Last Mile’s E-scooters, the Perfect Solution for College Kids

What’s “Last Mile” about?

Think Zipcar but with scooters and e-bikes.

This service is “on trend”.

Unlike previous generations, Millennials don’t perceive car ownership as hip. They prefer access to ownership.

Case in point: Millennials account for about 23% of the general population but comprise more than 50% of Zipcar’s members.

Renting an electric scooter is environmentally friendly and leaves you free from the logistical and financial burden of vehicle ownership.

“Purchases of cars by the younger set are dropping precipitously,” confirms Bloomberg News , “Survey after survey shows that the latest generations don’t put car ownership high on their list of things to do.”

On March 5, 2020, Last Mile announced the acquisition of Gotcha Mobility, focusing on university campuses in the U.S.

MILE now has the broadest product profile in the micro-mobility space, featuring a pedal bike, e-bike, standup scooter, seated scooter and trike,” stated Max Smith, CEO of MILE. “Offering multi-modal solutions is key to expanding our network.”

Gotcha has secured permits to deploy 20,000 vehicles, 80% of which are exclusive. This acquisition positions MILE as the third largest micro-mobility company by location in North America, after Lime and Bird.

Transcript

Guy Bennett

Welcome to Equity Guru’s A Closer Look. My name is Guy Bennett. Today, I’m talking to Max Smith, CEO and president of Last Mile Holdings, a micro mobility company. Think Car2go, but with scooters and e-bikes. On Monday, March 9th, 2020, Last Mile will begin to trade on the Canadian venture exchange under the symbol MILE.V. Today, we’re going to find out what Last Mile is all about and what the investment opportunity is. Max, can you start by giving Equity Guru investors a bird’s eye view of Last Mile?

Max Smith

Sure. Last mile is formally OjO Electric, which was an electric scooter rideshare company.

Guy Bennett

Yes.

Max Smith

With the acquisition – the completing of the acquisition of Gotcha Mobility, we’ve changed the name of a public holding company to Last Mile Holdings.

Guy Bennett

Yes.

Max Smith

So we are a electric mobility company investing in and expanding our rideshare operations, which currently run through our consumer-facing division, which will be Gotcha.

Guy Bennett

Yup.

Max Smith

And Gotcha is a company that manages perhaps the broadest product portfolio of products, including a pedal bike, e-bike, stand-up scooter or sit-down scooter and a trike, which is an electric moped.

Guy Bennett

Yes.

Max Smith

We seek to operate in exclusive relationships whereby Gotcha has signed eighty exclusive contracts or marketplaces and we are deploying all those markets this year. So by the end of the year. Yeah, we have 20,000 permits that we’ve acquired in municipalities and universities and we will be deploying all those devices in the vehicles this year. Last mile, as the public-facing entity and holding company of Gotcha, will also be investing in other technologies and solutions that will either operate as other independent brands under Last Mile or be merged into Gotcha. This also enables us to acquire technologies that we will use throughout the Gotcha rideshare operations and then potentially license out to other companies in the industry.

Guy Bennett

Max, can you give me an example of what type of technologies you would be referring to?

Max Smith

We’re in discussion with several right now. Think of it as technologies that either expand our service, that could enhance our charging capabilities, enhance our docking capabilities, enhance fleet management, and then some of those technologies can also be licensed out to other companies who participate in the mobility space.

Guy Bennett

Okay. So to use a tired phrase, synergistic technologies, you’re not going to be 3D printing automatic weapons.

Max Smith

No, not at all. Yeah, it’ll all be related to our mission as creating the most robust mobility company platform and network in the industry.

Guy Bennett

I want to back up for a second. I know that you were the CFO of Jash, a TV digital studio that partnered with Sarah Silverman and lots of other people. But I don’t know much else about you. What winding road led you to be helming Last Mile?

Max Smith

Jash had something to do with it, so that’s an interesting segue. Prior to joining at the time, OjO, I had just completed my eighth exit.

Guy Bennett

Yes.

Max Smith

So Jash was my eighth exit. Typically I work with the company with a board, raise capital, build value and sell company. Of my exits, four were in the media space, two ad-tech companies, a mobility company and National Car Rental. When I was at General Motors and I sold National Car Rental and then another with the KKR portfolio company, the printing industry, which we IPO’d. At Jash, one of the co-founders of Jash, Doug DeLuca introduced me to OjO and Doug was an early, early involved in OjO, helped on the fundraising side and is currently a board director of Last Mile. So he made the introduction for me. And I will also add that some of my funding partners in Jash include Frank Giustra, and I was able to then introduce Frank to, at the time Ojo, and explain to him what my vision was in migrating a retail scooter company to a mobile rideshare company, and now more globally thinking as a rideshare electric mobility company that should be a global platform. And Frank has been a great supporter of us at Last Mile as well, helping us fund our journey.

Guy Bennett

Max, one of the things we’re doing at Equity Guru is bringing in a new class of investors. For them who may not know, what does it mean to negotiate an exit?

Max Smith

An exit is actually a sale of a company – it’s a distribution. So it could be joining forces with another larger company. And we’ve received interest from a variety of companies that are either OEM car manufacturers. Many people will know Ford last year bought Spin, which is a competitor of ours. So there are many companies interested in finding alternative ways of mobility. I’m very focused on the rapid expansion of our business model. I have completed 40 acquisitions in my past. The most likely scenario for us is that we do end up going through an exit with another larger strategic company.

Guy Bennett

And that’s important I think for people to hear because it suggests that you have a track record of taking a set of assets and adding value so that they can be sold later for more money, which is sort of the whole game.

Max Smith

Yeah. Yeah, that is kind of the ultimate goal. Take it as far as we can until we meet another company, who combined, when we have that agreement that, you know what, collectively we could be, we could do much more greater things. Yeah, I still think there’s a long way to go for us independently to create value.

Guy Bennett

Let’s drill down a bit more into the Gotcha acquisition, what is Gotcha’s business model and how did this opportunity come to you?

Max Smith

Most people think of electric scooter or e-mobility companies as the launch of Bird, which occurred in September of 2017 when they dropped scooters in the middle of Santa Monica. Thus the industry was born. So Gotcha launched. They have thirty five university contracts. Forty-five municipal contracts and the municipal contracts in being exclusive are really in maybe middle-market. It’s Charleston, Raleigh, Durham, North Carolina; Mobile, Alabama; Birmingham, Alabama; Baton Rouge. Those types of relationships require a company to be able to offer a turnkey solution in order to earn and gain the trust of a municipality or university. You have to show a long history of operating responsibly, of operating in coordination, in conjunction with cities and universities. Neither OjO nor Gotcha had ever launched a city without a permit. And what we’ve learned is cities don’t want to deal with nine vendors or four vendors or five vendors. They want one company that they trust that can deploy responsibly, that has a good track record and that’s what Gotcha’s built. Last Mile owns Gotcha, but it’s really merging now. All of our rideshare operations into that Gotcha company and brand as the consumer-facing brand because they’ve really built out a great consumer experience and a great reputation amongst that university municipal population.

Guy Bennett

So when you say you have an exclusive partnership with a university, that I take it means that the university has agreed to lock out competitors. Why would they do that?

Max Smith

They do that because we can serve all of their needs.

Guy Bennett

Yes.

Max Smith

We’re working with long-term contracts that are not only exclusive, but the average duration is 3.3 years. And so that’s what gives us confidence and gives us confidence that we’re investing in the community. We do city planning with them. We help them write an RFP. We show them where and how to organize, where to put docking stations, where to put parking hubs. We don’t always have free-floating scooters or bikes that can be dropped anywhere. We have virtual parking, where in order to end your ride, you must leave it at a bike rack. And if you leave it outside of a bike rack or away from them, you’ll get a pop-up in your app saying, parking here is accessible, but it’s a five or ten dollar fine. And so using carrots and sticks, we can change behavior that creates more order. And we’re trying to create that order out of chaos. So those initiatives and tech investments are very well received when we get to the municipal or or university discussion, because they want to know, you know, sometimes scooters can be very polarizing. In the beginning, they’re great and everyone loves it. Find it, write it, leave it. But there are a lot of externalities and unintended consequences that it’s not well thought out and well supported. It requires a lot more reform afterwards. We like doing it right and doing it right up front. And that’s where we spent a lot of time negotiating, working with the partnerships, universities or municipal partners, to define that ecosystem. Where should scooters and bikes work? Where should they not work? Where do we lower and change speed zones? We always take the approach that this is your city, not ours. We wouldn’t substitute our judgment for yours.

Guy Bennett

Yeah, ok.

Max Smith

Sort of a different approach them than other companies say, but it seems like common sense to me.

Guy Bennett

Part of your brand is that you don’t make enemies and that you collaborate with the jurisdictions, municipalities, educational institutions you’re in business with.

Max Smith

That’s correct.

Guy Bennett

Let’s assume I have to make a trip and I’m either lazy or busy or it’s too far. And I don’t want to walk. I need a vehicle. I could buy a car or a motorcycle, insure it. I could ask a friend to drive me like a cab. I could use Uber. What is my driving motivation to use your service?

Max Smith

We’re probably the most robust company to offer modality, multi-modality, multi-modal products. We need to create that system that enables you to go from one vehicle to the next seamlessly without incurring additional start fees. And that’s really our vision of our ecosystem: Provide great access to stand-up scooters that go for short rides, bring you to that next vehicle. The average ride on a seated OjO scooter is two miles. We have rides every day in our markets where we have the OjO scooter of 5, 10, 15 miles. Those are rides that are typically associated with an Uber or a Lyft. Now that we’ve got vehicles that can go that longer distance, that’s where we see a lot of value. We also make our vehicles, our seated scooters available for food delivery services or delivery of other products, goods or parcels. So we’re trying to build out that ecosystem that not only moves people, but enables people to use our vehicles in the gig economy for the delivery of products and food.

Guy Bennett

Obviously if I pick one up, I don’t want the battery to run out three blocks later. How does that work? How did these hubs work? How do you ensure that the user has a charged vehicle?

Max Smith

The early models from some of our competitors were sort of a gig economy where chargers pick up scooters and bring them back to a warehouse, charge them and redeploy them. We’ve developed all of our products with swappable batteries and so that is operationally much more efficient.

Guy Bennett

Yeah.

Max Smith

Where we don’t have to pick up vehicles, take them to a warehouse, charge them and then redeploy them. Our vehicles are on the road at all times, so they’re available to be rented and then in using that hub system, when we park vehicles together, when they’re clustered, it’s very easy, much easier for the fleet operations people. They carry extra batteries. We see the scooters in our backend through our CMS that identify what scooters have to be charged once they get down to a certain level and then that’s how we deploy our operations team to either rebalance the fleet or swap batteries while they’re rebalancing the fleet. Our current stand up scooter and the e-bikes that we’re just deploying, these would be V three that come out in about two months time, have the exact same battery. And so using not only swappable batteries, but swappable batteries in multiple vehicles, is sort of an order of magnitude advancement of infrastructure and operational efficiency that I haven’t seen any other company do.

Guy Bennett

Yesterday, I listened to a webcast and you were talking about unit economics. Can you explain a bit more about that concept?

Max Smith

That’s a very important focus for this industry. The first scooters that were really deployed in this space two years ago had an average life of 28.8 days. The lifetime of a scooter has advanced dramatically. But in the beginning, scooters that would only last a month, either because they were not built for rideshare, they were built as a consumer product and there was also a lot of theft and vandalism in those early models. That produced very poor unit economics. If you buy a five hundred dollar scooter and you only have revenue or contribution of $20 to $40 in the first month, early companies were losing a lot of money for every scooter. I would say the first year of Lime and Bird raised significant capital, now over a billion dollars for each. Much of that early capital was spent recycling scooters on a monthly basis. The importance of unit economics is to recoup the cost of the scooter with contribution and then obviously have a lifetime where there’s positive cash flow. We expect to recoup the cost of our bikes in probably let’s see, about five to 10 months depending on when you watch it, whether you launch it in November or you launch it in in March, because there are different times of year where you get better unit economics. The average cost of a bike is about $850.00 and will last five years.

Guy Bennett

Yeah,

Max Smith

We expect our scooters to recoup in about three to six months. And that can be three months for a stand-up scooter, six months for a sit-down scooter. The life of our stand-up scooter is about a year right now and we expect the life of an OjO, a seated scooter, to be two to three years. So, building products that are durable, that have good operational efficiency with charging and swappable batteries, that’s what yields positive unit economics.

Guy Bennett

Okay.

Max Smith

Now, the unit economics, average revenue per vehicle per day, one of the largest drivers of unit economics, the vehicle has to work. It’s got to be sustainable. It’s gotta last, the charging system has to work, but deploying those in the market where we get maximum usage, that also drives quick recoupment and positive economics on unit economics.

Guy Bennett

I noticed that you were partnered at Syracuse University, where I went to school back in the day, so it’s bitterly cold in the winter. So I’m assuming that your revenues in a market like that would draw, like if it’s 20 below, I might not be wanting to get on a scooter.

Max Smith

We see obviously that weather can impact ridership. We’re deployed in Michigan State where we put scooters. We have e-bikes in Syracuse, electric stand-up scooters in Michigan State. We had an incredible, great robust ridership in October and November. And then by mid-December, the snow came and then we put that program a night. And so, you know, we will where we operate in environments like that, migrate that fleet, just like the snowbirds down to warm cities.

Guy Bennett

Interesting.

Max Smith

So when we closed Michigan State down in the middle of December and it’s actually relaunching again next week. When we closed it down, we put all the scooters, we took 250 scooters in a couple of vans and took two to three days finding them. I think it was two days down to Mobile, Alabama. So three days later, we relaunched the scooters in Mobile and had, I think, 800 rides on 200 scooters the very first day we did that. No one had known about it. They didn’t have the scooter. They didn’t have the app. There is no marketing. It shows that when we have that exclusivity and we build awareness and then we migrate the fleet, we can double down and chase economics where the cities are our best.

Guy Bennett

That is interesting. I hadn’t thought of that. You can deploy I guess it’s a big, big advantage of being a scooter rental, not a car rental company, you can put 200 of them in a big five ton truck and deploy those resources where needed.

Max Smith

I think I think it took us two days to recoup the costs of migrating the fleet. Yeah. So yeah, it’s a it’s a very flexible system that can be scaled up and scaled down. Other than a warehouse which is not expensive in the markets where we operate. Other than that, the rest is variable cost. And so, all of these part time workers who supported to do battery swapping, that goes away, we migrate the fleet to better weather cities and then get the best economics.

Guy Bennett

And so concludes part one of my two-part interview with Last Mile CEO, Max Smith. In part two, coming soon, Mr. Smith discusses insurance issues, expanding app functionality, promo codes, incentivizing riders, food delivery, international expansion, attracting strategic capital and the company’s milestones for 2020 and 2021.

FULL DISCLOSURE: Last Mile is a paid client of Stockhouse Publishing.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.