> is that enough to justify a $2B valuation for a scooter-sharing startup?

For a 5% earnings yield, they would eventually need $100 million in income. There are probably $100 million in profits in New York and San Francisco alone. So yes, if this works that valuation seems appropriate.

>There are probably $100 million in profits in New York and San Francisco alone.

If we extend "San Francisco" to mean "Bay Area" and estimate that New York + Bay Area have a population of about 16M then if the company manages to get 5% of locals to become regular riders, $100M in annual profit is over $10 per regular rider per month. Assuming sufficient demand is there, consider the number of scooters that would need to be deployed and maintained to provided sufficient density to service this adoption level. Does that $100M in profit still seem probable in these two metros?

$100m profits in SF sounds optimistic. London's heavily subsidised cycle share scheme, for example, gets a little over 1m rides in peak months even with most of those rides being free.

If this is a profitable scheme (I don't think it is because of charging and theft issues), the competitors will move into the market as well (there is no moat). In big cities the market will be very segmented so they won't be able to reap all the profits, and the margins will be very thin due to intense competition.

A 5% yield is only reasonable for low-risk blue-chip equities. No one will settle for 5% with that much risk to their capital.

> A 5% yield is only reasonable for low-risk blue-chip equities

Emphasis on “eventually”. A basic test for valuation sanity is “are the earnings this company would need for a zero-growth valuation possible?”

Oh yeah. They should bring way more profit home....

You’re not the one investing at that valuation, so why do you care?

Because it could potentially hurt the rest of the investment ecosystem.

I don't agree with the premise, but if it really is the case the valuation is too high, the "bad" investors who don't know what they're doing will lose money and thus have less influence on the markets in the future. It's important for the long term health of the investment ecosystem to have mechanisms to remove the market impacts of those who make bad decisions (and increase the influence of those making good decisions), and this is that mechanism.

Why not? The global bicycle market around $28 billion in sales per year.

Which does not automatically make any bike-sharing startup worth billions though...

The issue is the value of this particular scooter-sharing company here, not the value of the global scooter market.

Sure, but if you believe the scooter-sharing market will end up being dominated by a few companies (because consumers will prefer to use whichever company is most likely to have a scooter available wherever they are), then it's not unreasonable to bet on one particular scooter-sharing company ending up with a large percentage of that market.

Way more than that.