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Why Uber is buying e-bike sharing startup Jump Bikes

Here are six reasons why the ride hailing giant wants in on an e-bike network.

The big daddy of ride sharing, Uber, has officially jumped into electric bike sharing.

On Monday Uber announced that it has acquired Jump Bikes, a 10-year-old venture capital-backed startup that rents out dockless electric bicycles to users around cities. Terms of the deal were not disclosed but a report from last week said that an acquisition was worth over $100 million.

So why has Uber, with its $72 billion valuation and deep global reach, suddenly noticed the company that’s been managing 250 neon red e-bikes in its backyard for a few months (as well as thousands of non-electric bikes in other cities)?

It’s a combination of the right timing for the mobility market, the evolution of the wireless computing and battery technology, and the right positioning for a friendlier Uber (along with a few other things). Here are six reasons that led to this union:

1. The explosion and evolution of mobility services

It’s the catch-all word for new alternative ways to get around cities, but urban "mobility" options have boomed in recent months and years. Incumbent auto makers, rental car companies, startups, ride-hailing companies and even electric car maker Tesla have been exploring ways that users can use mobility-as-a-service instead of owning a car and driving it around urban areas.

For Uber, anything that gets a potential user out of the routine of owning and driving a car — even if its a bike ride —  could be helpful to bring in more users as well as give current users more options. Susan Shaheen, director of Innovative Mobility Research at University of California Berkeley’s Transportation Sustainability Research Center, explained that "the market for shared mobility services continues to evolve." 

Shaheen points to recent mobility unions such as the merger of Daimler’s Car2Go and BMW’s DriveNow program, as well the launch of Ford and bike sharing company Motivate’s network in San Francisco. "Increasingly, we’re seeing companies broaden product and service offerings beyond auto-mobility and transforming their portfolios into multi-mobility companies."

2. A bike-sharing land grab

In particular, bike, e-bike and scooter sharing networks have emerged as a hot commodity recently, with various companies fighting for the same real estate. In the blog post announcing the Uber deal, Jump Bikes founder and CEO Ryan Rzepecki wrote: "Over the last two years, the bike share industry shifted from a slow-moving government contracting business to one of the most well-capitalized and competitive consumer technologies in the world."

Some of these fast-movers have entered the U.S. off the back of success in China, such as Mobike and Ofo. But there’s also VC-backed startups such as LimeBike and Bird and Motivate, the most well-known and visible among the bike sharing companies in the U.S. Motivate has an exclusive contract with San Francisco for a docked bike share network until 2025.

3. The tech

The technology that underlies and controls Jump’s e-bike sharing network, as well as others, is based on low cost and ubiquitous cloud computing, wireless networks and mobile apps. Bikes can be tracked remotely by GPS, and sensor systems can lock and unlock them.

Combine that cheap and readily available computing with the dropping cost of batteries and electric motors, and the Jump Bikes are a product of this era’s economies of scale and matured technologies.

For investors and potential acquirers admiring Jump’s technology, they see hardware and software that can be used to manage and control any kind of mobile vehicle, from a bike to a scooter to a car to a self-driving robot. It doesn’t really matter what vehicle makes the trips, it can get hooked into the computing system, powered by a battery and managed easily.

In addition, the electric bikes, in particular, seem to have struck a cord with riders, at least in San Francisco, where there’s a lot of hills and many commuters going to work. The assist from the motor helps riders arrive at their destination without too much sweating, and the boost can get riders up and over those sizable San Francisco hills.

Everything changed for Jump when it launched its custom-designed e-bikes. A regular non-electric bike trip is less than a mile, while an average Uber or Lyft trip is about 5 miles, wrote Rzepecki. For Jump, the average number of miles with an e-bike has been 2.7. Rzepecki says that number "proves that e-bikes bridge the gap between bikes and cars." 

4. High demand for low-cost last mile trips

Part of the reason that Uber bought Jump is because Jump has been able to unlock demand around those last mile short-range urban trips. Rzepecki called the response from San Francisco users to the Jump’s red neon e-bikes "incredible" and as of March the company has been seeing four trips per bike per day.

Part of the reason that users are regularly jumping on Jump bikes is because it turns out that riders can be pretty price sensitive. If an UberX or Uber Pool (Uber’s carpooling service) costs $5 to $6 a trip, a user can grab a Jump bike for closer to $2 to $3 per trip.

"E-bike sharing opens up an entirely new market for Uber," said Scoot Networks founder and CEO Michael Keating commenting on the deal. Scoot Networks manages an electric vehicle network sharing program in San Francisco, and the company has plans to introduce e-bikes. "A lot more people can afford $2 or $3 a trip a day. E-bikes are great."

The demand for these mobility services is large enough that Jump and other bike and e-bike services could have ended up competing with Uber’s services, though currently Jump’s network is way smaller than Uber’s. In China, bike-sharing has indeed emerged as a small threat to ride hailing networks such as Didi.

At the same time, Uber’s own growth appears to be slowing. How could it not with the lightning pace at which its boomed in recent years? An alternative and complimentary method of growth, such as e-bikes, could help keep the growth going.

There's also an ease to this acquisition. Uber will be able to quickly leverage Jump’s network within its own expansive network. It already has through its previous partnership with Jump. Uber’s cost of capital is low and can expand Jump’s network pretty rapidly and with minimal investment. 

5. A friendlier, more collaborative Uber

In the era of new Uber CEO Dara Khosrowshahi, the company appears to be trying to put its combative past behind it and work more collaboratively with cities. Khosrowshahi wrote in a blog post about the Jump deal that Uber’s ultimate goal is to "make it easier to live without owning a personal car."

Some research has found that Uber and Lyft are contributing to increase congestion in urban areas. On the other hand, bike sharing and e-bike sharing have been shown to reduce congestion and lead to lower greenhouse gas emissions. 

Researcher Shaheen said: "Early documented impacts of bikesharing include increased mobility, reduced greenhouse gas emissions, decreased automobile use, economic development and health benefits."

Jump is also one of the dockless bike networks that has been more proactive in working with the city of San Francisco. Companies such as LimeBike and Bird recently have dropped electric scooters off on sidewalks around the city, provoking the ire of city officials.

6. The people

The old saying goes that investors back people, not companies, and the same rings true for acquisitions.

Founder Rzepecki has been working on this concept for a decade and was one of the original creators of the dockless bike network. "Ryan was the first person to say we can do bikes without a rack. It was an awesome idea," said Scoot Network’s Keating.

The two companies also have something in common beyond technology and rapid growth: an investor. Menlo Ventures Partner Shawn Carolan led investments in both Uber and Jump.

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