February 14th, 2020 | #62
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This Week in Europe: Barcelona, e-mopeds and overregulation

On Wednesday, Timo Buetefisch, founder and CEO at sustainable mobility company Cooltra tweeted the following.
If you can’t read Spanish from a very pissed of CEO, let me translate that for you.
“We are devastated. We brought the first 250 electric mopeds to Barcelona, turning it into a pioneer city in Europe. We’ve created the local sustainble mobility industry with over 330,000 registered users. We are 100 full-time employees. Now what?”
The tweet is in response to a new regulation dictated by Ada Colau’s city hall in Barcelona that regulates the number of e-mopeds that each company can deploy and taxes €71.50 per vehicle per year. 
“New regulations announced in Barcelona on Friday have placed a limit on the number of shared electric mopeds in the city. Now, a maximum of 6,958 vehicles will be permitted on the city’s streets, divided evenly between 21 providers.” 
At first, this might look like a reasonable measure at a hyper local level. Why should you even care about what’s going on in Barcelona? 

But as you know, I rarely talk about reasonable measures here. There’s a bigger lesson to be uncovered in those whole e-moped fiasco. 

Breaking down the problem

Let’s start with some basic math. 6,958 e-mopeds splitted across 21 providers means a maximum of 331 vehicles each.

First, the fact that it was splitted evenly across 21 (yes, twenty-fucking-one!) providers with no consideration to what the companies or the market needed is an indicator that this was a poorly thought-out move. Lazy egalitarianism rarely leads to something productive.

Now, let’s look at what’s actually going on in Barcelona, on the ground. At this point I know what you are thinking: if there are 21 providers, then the city must’ve been a shit show so some regulation couldn’t hurt. 

Think again. 

At this very moment there are five shared e-moped companies in Barcelona – Scoot, Yego, Acciona, Movo and Cooltra (there’s also one scooter company.) I live in the city center, and corners crowded by e-mopeds are a rare sight. I also lived in Paris during “peak scooter” and this is nothing like this. 

But since all of the existing players in the space have more mopeds than the new legally mandated limit, they will need to remove some.

Cooltra, who is projected to do €50 million in 2020, is the most affected one, with 1800 e-mopeds. This means they’ll have to withdraw 4 out of every 5 vehicles on the road. 

That is a problem for both companies and users.

Both companies and users are worst-off

A mobility play’s prerequisite for success is access. You need enough coverage and critical mass on the supply side (in this case, e-mopeds) so users can easily access it without much friction. 
Open the app, and there’s a scooter nearby. Open the app, and an Uber is 4 minutes away. If you open the app and the nearest e-moped is seven blocks aways, you are closing that app and figuring something else out. 

If you mandate a certain limit of vehicles per provider, you’ll instantly and with a not-so-gentle swoop eliminate the critical mass on the supply side that mobility companies have been working so hard to build up over the years.

Ada Colau’s government just took that loop to the back of the barn and shot it. Now, two things will happen. 

First, users will be forced to sign up to 21 different services, download 21 apps and play “mobility app bingo” on their phone every time they want a ride, hoping to find an e-moped nearby in less than 3 tries.  

Second, mobility companies will go out of business, making the problem worst over time. Buetefisch told Sifted that over 14 years in business they learned that a city must have at least 1,000 vehicles to achieve profitability. That’s 3x what the regulation mandates.

Cooltra will survive because of the sheer size of the company and the fact that it has three different business lines, but smaller providers (Coup went out of business last year) might not. 

What will happen when most companies are dead, and the top five providers can only have a couple hundred vehicles each, not nearly enough to cover Barcelona? 

Chau sustainable mobility and funny enough, chau tax euros. This meme reminds perfectly sums up the situation.

Overregulation and resistance

In his last article, Alex Danco said that to sound smart you should quote Carlota Perez’ Technological Revolutions and Financial Capital, so I’m going to do just that.
“Each technological revolution is received as a shock, and its diffusion encounters powerful resistance both in the established institutions and in the people themselves.” 
Resistance is expected, at least until institutions are reformed. But for now, we need to get used to knee-jerk reactions from a government who is not used to dealing with technological progress and feels they need to do something about it.

For those in Barcelona, the lesson at a local scale is that top-down regulation rarely works. As we learned from Malaysia and Thailand in How Asia Works, for such an approach to work there needs to be an extremely careful balance between rules, market forces and execution.

But there’s a bigger problem. Barcelona is desperately trying to claim a spot among Europe’s main tech hubs and this is a gigantic step in the wrong direction.

Let me lay out for you.

Cooltra invested significant resources to kick-off a new industry and open an unproven market in Barcelona. They took on an enormous risk because there’s an equally enormous advantage (and a reward) for being the first-mover. 

Stumping that first-movers advantage and leveling out the playing field with a top-down approach because you didn’t think through the second order consequences of your regulation is, frankly, a dick move.

Particularly if you tax the debris at €71.50 per vehicle per year.

But other than being a dick move, it’s a stupid move. It kills whatever incentive there is in the future to innovate in Barcelona and it sends a message: don’t come here. You are not wanted.

For everyone else, the lesson at a global scale is that crushing down innovation will only incentivize people to take their business, their capital and their ideas elsewhere.

I want to say that regulators ofthen undersestimate the consequences of their actions. But maybe that’s what Barcelona – a city that has a history against technology and progress – actually wants.
📕 Good Reads

 💸US venture capitalists are coming to Europe. The politically correct reason is that US deals are getting pricier, and China is going through a draught, amplified by the coronavirus so capital is finding its way to Europe. But is there something else? Here’s Nicolas Colin

“Right now, though, my question for every Silicon Valley-based venture capitalist I meet is: Do you invest in startups in Europe? I’ve asked powerful and well-connected people for introductions to discuss that matter. But they all came back empty-handed. Venture capitalists in the Bay Area are not interested in Europe in a systematic way. A few firms now have outposts in Europe, but the reasoning seems to be as random as 'One of our partners wanted to spend some time in London with his wife, so we figured we should have a look at some startups there.'”

📰 Dragos Novac has a short but insightful overview on the tech media landscape in Europe

It is obvious though (to me at least) that in the years to come, media will not be won by the outlets with the highest traffic or social media following but by the ones with the better brands and smarter product strategy.

🤑 Every year, Benedict Evans produces a big presentation digging into macro and strategic trends in the tech industry. This year's is particularly fascinating and looks into something I talk about quite a bit – regulation. Here's a teaser.

📰 Community News

🧠 Facebook quietly acquired another UK AI startup and almost no one noticed. Deeptide was founded in 2018 by Robert Stjonic and Ross Taylor as part of an Entrepreneur First cohort. We are too focused on Instagram, elections and antitrust but Facebook is once again quietly gearing up to  build the future. They did it a decade ago when they abruptly moved to mobile.Now they are doing it again.

 💳N26 exits the UK market. Officialy, they are claiming Brexit and the fact that they can’t passport their German banking license to the UK as the reason. But they entered the market well after Brexit was confirmed, and was facing increased competition from Monzo, Sterling and Revolut. I call B.S.

🌲 There are many angles to tackle climate change and not all of them are obvious. A/O PropTech raised a €250 million fund to invest in startups disrupting real estate. The reason? The real estate industry consumes 40% of the world’s energy and raw materials.
💰 Fundraising & Acquisitions
  • Fenergo raises $80M at an $800M valuation for compliance and other fintech services aimed at banks
  • Challenger bank Starling Bank snaps up €70.7 million to expand and award employees shares
  • Travel tech startup Impala raises $20m just four months after raising $11m
  • Paris-based Flitdesk closes €1 million seed round to make running a flexible workplace simpler
  • Dealroom, Europe’s top startup research platform, raises €2.75 million Series A
  • Berlin-based medical cannabis startup Sanity Group raises €20.1 million Series A funding
  • London-based Unmind raises $10 million Series A to bring its mental health platform to the workplace

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