What has four wheels and loses money?

This is our Wednesday show, where we niche down to a single topic and go deep. This time Natasha and Alex corralled TechCrunch transportation editor Kirsten Korosec to talk to us about the endless parade of EV SPACs, and more. Before we get into the show notes, you can follow Equity on Twitter here. https://twitter.com/kirstenkorosec/status/1394726967203667969 And, because we are proud, we won a Webby! Our show! How cool is that? Thank you for love listening, hate listening, all of it. We are so thankful. Ok, here's what we talked about: Why is every electric vehicle company going public via a SPAC, and why is there so much potential fraud in the space? Kirsten has some notes on the matter, but it boils down to money in both cases. The Bird-SPAC deal in all its glory. You can read Alex and Kirsten's dive into the Bird investor deck here. We had questions like why was the shared scooter model ever considered viable, and, how did the company improve its economics during a pandemic? The SPAC world never, ever disappoints. Of course, we couldn't resist talking about the scooter barrage of news from years ago and how things have changed since. We end with her latest scoop, a series of exits at Waymo, and what that means for the future of the autonomous vehicle company. Plus, we didn't get to make a joke about it in the show but let's just say: Waymo has a waymore to go before it has driverless tech all over the streets. And one more thing: Kirsten gives a look at some of the speakers at our upcoming mobility event. Snag tickets here, and subscribe to her newsletter, The Station, for all things mobility every week. And that's that! We are back with our regular weekly news rundown Friday morning. Chat you all then! Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 0:24Speaker 01

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• 0:42Speaker 00

  Hello and welcome back to Equity, TechCrunch's venture capital focused podcast where we unpack the numbers behind the headlines. Of course, this is our Wednesday show where we niche down to a single topic, or in this case, two topics or four topics to know what type of motor vehicle you might find yourself on. My name is Alex, of course, and I had Natasha Moscarena here with me. Natasha, how are you?

• 1:02Speaker 01

  I am so excited about this topic. When I notoriously interned in San Francisco, that's when all the scooter wars/saga/littering everywhere began. And so it's great to do a checkup on this topic.

• 1:16Speaker 00

  It is indeed. But we are not here alone. It is not just the two of us. We have Lassoed, one of our favorite colleagues. We have Kirsten Korosec here with us. Kirsten, please say hello to the Equity fam.

• 1:26Kirsten Korosec?

  Hello to the Equity fam.

• 1:28Speaker 00

  I don't like that phrase. I've just decided that now we've said it twice, that's going to be the last two times that ever happens again.

• 1:33Kirsten Korosec?

  And it's been forever branded.

• 1:36Speaker 00

  Kirsten is our transportation editor. She runs a team of people covering the mobility, micro mobility, EV, batteries, SPAC. Essentially, if it moves and you can sit on it, Kirsten probably writes about it. Is that pretty much fair, Kirsten?

• 1:50Kirsten Korosec?

  Yeah, it's fair. And if it also just randomly decides to raise a bunch of money by merging with a special purpose acquisition company, that is also fair game.

• 2:00Speaker 00

  To give everyone a quick overview of what we're doing today, we are going to talk just about that, the EV SPACs, essentially a rundown of fraud and various bits of chicanery. We're going to dig into the bird SPACs. If you want to know a little bit more about scooter economics, or as we call them, scooternomics, we'll have quite a lot there. And then we're going to wrap up with some Kirsten scoops, actually, about changes over at Waymo, which is now Waymo cheaper for Google because no one works there. Let's kick on. I apologize for that. Let's start with the granddaddy of electric vehicle SPACs, Kirsten Nicola, a company that has become synonymous with the hype cycle of these deals. So taking us back in time, when Nicola decided to actually SPAC itself on the public markets,

• 2:43Speaker 00

  I'm curious how familiar with the company you were.

• 2:46Kirsten Korosec?

  I was very familiar with them and I had the pleasure of interviewing Trevor Milton years ago. When he told me that he was creating the next iPhone, I just knew he's absolutely a salesman and that was what my main takeaway was. But I was like, hey, maybe this is a guy who can just like pull it off. Man, anyone who dug into that company then probably would have found lots of amazing stories, but instead it was Hindenburg Research, the short seller, that really, and Bloomberg, I should say, they both uncovered some exaggerations and some potential fraud.

• 3:21Speaker 00

  So they're a short selling group that's put out research on another company we'll talk about in a second. But Natasha, if I recall correctly, that the valuation of Nicola, since its peak, has really come down to a much smaller number.

• 3:31Speaker 01

  Yeah, so it debuted on the NASDAQ in June. It was worth about 29 billion then, and then now today it's worth closer to 5 billion. So extreme, extreme downfall. And I did want to share one anecdote between me and Kirsten of when I was writing about mobility once, I fell for the iPhone on wheels line that a founder used. And she was like, that's a normal cliche. And I was like, that sounds so smart, because the idea is that cars should be adapted to be as savvy and swift as the things that exist in our pockets. And so in general, that's apparently a common phrase used in mobility and Nicola kind of ruined it for everyone else.

• 4:08Speaker 00

  The Nicola saga to me was kind of an impetus or a driver, if you will, of the broader kind of early SPAC boom. Not the current SPAC boom that we're in. It was almost like a predecessor wave of SPACs. And we saw a bunch of other companies take part in this. Kirsten, Fisker is another company that's come up. So I've heard of Fisker because they used to make super high-end like supercars, if I recall correctly. And I was a little surprised to see them in the SPAC game. How did they end up going? Going public in this manner.

• 4:38Kirsten Korosec?

  So Henrik Fisker, who is the founder, is a well-known car designer and had another company that did not survive. He's taken this company through a SPAC, the same reason why every EV startup would find a SPAC attractive. Basically, think of it this way, to build your first production series vehicles, you need about a billion dollars. That's if you're going to do the traditional factory route, and that's a minimum amount. So the Rivians of the world, they need to raise a ton of cash. Rivians managed to raise something like seven or eight billion dollars, the traditional VC and strategic route. Yep, I know.

• 5:19Speaker 00

  That's a lot of, that's a lot of money.

• 5:22Kirsten Korosec?

  Yeah, Lucid did the Saudi sovereign fund route and then did a SPAC. And I believe that they're officially a publicly listed company. And Fisker followed the same route. It's just very expensive to design, develop and build a production series automobile.

• 5:39Speaker 00

  And the reason why Kirsten says that SPACs are good for raising a lot of money is because they're very good at raising a lot of money. And they're priced when the deal is put together. So the company can kind of tell before it's even announced, how much money on a gross basis will be raised? How much runway that will give them, how far they can get. And so it's like going public in an IPO, but with less kind of last minute dicking over the numbers. And so you can raise a big chunk of cash all at once, which has proved to be so, so popular. And then we have on the fraud train, Natasha, Lordstown Motors. Can you rock us through the share price decline there? This is one of my favorites.

• 6:11Speaker 01

  Yeah, so they SPACed in October, their shares topped about $29. And now their shares are at around $10, along with some news that they are being probed by the SEC for misleading investors about their progress to date. And notably, the startup is also backed by General Motors. And so we're seeing some of these heavyweights.

• 6:31Speaker 00

  You know, backed by, so Kirsten, here's the thing. So prepping for today's show, I'd forgotten just how long the litany of shadiness had gone in this space. And I was a little bit amazed at how some of these companies, I think Lordstown was part of the list, would essentially find anyone who say, we might want to buy one of your cars in the future. And then they would trumpet it out like 10,000 orders, you know? And so they kind of built up this almost like fake demand to drive adoption of their SPACs. And is that all over now or is that still a tactic that's being used?

• 7:04Kirsten Korosec?

  I wonder what famous billionaire who also has an electric vehicle company could have possibly popularized such a tactic. I can't think of it at all.

• 7:13Speaker 00

  Yeah, me either. I don't know, like Sergey, Sergey Brin.

• 7:18Kirsten Korosec?

  Yeah, I have noticed them backing off a little bit. I think in part because some companies are purposely trying to differentiate themselves from that.

• 7:28Speaker 00

  Makes sense. I mean, it doesn't, it doesn't look good. But before we go to Natasha, I just want to point out that the difference between Elon Musk and these other people is that Elon Musk consistently mostly ish delivers on his promises and hype.

• 7:41Speaker 01

  The most annoying thing about him.

• 7:42Kirsten Korosec?

  Ish, ish, ish. You know, we still don't have, you know, a Cybertruck. We still don't have the, the new Roadster. We still don't have the semi truck. There are some things that have been delivered. Absolutely. The timelines tend to get extended and kicked down the road quite a bit.

• 7:59Speaker 01

  The last thing I'll say is to me, it's kind of interesting slash poetic that these companies all have started the conversation about SPACs and now are part of our everyday news announcements. But now they're also the ones that are adding a little bit of the we told you so SPACs are shady conversation back into it. And so it's like two years from now, or maybe five years from now, I wonder if we're going to be better because of this period of SPACs, or if it's just going to be like a spurt in the ground and we're going to all pretend like it never happened.

• 8:28Speaker 00

  Things never get better in finance. Things never improve. I mean, think, think about how we all learned that collateralized debt obligations with when you bring, you know, subprime debt into one unit to make it look better is a bad idea in 2008. We're doing that now with car debt. So we've learned nothing. Look, the profit motive and greed in the world of capitalism, which I take part in, to be clear, is never ending in for ages. So no, we will learn nothing. In that vein, two other quick EV SPACs, Canoo, now under, that's C A N O O, by the way, is it Kent, Canoo?

• 8:59Speaker 01

  I hope not.

• 9:00Speaker 00

  Is it like Yahoo? Like with the exclamation point?

• 9:02Kirsten Korosec?

  There's no exclamation point. It's just canoe.

• 9:06Speaker 00

  No enthusiasm for me then. They're under SEC investigation and then a rival SPAC back in November and has lost about half of its value. Our producer, Chris Gates, who helped us kind of put together this, the show today was like, you know, is this a good or bad use of SPACs, these companies? And I have to say, I think it's bad for individual investors, but great for the companies. Because prepping for today, I forgot that nickel as an operating company, and I checked and they had $764 million in cash at the end of Q1, and they're building the factory to make something. So I think it's kind of kick butt. If you can get a free check for, you know, that amount of money. So I vote good use of SPAC, bad use of capitalism. All right. Um, we're going to move on to scooters,

• 9:46Speaker 00

  and we're going to talk about BIRD. Now, Natasha mentioned the scooter wars that took place a couple of years ago, when, you know, BIRD and Lime were kind of bashing each other's head in the US to get market share and so forth. Then everything changed. Then the pandemic hit. So just to ground us a little bit, what is the state of the micro mobility revolution, you know, in this kind of midpoint of 2021?

• 10:08Kirsten Korosec?

  The scooter economics are forcing companies to completely rethink their business models. The shared approach in conquering every major city and just dumping a ton of product isn't necessarily working out. And so you're finding a big technological push. So on the software side, to appease cities, to also on the hardware side, to sort of make their vehicles more robust. But that, that requires capital outweigh. And so here lies the problem. But I suspect if there are more future SPACs or IPOs from micro mobility companies, we might run into some similar economics.

• 10:51Speaker 00

  Natasha, I'm curious, when you were kind of prepping for the show, were you surprised at how bad the BIRD economics were for their original model?

• 10:57Speaker 01

  Yeah, I mean, unfortunately, I've been thinking scooters are struggling ever since they got quiet and kind of legally ruled out in a lot of cities. But BIRD was interesting when I was prepping, was hearing that it had recently planned to spend 150 million on European expansion. It acquired a company and really was talking a lot of game about launching operations in new cities, even after it had to shut down operations, I believe, in different cities in the Middle East. And so you felt like it was getting ready to do something big. And then it's backed. And then I read your guys' story, and now I'm concerned about it. So maybe let's run through the numbers. So everyone understands actually how difficult that company. Looked like.

• 11:35Speaker 00

  Okay, so here's what we're going to do. I'm going to talk everyone through the numbers. And then we're going to have Kirsten explain to everyone why they're now running a partner program and how that might save their bacon. If you go to the SPAC investor deck, we'll link to that in the show notes. Go to page 17 and look at this beautiful catastrophe of a chart. And you'll see in 2018, the company's ride profit inclusive of vehicle depreciation, scooters falling apart, being thrown into lakes and so forth, was a negative 348% of sharing revenue. So that means that their business was the worst thing I've ever heard of. That number makes WeWork look good. It improved all the way to negative 297% in Q1 of 2019. And then by 2020, things actually began to change a little bit, Kirsten. And that's when the business model shakeup kind of happened. So tell us a little bit about the, the partner program, if you will.

• 12:20Kirsten Korosec?

  This is the fleet manager program. And I think the best way to think about it is as sort of a franchisee model. It's interesting because as a franchisee model, it can seem very appealing to the outsider because here they could control their own business. They're essentially becoming an operator. So you, Alex, can become an operator.

• 12:43Speaker 00

  Terrible idea.

• 12:44Kirsten Korosec?

  There has been a few reports really kind of diving into how this is creating a lot of upfront fees to manage the fleet and putting some operators into debt. So not so great for the franchisees. And then there have been other reports, which I have not done. So I can't, you know, verify that this is amazing and that they're generating so much cash, many more hours spent to reach that. So who knows what that hourly breakdown ends up being. Bird is then, you know, offloading some of that risk to operators, which is regular people who can create these mini fleets and operate them in cities.

• 13:22Speaker 00

  Yeah, Natasha, God, check me on this. It feels a little bit shady for the company that raised all the money in the world to offload risk to people who have to borrow money to do this. But what's your take?

• 13:30Speaker 01

  It honestly feels like a step away from the ambition and imagination around when scooters first got on the scene. It feels like it didn't work, so now we're pivoting, which could work for a very niche set of cases, but I am really curious to see like who and how they work with people. And to your point, Kirsten, like just figuring out how they vet these opportunities, because if they're swindling people, then it could just put that in a lot of people's hands instead of actual change.

• 13:55Speaker 00

  Well, in a sense, it has to work economically for the the partner else they will not do it. And then, you know, Bird can't pull this off. So it has to be at least, it has to work for at least some people, right? If you look at the company's economics, and this is again from their own data, once they began to really shift their revenue towards the partner model, their margins did improve. And so the the business did get better. But what this shows to me is that if you just think back to the era in which Lime and Bird, it felt like we're racing like every other week, bigger and bigger rounds. Everyone was just pouring money into them. It's kind of crazy to think that like they were just setting fire to tens of millions of dollars on equipment that broke and an economic model that that wasn't viable. How did that not scream across all of their dashboards, Kieran?

• 14:37Speaker 00

  I'm just, I'm shocked at how much money was just kind of consumed by these projects.

• 14:42Kirsten Korosec?

  I mean, it's always easy to go back 2020 hindsight and think about it. But I think this is happening across shared scooters. This is a difficult business in which hardware gets completely abused. Cities are placing more and more restrictions. The business model was flood city streets and get as many people on these, but also be price competitive. I mean, it is going to gobble up cash. I did want to mention one other thing, which there is an interesting idea that the fleet manager program that Bird and maybe other companies will end up doing somehow allows them to get around operational use within cities. And I need to look more into that. But Bird has a lot of mixed results recently in terms of landing permits.

• 15:25Kirsten Korosec?

  They landed one for New York, which is considered a huge win. But they have also been kicked out of Santa Monica, which is where they started.

• 15:34Speaker 01

  That like defines scooters in one sentence.

• 15:36Speaker 00

  Famously so.

• 15:37Kirsten Korosec?

  As he comes out, right? I think that the churn is the big problem here. There's like nothing that sticks around. And the companies that can figure out how to do that are the are the ones that are going to be able to potentially boost their prices and become more efficient. And create branding within the community and not waste a lot of money. And that's difficult.

• 15:58Speaker 00

  We're going to move on to Waymo in just one hot second, but I've pulled up as we were talking, the, um, the historical financials for Bird. And because I'm a jerk and a bully, we're going to talk about it for 10 seconds. So I'm sorry. If you don't care about numbers, just fast forward 15 seconds. In 2018, they had gross transaction volume of $79 million. That was worth revenue of 58 million. Their gross profit was negative 212 million, which is a really funny number. Their adjusted EBITDA as a percentage of revenue in 2018 was negative 331%. My mind explodes.

• 16:35Kirsten Korosec?

  That is a, that is a solid business plan, Alex. I want to invest in that. I want to invest in that.

• 16:43Speaker 00

  The gross profit and just even I improved greatly in 2019, everyone, though. It's just EBITDA as a percentage of revenue was only negative 150% in 2019.

• 16:55Speaker 00

  Yeah, it's a, it's a hard game. I'm, you know what, though? Shout out for not giving up. You know, I would have given up after that.

• 17:02Speaker 01

  Speaking of struggling to steer the wheel, let's end with a scoop by Kirsten about some recent exits at Waymo, which is, um, you know, probably one of the most famous autonomous driving, um, startup slash businesses out there. Kirsten, what has been going on with their executive team?

• 17:18Kirsten Korosec?

  Waymo, for those who don't know, is the autonomous vehicle company that spun out to become a business under Alphabet. It was the former Google self-driving project. They have upwards of about 2,000 employees now. Their CEO, John Krafchuk, stepped down this spring and now either right before his departure and then now right after, there's been a number of other executives. Garrett Dwyer, who's their CFO, their head of partner automotive partnerships, a super important position, a guy named Adam Frost.

• 17:48Speaker 01

  So is it on fire? Is there a Waymo mafia brewing? Like what, what are you thinking of when you see all this shakeup happening?

• 17:55Kirsten Korosec?

  I think that competitors would love for me to say that, but I'm not going to. I do think that if you look at the backgrounds of a lot of these folks personally, like on an individual basis, you see a lot of them either hitting the top of where they're going to be within a company and deciding to leave, or being at the company for five years, or with Google, you know, try 15 years and just picking their moment. I will say it doesn't breed a ton of confidence, but their co-CEOs are, one in particular, has been there since the beginning. So I don't know how the co-CEO thing is going to work out, but their former CTO, Demetri Dolgoff, who's been with the company forever, he is co-CEO with Takidra Mawakana, who was COO and really doing a lot of stuff. And I have

• 18:37Kirsten Korosec?

  to say, I had an interview with her once last year before a mobility event, and I jokingly said to her, when she had listed her, everything that she was doing in her job, I jokingly said, so when are you going to take the CEO position? And she sort of laughed nervously. Yeah. But, but I saw it then, and it wasn't a prediction. It was more that she was doing so much. Key people under them have not left. So let's see what happens. I'm not going to say it's the end of Waymo. I do think that it is a lot of transition, executive shuffling, which can create some chaos. As long as they get that under control, it will be okay. But I do expect more to leave in the, in the coming months, for sure.

• 19:20Speaker 00

  Okay, it's two things. One, I volunteered to be CFO, because that sounds like fun, because all you have to do is lose money, and that's kind of it. And two, I wanted to say something really nice about Waymo, because there was a viral

• 19:31Kirsten Korosec?

  Yes.

• 19:31Speaker 00

  post that went out, a video, really, of a self-driving taxi enthusiast, for lack of a better phrase, who like videotapes his autonomous taxi rides in, I think it was Arizona, Houston.

• 19:42Kirsten Korosec?

  Yeah, this in Chandler.

• 19:43Speaker 00

  Yeah, yeah. And he was in a ride, and it didn't go very well by any, it was cool up until the end, and then he got kind of stuck in traffic, and then the taxi couldn't do anything, and it blocked, there was a construction zone. And everyone was like, oh, look, you know, Waymo, you know, doesn't work. But here's the thing, I watched it and up until, yes, things didn't go right in a very complex situation, super impressed, the technology, the experience and how it looked. And I just, I hadn't realized it was that smooth. You know, in sure, one location, one environment, blah, blah, blah, blah. But like, I'm hyped about this. I hope as a consumer that Waymo doesn't give up and that they don't throw away or, or, or, you know, not give full juice to the work they've done so far, because I would like to never drive again.

• 20:26Kirsten Korosec?

  I can assure you they're not going to give you up. And I'll just very briefly, so that was the Waymo one, that was their ride hailing. They have a driverless one, so no safety operator. And then they have ones with safety operators. There were two failures, basically. The brain, if you will, failed and got confused by the construction cones. But then there's always a remote assister. They're not controlling the car like you would think, like with a steering wheel, like sitting in front of a monitor, although there are companies that do that. It is more someone who will provide a path planning route to the brain of the car. And that was done incorrectly. And so then the vehicle got confused again and required a roadside assistance to come.

• 21:08Kirsten Korosec?

  The important thing or takeaway from all of this is that the number of humans required to support an autonomous vehicle outnumbers a single Uber driver. And so the economics is going to be incredibly interesting in the future. It's a super hard and complex problem. Chandler is a simple environment, relatively speaking, compared to San Francisco with good weather. And so even then, with those complications, you can see how big this problem is going to be. And it's, it's really exciting and it's a fun beat to cover, but it is in no way completely solved.

• 21:45Speaker 00

  But if you want to learn more about how this is being solved and a deeper dive into all things mobility, Kirsten, you're hosting an event and I wanted to give you 15, 20 seconds to plug it. So go ahead and, and talk your game.

• 21:56Kirsten Korosec?

  Okay. TC Sessions Mobility 2021 is a virtual event on June 9th and it's going to be great. We have a series of one-on-one interviews and panels. We're going to be covering things like China and robotaxis with folks from AutoX, We Ride, Momenta Europe. We have Reid Hoffman, who was the investor and the one who created this SPAC, which Of course, merged with Joby and we have Mate Rimac. If you are a big car fan, Mate Rimac is the person you want to listen to. He started his company in a garage by himself. It is now 1,000 people and Porsche has a stake in the company.

• 22:36Speaker 00

  Rimac is R I M A C. They make those amazing electric cars, the one that Richard Hammond crashed off a cliff and nearly died in.

• 22:43Kirsten Korosec?

  Yes.

• 22:43Speaker 00

  From Top Gear. Nice. Oh, my gosh.

• 22:45Kirsten Korosec?

  Yes.

• 22:45Speaker 00

  So, okay, so Remax are really cool. If you haven't seen, Google it. It's okay. Holy crap, I didn't know they were coming.

• 22:52Kirsten Korosec?

  It's such a fun event. We love to dig in. We love to ask them tough questions. It's generally a good environment, good conversation. So highly recommend you come join us and watch and participate.

• 23:03Speaker 00

  All right, well, we are back on Friday morning with your weekly news dive. This has been our kind of like, you know, double click on one particular space. In this case, mobility. We'll talk to you all soon. Natasha, Kirsten, thank you for your time and everyone else, goodbye.