🚗 Free Uber Rides?

Free Ubers and Lyfts?! Okay, you have my attention.

Today we’re doing a deep dive into Freebird, a startup that’s already raised ~$3M on Wefunder at a $32.5M valuation. I’m going to (ride)share my opinion on whether I like this investment opportunity or not.

• 💸 Rider Rewards: Businesses dish out rewards for riding to their store

• 🛠️ De(beta)ble Past: Was their ‘beta’ just a clever rebrand?

• 🚗 Ride Requested?: Am I hopping in the car with Freebird?

RIDER REWARDS

Take Uber. Get Rewarded.

Freebird is looking to cash in on the rapid growth of rideshare while making rides less expensive for consumers. Their app lets local businesses and brands pay riders a cash reward for taking an Uber/Lyft to their location.

For example, Applebee’s could incentivize consumers to Uber to their restaurant by offering a $10 ride credit. It’s marketed as a win-win for all parties involved - Applebees gets additional customers + revenue that it normally wouldn’t have. Consumers get a cash reward. And FreeBird collects a fee on each ride from the business.

Freebird has implemented safeguards to make sure that the business actually benefit from the riders it gives credit to. Users must make a transaction at the venue to claim the reward (this is tracked through linking a credit card).

In past partnerships, Freebird has touted that top businesses saw a 20x return on investment from ride promos.

The user experience appears to be frictionless. On the app, consumers can view offers in their area. Once they select a location, it takes them to Uber/Lyft where they can book a ride as they normally would. Then, the reward is released to the user once they make a transaction at the destination.

Freebird has been an investor darling, as nearly $3M has been invested into their current raise. But some red flags emerged as I took a closer look into this startup.

DE(BETA)BLE PAST

Grab a shovel, we’re digging into their ‘beta’

In my due diligence, I went to download the app to test out the user experience. I quickly found that the app is no longer in the app store. In fact, Freebird is not actively in operation – and the details around their history are fuzzy.

For starters, the company has been around for nine(!) years. Freebird’s fundraising page refers to past activity as a ‘beta’, but that is a straight-up lie. They were fully in operation, and appeared to have shut down sometime in 2020.

I understand that Covid lockdowns likely impacted their business, but this is still a major red flag to me. Especially since the company claimed to have previously raised $30M - with that war chest they should have been able to weather the storm. Clever on them to rebrand the failure as a ‘beta’, but don’t be fooled here.

Next, many of the numbers in their pitch are confusing or don’t make any sense.

For example, they claimed their beta had ‘30,000+ monthly active users taking more than 4 million Freebird rides’. That comes out to 134 rides per user. That seems a little far-fetched to me, even if they excluded users who only took one ride and weren’t ‘active’.

Looking to the future, Freebird plans to relaunch in early 2024 with their ‘All-Star Executive team’ leading the way. I looked into their key personnel, and both the CTO and CMO have occupations elsewhere. The CTO runs a small shop that designs apps for companies – which makes me believe that Freebird will not be his only focus.

The CMO talks about Freebird in the past tense, writing this on her LinkedIn page: "Previously at Freebird, a rideshare reward platform, Danielle worked closely with the development, product and data analysis teams.”

Two things – this confirms that Freebird did not run a ‘beta’, they took a shot at it and then wound down the company. Second, their CMO is employed elsewhere, at a dating app startup. Will she be a fractional CMO or is she leaving their current employer?

In their SEC filing, Freebird looks like it has absolutely nothing going on. Less than $30k in operating expenses, no revenues, and most importantly – no salaries.

Is their leadership team working free of charge? Are they even official employees of the company? I’m left with many questions around their core leadership team.

RIDE REQUESTED?

No thanks, I think I’ll just walk

I think it’s clear that I’m staying away from this one. I simply don’t trust this company and that alone is enough to steer clear of investing.

The valuation is also completely unjustified by the company’s traction. $32.5M is a valuation that you would assign to a startup that has shown traction and present growth. Freebird’s app remains dormant and operations are halted, which leaves investors essentially paying a $32.5M valuation for a website. 

I also foresee issues with Freebird’s business model. They plan on bringing in revenue primarily through the $2.50 fee they charge to businesses per verified ride. $2.50 is a small sum of money which means that Freebird will need to generate truly massive scale.

It’ll require 400,000 rides just to reach their first million dollars in revenue. In my opinion, the cost to acquire riders will be too high to properly offset their lifetime value. I don’t see a path to profitability with this one, and I’m not paying top-dollar to get into this deal.

It’s a no from me!