In 2021, Tier Mobility was so well off financially that one could almost get the impression that the e-scooter rental company didn’t even know what to do with their money. Within a short time, the Berliners incorporated five companies, including well-known names such as the Leipzig bike-sharing top dog Nextbike. In mid-August 2022, CEO Lawrence Leuschner (40) suddenly braked: Tier deleted about every sixth position, 180 employees had to leave. The “scarcity in the financial market” makes the cuts necessary, explained Leuschner.
It is becoming increasingly difficult to attract investors to start-ups from the mobility scene. An evaluation by the management consultancy Oliver Wyman, which is available exclusively to manager magazin, documents the trend. In 2021, financiers worldwide still put 81.2 billion US dollars into the industry. In the first half of 2022 it was only 21.7 billion. “The big hype is over. It’s making way for reality,” comments study co-author Andreas Nienhaus.
2021 was “not just exceptional, but exceptional above average”. “Money was cheap, and investors had to actively look for their goals. Also, many companies have gone into scaling. For that you often need even more money than in the development phase.”
Russia’s invasion of Ukraine and the economic upheaval it brought to an end “abruptly” brought the hunt for records to a halt. Nienhaus fears that the downward correction will be sustained. Anyone who is currently in the phase of customer development or technology tests will have a hard time. Bitter for the founders affected, but also bitter for the turnaround in mobility, “which is urgently needed from a climate protection perspective,” says the consultant. “After all, the planet doesn’t care how the financial markets look. Ideas for climate-friendly transport need more money, not less.”
Like Tier Mobility, other hopeful companies hit hard in 2022. The scooter rental companies were hit in droves. Voi also had to save, US competitor Bird lost 97 percent of its value on the stock exchange and descends into chaos. “Many e-scooter companies couldn’t live up to the hype,” says study co-author Steffen Rilling. “To get a profitable business model is complex.” Other mobility services are also finding it increasingly difficult for investors. “There hasn’t been a new big bang in this area for a long time, with which a provider turns everything upside down,” comments Andreas Nienhaus.
Online car dealers have also come under pressure in recent months. The British Online used car dealer Cazoo
stamped out its businesses outside Great Britain due to severe turbulence. The experts at Oliver Wyman do not expect any improvement in this segment either. The situation is similar in ride hailing. “It is questionable whether the providers will be able to pick themselves up again quickly,” says Nienhaus.
The End of “Hockey Stick Predictions”
Nienhaus and Rilling, on the other hand, give hope to companies that have already proven their business model. “Investors are still willing to spend money when they see the added value. With a solid business model, start-ups can also enforce their expected valuations,” says Rilling. Anyone who has the potential for an IPO is considered “a relatively safe bet”. Companies with hockey stick forecasts, on the other hand, are skeptical, “according to which a long trough is said to be followed by a meteoric rise at some point”.
And so, in the foreseeable future, investments are likely to focus on significantly fewer companies than in the past. Anyone who is convincing could continue to manage large financing rounds. In the first half of the year, the average was $46 million per round. Although the trend was downward compared to 2021 ($54 million), it was still clearly positive compared to previous years.
In the first half of 2022, investors invested the most money in ideas for connected cars, at $7.1 billion. “Connected vehicle is currently considered the hottest topic in the scene – especially since it is closely related to electromobility,” says Nienhaus. In operation, e-cars sometimes provided twice as many data points as vehicles with combustion engines. This opens up the opportunity for additional business such as over-the-air updates or on-demand services.
At Tier Mobility, they had already begun to expand the range of services before they had demonstrated a viable business model. The Berliners are now taking the opposite route. At the end of the year they will stop renting electric mopeds. It had never counted. “We have to reduce the number of products and projects,” said Leuschner in the summer, “in order to become profitable more quickly.” Faster than he would actually like.