When you think about shared micromobility, Veo isn’t exactly the first company that comes to mind. It’s not as widespread as competitors like Voi, Tier and Lime, and it hasn’t raised nearly as much in venture capital. But as consolidation and, simply put, bad business shapes the industry, Veo has maintained a steady and profitable pace. That is, if CEO and co-founder Candice Xie is to be believed.
Veo, which is perhaps most noted for its comfortable sit-down scooters and its continued presence in New York City’s e-scooter pilot, has stuck by a business model that looks at micromobility more as a utility and less as a startup. Rather than raising tons of money to expand as quickly as possible in the hope of achieving favorable unit economics, Veo has slowly focused on being sustainable, one city at a time. In June 2021, Veo was in 22 markets. Today, it’s added another 27, bringing it up to 49 cities, almost all of which are exclusive or limited vendor contracts.
“I’m truly a believer that this industry takes time to build, and whoever survives is the most important thing. Long term, who can weather all the crazy market turbulence?” Veo CEO Candice Xie
While VCs might shudder at such apparently slow growth — Lime’s global city count is around 225 — Xie says Veo is on track to maintain a sustainable business that continues to turn over profits.
We sat down with Xie one year after our initial interview to talk about what is going on with all these layoffs, why scooter ADAS isn’t all it’s cracked up to be and how a sustainable financial base can help startups weather market turmoil.
The following interview, part of an ongoing series with founders who are building transportation companies, has been edited for length and clarity.
TechCrunch: Looking back over the past year, what has changed?
Candice Xie: Everything changed and nothing changed. I know it’s a cliche. But I’m super happy now that a lot of the things we discussed in our call a year ago — like our strategy and our goals — we’re still executing the same plan.
Our volume changed, the number of markets we’re entering changed, the number vehicles we deploy has changed. The form factors we are deploying out there have changed. I’m actually very excited about what’s coming, especially in the last two months, the volume has been picking up.
The market is in turmoil right now, but we have a very strong business foundation. Veo surfaced to the top during the last crisis in 2020, so there’s another opportunity for us with this next crisis because we have a strong business outlook.
Last year, you wrote a post coming at Lime for claiming to be the first profitable micromobility company, when in fact, Veo had been profitable first. Are you still?
We are profitable and we are cash flow positive.
There’s been quite a few layoffs in the industry with Bird, Superpedestrian and Voi. Is Veo looking at reducing its workforce to prep for the incoming economic winter?
No, we don’t have a workforce reduction plan. And that speaks to our business model and how we want to treat our employees. Also, our business foundation enables us to do this. We plan on keeping everyone and we have a stable growth plan to execute.
What is different about your business foundation than other companies?
Starting from the beginning, we have not been chasing growth at all costs. Instead, we’ve been working on building long-term contracts and relationships and focusing on a vehicle that’s specifically designed for shared use.
We have a very strong user base because of the different form factors — people can ride a Veo stand-up or sit-down scooter, or use bikes to support different types of trips. So that supports our revenue.
On the cost side, we have a playbook to operate in each city at a profit, which is able to support our central team growth. We’re growing at a healthy pace, but we’re not looking to chase valuation. To be a unicorn, we would need to deploy a couple hundred thousand vehicles by this time. We don’t have those targets based on valuation. So I think our decisions may be based on how we can stay here for the long term.
It’s still early days for micromobility. Who knows what will happen? I’m truly a believer that this industry takes time to build, and whoever survives is the most important thing. Long term, who can weather all the crazy market turbulence?
There are examples of companies that haven’t done well with the growth-at-all-costs model, but Lime seems to be doing OK with it.
They’re not a public company, so a lot of information is not disclosed. However, they’re doing better than Bird, even though they’re facing some challenges, too. It’s really sad to see how Bird prices have crashed because it impacts how the public markets perceive the industry.
But hopefully Lime will be one of the competitors that can stay with us to the end. I really hate to see micromobility companies screw it up and make people feel like micromobility is just a fad. It’s not. We still have a robust ridership. This is a really important service, and our partner cities see it as a long-term transportation option. So I’m really hopeful to see stronger financial performance and a more responsible company stay and ride along with us.
Your last round was a $16 million Series A about a year ago. It doesn’t seem like the best time for it, but are you trying to raise any funds?
We have other options available to us besides equity raises because we do have really strong financial performance. So a lot of options are opened up to us, like debt financing, debt raising and also better valuation on the equity side. We don’t want to take more than we can actually spend, and I don’t want to commit to more than we can do in the next 12 months, either.
Would you consider acquisitions?
There are some conversations, companies approaching us, but at this point, we do want to stand alone and build a very valuable business. But I would never say no to any opportunities that make sense.
What about if Veo were to acquire a company to expand its market position?
I am not seeing a lot of alignment between us and smaller or similar-sized companies that can work with us. We’re not actively looking for an acquisition target. A stock investor friend of mine said it’s always cheaper to build than to acquire, depending on your objectives.
We have a lot of valuable U.S. contracts, so we don’t need to acquire for contracts. In the last wave of ride-share, there have been ups and downs. There were some contracts we lost but we got them back eventually.
We don’t need to acquire for hardware or technology because we build everything in-house. And we have really good financial performance, so it wouldn’t make sense to absorb a company with worse financial performance than us.
Speaking of acquiring companies with poor financial performance, Helbiz is purchasing Wheels in a primarily all-stock deal. My sources tell me Wheels must be even worse off financially than Helbiz to sell out entirely for Helbiz’s stock, which isn’t doing too hot.
Yeah, I think that is right from the information I also heard. I think Wheels just wants an exit. Wheels raised like almost $100 million so I don’t know where they spent that money, but those investors and funders probably want to have a good exit on their website.
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What do you think has been the most challenging for Veo this year?
The labor market has been interesting. During the first half of the year, we saw challenges of raising salaries. Sometimes I look at the numbers like, it doesn’t make sense! Right now the labor market is starting to cool down, and we did hire some great talent to match our expectations, but it was definitely challenging at first.
On the bright side, we do have really high retention rates. Last quarter, we achieved more than 95% retention rates in the company.
Over the next six to 12 months, I think we have a chance to win more. The demands of the market are here to stay because if people are more conservative on their spending, they will be more calculated on how they commute, how much money they want to put into gas. So I do think we will have more people using micromobility to replace their short car trips or Uber rides. That happened two years ago in the last crisis, so I’m confident about that.
I am of course a little worried because we don’t know if this is a recession or just a bear market and stocks are underperforming expectation. I don’t have an answer for that. But to get through whatever it is, cash is the key, for sure. We do want to make sure we capture the opportunity this year. So we’re still executing our expansion plan to have a very fruitful 2022. We’re not an excessive spender so we don’t have to be like other companies and cut costs. We just have to capture the revenue in the next few months, which is peak riding time, and look at the market trends, evaluate the market demand and determine how we can continue to sustain.
We expect some companies to have to exit cities, so we’ll be ready to jump in when they do.
One of the requirements I’m seeing for scooter companies to capture new markets and win RFPs is to have scooter ADAS, some kind of tech that helps prevent sidewalk riding or inappropriate behavior. How is Veo approaching this?
We are actively building our own solution, but we don’t want to make blank promises. We are educating cities on what is actually possible. We’ve been very transparent with them that, for example, camera-based systems are not really reliable and don’t work at night.
We don’t want to promise them the whole world only to leave them disappointed, which has happened in some cities. Like last year in Milwaukee, the city started requiring vendors to have sidewalk detection technology in order to operate downtown, but the tech is not mature right now. Some promised them it was, but the city ended up pausing operations and taking out Lime, Bird and Spin.
When cities get disappointed, they become realistic about what they are looking for. There are some technology requirement trends, so we’ve been helping cities understand what is most important there.
What is Veo working on then, particularly when it comes to sidewalk parking, which is one of the biggest issues?
That is one thing we have been working on very extensively. The AR technology that Bird and Lime are using is not rocket science, by the way. It’s basically a Google plugin and our engineers tried it out, too. But we are working on our own hardware and software solution to potentially pilot in New York and Seattle. It’s more location-based than computer vision, and we own the algorithm, but we might work with a third-party vendor to build the hardware.
Another thing that’s affecting everyone is supply chain issues. You have dedicated supply chains in China, Cambodia and Portugal. Is the supply chain affecting your outlook for 2022?
I am very surprised there are still some companies quoting supply chain issues in our industry. I know there are some delays when it comes to batteries, but you can’t blame the supply chain for failure to achieve a promised target. It’s 2022 right now, not 2020.
How do you expect to grow over the next year?
We’ve had some new launches this year like Berkeley, Syracuse, Sarasota. We’re launching in Providence pretty soon and a couple more markets I can’t yet disclose. The goal is to increase by 100% this year. This will be a very promising year.
Correction: A previous version of this article stated that Veo was present in 27 cities.