Razor Chases Cash-Rich Startups in New Scooter Boom

By Anonymous

CERRITOS, Calif.—Razor USA LLC kicked off the last big scooter fad in America nearly two decades ago, when its collapsible, two-wheel models became an overnight sensation for children across the country.

Now the California company is racing to catch up in a new scooter boom, hoping for a second act in a crowded market for shareable electric rides for adults driven by high-octane startups and torrents of venture capital.

Razor, which still makes scooters as well as other personal transportation devices, has big ambitions for entering the rental business. Executives say they can get better-quality scooters designed for heavy use at a lower cost than rivals by leveraging its manufacturing relationships in China.

Razor executives say they were spurred to enter the rental business recently after realizing that the company was neither making the scooters that rivals were renting out, nor offering their own rental option.

Carlton Calvin, Razor’s co-founder and chief executive, recalls going to check out the scooter boom last fall when Bird Rides Inc. sprinkled its rental scooters around the beach-lined streets of Santa Monica, Calif.

“I went over there and I just couldn’t believe my eyes,” Mr. Calvin said.

It stung in part because Razor has been designing and selling similar electric scooters for a few years, but Bird was using a newly popular scooter made by Ninebot Inc., a Chinese startup backed by electronics giant Xiaomi Corp. Executives at the scooter startups have said they liked the design of the Ninebot scooters, and they’re both in the process of securing custom-made scooters.

Razor Chases Cash-Rich Startups in New Scooter Boom

Razor electric scooters in a warehouse. Photo: Razor USA

Since late July, Razor has launched its scooter rental service in San Diego, the Phoenix area and Long Beach, Calif. It is planning to have presence in about a dozen cities by the end of the year.

Meanwhile, Bird and competitor Lime, a division of Neutron Holdings Inc., have raised nearly $900 million between them since they incorporated early last year, and are valued at $2 billion and $1.1 billion respectively. Their initial success has ignited a frenzy among Silicon Valley investors hungry for the next big thing, and their business model—offering scooters that can be rented via smartphone and left anywhere after use for prices starting at $0.15 a minute—is easily replicated. Car-hailing companies Uber Technologies Inc. and Lyft Inc. also are pushing in.

The companies don’t release numbers, but Bird and Lime both say they’re in more than 100 markets and each have logged over 10 million rides. Cities typically have a few hundred scooters per company.

“Competing against very well-funded companies like Bird and Lime is going to be a challenge for [Razor]”, said Ashish Aggarwal, a principal at venture-capital firm Grishin Robotics who has invested in two other scooter startups.

The startups have spent a year working out the kinks in a business that requires a network of people to pick up scooters and charge them every night, and have begun to learn the intricacies of dealing with local governments, he said. “Those are new areas where they don’t have any advantage,” Mr. Aggarwal said of Razor.

Razor executives say they are learning quickly and think they can be profitable in the business. The company is also focused on cooperating with local governments.

Startups often have a cachet that can make it easier to draw young coding and marketing talent. Bird’s offices in Venice Beach are in a sleek renovated warehouse—previously home to Vice Media—off the famous Abbot Kinney Boulevard, with shops that serve avocado and Oaxacan chocolate ice cream and matcha tea sparklers. Snapchat’s first office was nearby.

By contrast, Razor is based 30 miles inland in suburban Cerritos, Calif., in a bunkerlike concrete building with a white drop-ceiling inside. Razor said it can attract high-quality talent.

Razor Chases Cash-Rich Startups in New Scooter Boom

Scooter power. Razor kicked off the last big scooter fad in America nearly two decades ago, when its collapsible, two-wheel models became popular with children. Photo: Anne Cusack/Los Angeles Times/Getty Images

The company started in 2000, when Mr. Calvin, who had been designing and selling toys on a small scale, joined with Taiwan-based JD Corp. to bring to the U.S. a scooter JD was manufacturing and selling in Asia. It was a hit. In 2000 alone, Razor pumped out more than 5 million scooters, Mr. Calvin said. But children quickly moved on to the next fad, and demand sank. Warehouses full of Razor and competitors’ scooters sat unsold.

“It was the craziest time in my existence,” said Mr. Calvin, now 57. “When it stopped, it stopped dead.”

Since then, Razor has dabbled in other products like pogo sticks and hoverboards, all while continuing to pump out scooters of all shapes and sizes.

The closely held company declined to share details on its finances or its shared scooter business, but Mr. Calvin said he is “very, very focused on making money right now off the scooters, and I think that’s something we can do.”

On a recent visit, a warehouse attached to the back of Razor’s headquarters was filled with row after row of neatly parked electric scooters awaiting deployment. Mr. Calvin said the company already has “many thousand” and is getting more.

The learning curve is steep. Its app has been buggy and a scooter ended up across the Mexican border from San Diego, in Tijuana.

“There’s a lot of challenges that you don’t have when you just sell it from Walmart , ” Mr. Calvin said.

Write to Eliot Brown at [email protected]