The city of San Francisco announced it's granting scooter permits to small start-ups Scoot and Skip, shutting out well-funded hometown businesses including Uber, Bird, Lime and Lyft.
The move follows San Francisco's decision earlier this year to ban the scooter companies from operating without a permit, after scooters from several providers, including Bird, Lime and Spin, flooded the streets and clogged up sidewalks. The city opened up a permit application process and said it would allow 1,250 scooters onto the streets.
A dozen operators submitted applications, and San Francisco ultimately shunned the companies that started the rush in favor of two newcomers. Skip and Scoot will be permitted up to 625 scooters each.
"At the tail end of March, three companies -- Bird, Lime and Spin -- unloaded hundreds of motorized scooters across San Francisco," the city's Municipal Transportation Authority said in a statement on Thursday. "While they were operating, several concerns were raised by the city and our communities."
Venture firms have poured capital into bike and scooter start-ups, pumping up valuations, after ride-hailing companies like Uber and Lyft trounced the entrenched taxi industry. Lime and Bird are each worth more than $1 billion on paper, to the disbelief of many Silicon Valley observers. Uber acquired Jump Bikes in April for about $250 million, notching an early exit for investors in bike-sharing. But the battle for "last-mile" transportation is still in its very early days.
Companies that offer electric scooters and bike-sharing services are now in a race to grow their operations across U.S. markets like San Francisco and southern California, where the weather is mild and residents can make use of their products all year round. Local officials in the Bay Area have tried to rein in companies that they viewed as sidestepping existing regulations to establish a footprint before proper rules could be put into place.
"Investing in the city -- including bike lane infrastructure and job training -- is a commitment we made in our San Francisco permit application," Sanjay Dastoor, Skip's CEO, said in a statement. "We're glad to see others in the industry following our lead and look forward to making the success of shared electric mobility something that we can all be a part of."
Venture investor Shawn Carolan, whose firm Menlo Ventures backed Skip as well as Uber and Jump said, "I'm so pleased to see San Francisco work closely with companies to solve 'the last mile' problem. There are huge benefits if the city gets it right: Innovation from new transportation startups can create jobs, reduce traffic, and benefit the environment while driving productivity."
For Bird and Lime, it wasn't all bad news on Thursday. The scooter-rental businesses won permits to operate in Santa Monica, California, Bird's hometown.
But San Francisco came down particularly hard on them. The city gave Bird a "poor" rating in 10 of the 12 categories it graded, the worst performance of any of the applicants. Those categories include safety, access for disabled and low-income users, sustainability, good labor practices and a positive relationship with the San Francisco community.
Disappointment from the big players
In a statement to CNBC, a Bird spokesperson said the company is continuing to work with San Francisco to eventually return to the city.
"While we are disappointed with today's decision, we hope to have the opportunity to meet the needs of SF residents and to help the city achieve its transportation goals following this initial test period," the company said.
Skip scored the best in the assessment, getting a "safe" rating in seven categories, a "fair" in four others and "poor" in just one -- sustainability. Scoot was second, with six "safe" ratings, five "fair" and a poor determination for its approach to helping low-income residents.
Spin and Lime each had six "poor" ratings.
Representatives from Lime and Spin told CNBC they were disappointed in San Francisco's decisions. Lime said the city "has selected inexperienced scooter operators that plan to learn on the job, at the expense of the public good," while Spin said in a statement that "SFMTA chose not to distinguish between companies that have always worked in good faith with the city and those that did not."
Uber also expressed disappointment and said that, "granting only two scooter permits unnecessarily limits mobility options in San Francisco, and we plan to follow up with the SFMTA to share our concerns.
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