the batteries.
This is a critical learning point from their operational history, where taking the scooter off the road is not exactly optimal. They would rather just swap the battery and keep the vehicle on the road for longer.
How do you think Neuron will avoid the pitfalls of the bike-sharing industry?
The thesis is that this will not play out like the bike-sharing phenomenon. I don’t think that any e-scooter sharing company is going to go to a city and saying, I want to put 10,000 scooters across the city, and just blanket it.
When we looked at Zach and Harry (co-founders Zachary Wang and Harry Yu), they were already constructing a dock station, along with a scooter that’s well-equipped to handle compliance requirements by regulatory bodies.
They’ve thought through the problem at a very fundamental level, and that’s what attracted us to them, because they had considered all these factors, versus a model where you throw thousands of scooters at the problem, discount the life out of the service and hope that consumers come.
Neuron’s mindset of being regulatory-compliant rather than trying to skirt regulations is what attracted us. We believe that in the new world, after going through the ride-hailing and bike-sharing phenomena, governments and regulatory bodies in this third iteration have become far smarter. And so we wanted to align ourselves to a company that focuses on compliance.
An e-scooter is so much more expensive than a bike, and the logistics of recharging them are complex. Are Neuron’s costs sustainable?
Capital expenditure is not as big an expenditure in this space as operating expenditure is. The reason you keep hearing about heavy capex is because of players that are reliant on third-party manufacturers like Xiaomi, which have raised the prices of their scooters in response to their demand. Neuron, being self-sufficient, is able to keep that cost down. They are better to get better economies of scale.
Opex is quite a big chunk of overall cost.
So how is Neuron keeping opex down?
I would say that’s the secret sauce. Through machine learning and data science, they understand what needs to be done, where are the zones with high traffic and what’s the right schedule to charge batteries. They’ve figured that out.
What makes you confident that Neuron can scale in Asia-Pacific?
There’s a great response in Thailand. Last-mile transport costs there are high in some places. In Chiang Mai, Neuron is working with the mayor and city council very closely. That’s going to be their ongoing approach – to be as compliant as possible.
In Malaysia, they are in Cyberjaya, a smart city. We expect the same type of results… given what we’ve seen in the other markets, we don’t think it will be a problem.
People don’t realise that unlike in the US, e-scooters are not new to Asia-Pacific. If you go to Manila, Kuala Lumpur or Bangkok, people have their own e-scooters. Whereas in the US, it’s a novel fad.
Some say that e-scooters are a menace and public safety hazard. Others think it’s the future of mobility. What are your thoughts?
Bus and MRT are low-cost but consume a certain amount of time, and short distances are hard. Taxis are expensive but can take you wherever you want to go. There’s two ends of the spectrum.
Ride-hailing tries to address this problem, but if I had to get to a certain place under a certain amount of time, there’s no middle-of-the-road option, specifically for non-car owners. So e-scooters are interesting for me.
SeedPlus at a glance
- Partners: Michael Smith Jr, Chirayu Wadke, Tiang Lim Foo and Gabriel Lundberg
- Year founded: 2016
- Focus: Seed-stage investments of S$500,000 to S$1 million in early stage companies.