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Electric scooters draw hordes of investors and users — but a number of critics as well

Key Points
  • Electric scooters are taking over the streets of a few big cities like San Francisco and Los Angeles, and are slowly spreading to the East Coast.
  • LimeBike, Spin and Bird have attracted lots of investors and adopters, but the e-scooter trend has drawn its share of critics.
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City Scooters

The market for electric scooters is booming, with companies like LimeBike, Spin and Bird appealing to consumers in big cities who are looking for quick, convenient and environmentally friendly transportation.

Investors are pouring money into these companies, especially as public transportation woes snare urban consumers. LimeBike and Bird have both pulled in over $100 million in funding, while earlier this month, Uber acquired Jump, which offers both bikes and scooters.

Users call up an app to find a scooter nearby and unlock it. When the rider is done, the scooter can be left and locked anywhere. Depending on the length of time a user needs them, the scooters are also affordable: LimeBike, Bird and Spin are rentable for anywhere between 15 cents and $1 per minute.

In the last few months, these scooters have popped up everywhere — but not everyone is on board with their growing popularity. Last week, a headline in The Wall Street Journal blared that San Francisco was being "terrorized" by the trend.

Indeed, a casual stroll down San Francisco's Market Street offered glimpses of unattended e-scooters on virtually every block. While commuters have embraced the ease and convenience the e-scooters provide, their ubiquity has been met with grumbles and, in some cases, government intervention.

Recently, the San Francisco City Attorney's office slapped cease and desist letters on all three major e-scooter companies, taking them off the streets for now — but the companies are still attracting interest from investors.

As funding and consumer interest grows, companies are anxious to get their vehicles back on the road. In the coming weeks, San Francisco's Municipal Transportation Agency should notify companies when electric scooter operators can resume business.

For now companies like Bird, Lime and Spin are applying for permits to operate under the one-year pilot program in the city. Back in April, Bird CEO Travis VanderZanden, who is also an alum of Uber, issued a letter supporting more oversight.

Bird "applaud[s] city officials efforts to work with us in ensuring that we can bring environmentally-friendly transportation alternatives to San Francisco, and we support... legislation to regulate e-scooters and are eager to continue the conversations around these regulations," VanderZanden wrote.

Handout: Limebike electric scooter app

Bird is reportedly raising a $150 million round of funding led by Sequoia Capital, according to a report in Bloomberg, only two months after the company raised $100 million in a Series B round.

This new funding would make Bird the first unicorn e-scooter company. However, Bird is not the only e-scooter company raising funds: Lime is reportedly raising a $500 million round themselves, Axios recently reported. Lime declined a request by CNBC to confirm that figure.

Despite the booming market for e-scooters, however, even a few would-be adopters have voiced complaints. One San Francisco commuter named Heidi told CNBC that it took three tries for her to successfully rent an e-scooter, and on the third time "the battery was too dead."

She added: "I wish they had ... worked with businesses or the city [and] if they had parking hubs rather than being thrown about. They're cool, but it's annoying that they're randomly thrown about."

Caen Contee, LimeBike's co-founder and head of partnerships, told CNBC that authorities and residents are still grappling with the issues associated with the e-scooter's explosive growth.

"This is something that all cities are trying to figure out, there is no blueprint for how to do permits. We're very much looking for how to...show other cities throughout the country what's possible and how transformative a medium this can be," Contee said, and predicted there would likely be mergers in the space in order to save costs.

At least for now, LimeBike is taking full advantage of the e-scooter's popularity. The company employs people it calls "juicers," who help charge LimeBike's fleet of scooters, and has brand ambassadors to coordinate charging and bike deployment. LimeBike also has partnerships with coffee shops and stores to drive traffic to their shops, and is mulling other ways to incentivize e-scooter adoption.

"As that industry begins to shrink and figure out its longer-term players, it will be a lot about integration, working with other partners in adjacent spaces...and how we work with local transportation," said Contee.

Electric bikes have the potential to give residents "one of these smart cities we keep talking about," he added.