California electric scooter company Ojo has announced it intends to buy Gotcha a scooter and bike rental service. The deal is a sign that the micromobility industry needs to consolidate as competition creates financial problems for many in the market.
Ojo's rationale
Ojo claims its purchase of Gotcha, a 10-year-old company with headquarters in Charleston South Carolina will put it on “a path to become a top [three] player in the North American rideshare market, right behind Lime and Bird.” The statement is a bit optimistic perhaps as Ojo has just recently begun to offer shared scooter rides in a handful of cities. However, its e-scooters are said to be highly enjoyable. As can be seen in the appended video Ojo has partnered with Ford.
The Chief Executive Officers (CEOs) of both Gotcha and Ojo stressed the positive unit economics resulting from the merger. Companies in the market are struggling to recoup the cost of each scooter or bike in their services a key challenge to making their businesses profitable.
Other mergers are taking place
Bird has just recently bought competitor Scoot as announced in a press release: "Santa Monica and San Francisco, Calif., June 12, 2019 – Bird and Scoot today announced that Bird is acquiring Scoot, the San Francisco-based electric vehicle pioneer. The acquisition is a strategic decision from two like-minded companies. Together, Bird and Scoot will offer riders more vehicles featuring the latest technology advancements for the sharing market, and provide service in more communities, while helping cities meet their ambitious goals of reducing both automobile traffic and climate-changing carbon emissions. Scoot will continue to operate as Scoot, a wholly owned subsidiary of Bird."
There is also consolidation in Latin America as Grin and Yellow combine to form Grow Mobility: "Consolidation in the micromobility space has arrived — in Brazil, at least. A few months after Y Combinator-backed Grin merged its electric scooter business with Brazil-based Ride, it’s now merging with Yellow, the bike-share startup based in Brazil that has also expressed its ambitions to get into electric scooters."
Uber, the ride hailing company has also entered the e-scooter business by investing and partnering with LIme which rents e-scooters.
These consolidations are a sign that after rapid growth companies are having to tackle problems of unit economics, software, batteries, and safety.
Terms of Ojo Gotcha agreement
Ojo will buy 100 percent of the equity of Gotcha and will pay $2.5 million at the time the deal closes and another $2.5 million 5 months later. Ojo says it will issue $7 million in stock. Half of this will be issued on closing and the other half six months later but only providing that certain business milestones are met. The two companies hope to close the deal by the end of this year.
Gotcha's business has mostly concentrated on university campuses. Ojo has launched a rental service in Austin, Memphis, and Dallas just this October. By 2020 Ojo hopes to deploy 25,000 of what it calls mobility units for both on-demand delivery services and ride-sharing.
Previously published in the Digital Journal
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