Early Bird investors are underwater

The stock is trading below what private investors paid as far back as the seed funding round

On Tuesday I wrote about how Travis VanderZanden is selling his Miami mansion. The Bird co-founder bought the 13,816-sq-ft property in July 2021 for $21.8 million and has put it back on the market now at an asking price of $39.9 million, an 83% markup.

If he pulls the sale off, that would make TVZ a pretty good real estate investor! It would also help to cushion his personal financial blow from the collapse of Bird’s stock price, which is currently trading at $0.37 a share (BRDS 0.00%↑).¹ VanderZanden’s stake in Bird, worth around $296 million when the company went public last November, has shrunk to about $13.1 million, less than the mortgage on that Miami mansion.

Bird founder Travis VanderZanden is selling his Miami mansion

To follow that post up, I wanted to dive deeper into the performance of early Bird investors. We’ve all heard the adage “90% of startups fail,” but it’s also often assumed that if you get in early enough, you’ll probably be able to make a decent return if that company makes it to the public markets, even if it doesn’t perform well in the long term. This is the “greater fool” theory, the idea that there’s always dumber money out there that will buy an overvalued asset.

So I think it’s worth pointing out that sometimes even dumber money isn’t enough to bail you out. A lot of the firms that bought into Bird early are doing quite badly on those investments.

In private equity financings from May 2017 to March 2020, Bird sold investors preferred stock at purchase prices ranging from $0.41 per share (seed round) to $12.92 per share (series D). As of close on Thursday Oct. 13, Bird’s publicly traded share price was $0.37. In other words, anyone who bought into those preferred rounds from the seed stage on is currently underwater on shares they still hold. And if you were one of the firms that bought into Bird in a later round—yikes.

As you can see in the chart above, preferred stock in Bird’s seed funding—$3 million led by Goldcrest Capital in June 2017, according to PitchBook—was priced at $0.41 a share, a mark Bird’s public stock closed below for the first time on Sept. 1 of this year. It also only took 10 days of trading for Bird stock to close below the series C purchase price that first gave the company ‘unicorn’ status with a $1 billion valuation.

Of the private investors whose holdings are broken out in Bird filings, the worst performing appears to be Sequoia Capital. Sequoia led Bird’s series C and C-1 rounds and also invested in the D. Between those three rounds, the firm put in $110 million. Roelof Botha, a partner at Sequoia, sits on Bird’s board of directors.

As of Bird’s latest proxy filing, Sequoia held 17 million shares, equal to 7% of the company and 1.8% of voting power.² (That’s pretty much exactly what Sequoia had when Bird completed its SPAC deal last November as well.) At $0.37 a share, that stake is worth about $6.3 million. This isn’t a perfect one-to-one comparison to the private funding rounds, in which Sequoia bought a total of 12.6 million Bird shares. Still, it gives you a rough sense of how things have shaped up. Despite having more shares now, Sequoia’s stake is worth a fraction of what it put into Bird from 2018-19.

It’s also worth noting that Bird’s lock-up period ran until March 15, 2022, by which point its share price had already dropped to $3.50, meaning anyone affected by that didn’t really have a chance to sell until the stock was already in free fall.

In fairness to Sequoia, the ~$100 million they’ve lost on Bird is a relative drop in the bucket in context of some of their big investment wins, like Google and Airbnb. This is the logic of venture investing: you lose a lot, but you win big on a couple, and that’s all you need to do well. This is all fine, but the money that investors like Sequoia poured into Bird from 2017-20 also shouldn’t be decoupled from the general mania that surrounded e-scooters at that time, despite much evidence that these businesses could ultimately survive and turn a profit.

Between 2018 and 2019, private investors put $7.3 billion into micromobility startups, according to PitchBook data. A substantial portion of that went to e-scooters: nearly $700 million to Bird, $420 million to Lime, $168 million to Voi, $56 million to Dott, $47 million to Scoot (acquired by Bird), $68 million to Skip (acquired by Helbiz), $48 million to Tier, $46 million to Grin (merged with Yellow to form Grow), $159 million to the aforementioned Yellow, and a number of smaller deals that I won’t bother to mention here. The investing fervor felt like ride-hail 2.0. Everyone wanted to get in on scooters, in case one of the companies turned out to be the next Uber.

Inside Helbiz's 🔥 hell 🔥 biz

Several years down the road, it remains unclear whether any of these companies can make money. Most are still private, meaning access to their financials is limited, and the only ones to go public, Bird and Helbiz, are performing decidedly poorly. That doesn’t mean micromobility or even scooters are doomed—we certainly need to shift away from cars—but it does suggest that investors may be more cautious about whatever micromobility fad hits the market next.

1. I talked a bit in that post about VanderZanden’s limited sales of his public Bird stock, but an astute reader wrote in to point out that TVZ also reportedly cashed out about $44 million worth of “Founders Preferred” stock in June 2018, an unusual move for the founder of a then-year-old startup. A source told tech site The Information at the time that VanderZanden sold shares because the company’s series C funding round ($150 million led by Sequoia at a $1 billion valuation) was oversubscribed. Incidentally, investors in the series C paid $6.35 a share for preferred stock, more than 17 times Bird’s current share price.

2. That 20:1 Class X:Class A stock structure is a real killer when it comes to voting power!