Bird Global: From VC Unicorn to Chapter 11

Welcome to the 144th Pari Passu newsletter.

If you live in a big city, there’s a strong chance you’ve seen someone ride by on a shared electric scooter/bike or even have ridden one yourself. Over the past decade, these “micromobility” vehicles have changed the way commuters approach last-mile transportation and influenced the ways in which cities build new streets. Bird Global, better known as Bird scooters, was the first major mover in the micromobility space, and attracted substantial investor attention, raising hundreds of millions of dollars and becoming the fastest “unicorn” venture investment of its time. 

However, while dropping scooters on city streets was an easy way to rapidly scale, turning a profit was another story. This writeup explores Bird’s rapid rise to fame and enormous valuations, along with the issues that plagued its business model, including injuries, municipal lawsuits, and vandalism. We’ll also dive into the unit economics behind micromobility ridesharing to diagnose where Bird faltered. Additionally, we’ll examine Apollo’s unique form of scooter financing and how the firm leveraged Bird’s desperate need for outside capital in a Chapter 11 loan-to-own strategy. We’ll conclude with Apollo and the lender group’s outstanding turnaround of Bird and briefly compare it to its competitor, Lime.

9fin: Law firm DQ provisions are here, and people are upset

There’s a new front in the covenant wars and LME battlefield. According to several 9fin sources, sponsors are now adding law firms to DQ (“disqualified”) lists — language that discourages lenders from hiring certain counsels in future negotiations, especially in restructurings or liability management exercises (LMEs).

Historically used to block specific lenders from entering deals, these new provisions are now aimed at lender-side law firms known for tough tactics. Two versions are emerging: naming firms outright, or granting the borrower a one-time veto over the lender’s choice of counsel.

Sponsors believe this can smooth talks; lenders see it as a blow to their leverage. While some question enforceability, most agree it’s another sign of today’s competitive, supply-starved market tilting power toward sponsors.

Bird Global

Founded in 2017, Bird Global was a first-of-its-kind micromobility company with the goal of replacing car trips with a new category for short-distance transportation. Micromobility can be defined as transportation via lightweight vehicles, primarily e-scooters and e-bikes, that may be borrowed for short-term use within a city. Partnering with various cities, it was the first company to deploy shared electric scooters in the United States. 

Bird’s vehicle-sharing business encompasses both Bird vehicles (e-scooters and e-bikes) and its mobile app. To ride a Bird scooter, riders must download the Bird App, create an account, and use the app to locate a scooter, the locations of which are overlaid on a city’s map. From there, riders pay a fixed fee to unlock the vehicle and are charged per minute for the length of the ride. For reference, a typical fee structure might involve a $1 fixed charge, with the per minute charge ranging anywhere from $0.15 to $0.50, depending on the current market supply and demand for Bird vehicles. Riders complete a bird trip and stop being charged when the vehicle is parked in a designated area [1]. 

Shortly after Travis VanderZanden, a former Uber executive, founded the company in September of 2017, he deployed the first ten Bird scooters in Santa Monica, California. In just their first week, the vehicles logged thousands of rides. Over the next six months, Bird deployed ~1,000 scooters across the city of Santa Monica, with 50,000 people taking 250,000 rides during the same period [2]. For scale, at an estimated four to six million Uber rides in Santa Monica during 2017, Bird was still far behind traditional ridesharing but catching up.

Rapid Venture Capital Raises

Since Bird was proving itself to be the first mover in the micromobility market, it attracted enormous amounts of attention from venture capital funds.

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