San Antonio’s Blue Duck Scooters closes, explores bankruptcy
Blue Duck Scooters — a company founded in San Antonio — has ceased all operations in the 10 cities it operated in across the South from El Paso to Greensboro, North Carolina.
The company tried to join the cavalcade of companies fueled by billions of dollars from investors and flooded city streets with rentable scooters in the newly minted micro-mobility industry. The industry cooled significantly in the run up to 2020 and some of the biggest players pulled out of markets. The early pandemic drove ridership to miniscule levels.
Blue Duck, a company that targeted secondary markets and college campuses, had hoped to weather the storm and had seen a rebound far in excess of its 2019 revenues. The amount of debt the company took on to scale quickly, proved too much for the current organization.
“Who knows what it would have looked like without the pandemic,” said Johnny Vassallo, Blue Duck’s interim CEO.
Vassallo joined the board in the fall of 2020 and took over the CEO chair in the spring of 2021. Vassallo said he was brought in to cut costs and run a more lean operation.
Company officials informed investors Tuesday that it is now collecting scooters from streets “to preserve creditors’ collateral.”
“We have notified our senior lenders and have sought counsel for foreclosure or bankruptcy proceedings,” said Sean Brantman, director of finance and business operations at Blue Duck Express, in the email to investors Tuesday morning.
The company may dissolve the Blue Duck name and organization as it reorganizes, but Vassallo said he wants to ensure the company's 60 employees continue to get paid.
Company officials told existing investors last Wednesday in an email that the teetering scooter business needed another $5 million in funding to keep the company afloat. Without the cash it warned that it couldn’t meet a number of debts including $115,000 in shipping and customs costs for bikes it had already purchased. Without the money, Brantman warned, the company would go into default on Jan. 1.
The company's ledger had gotten so bad that Vassallo lent Blue Duck $75,000 to make payroll, according to emails.
In his pitch to current shareholders last week, Brantman boasted that Blue Duck had soared to its largest revenues ever — nearly 200% higher than 2019 and a reduction in its wages and cash burn — or its rate of losses. He mapped out new company strategies and launched new markets. He noted the company had cut costs around personnel, reducing wages 70%.
“I thought this summer we had turned a corner. We tripled our sales last year. We had some very good things happening and the last few months I don’t know if it was omicron or what we slowed down,” Vassallo said.
The company has yet to make a profit — which has been elusive for many tech startups especially among rentable scooter companies. The strategy for many scooter companies mirrored that of ride sharing — expanding to many markets, scooping up large investments and trying to stay in business until competitors die off. But investors became less interested in the scooter two years ago.
The company had been able in the past to raise significant amounts of money in loans and equity sales, according to filings with the U.S. Securities and Exchange Commission. In late 2019 it sold more than $4 million in equity. In October 2020. It then sold more than $8 million before another failed attempt in December 2020 where it raised just 2% of a $15 million ask.
After a flurry of meetings in the past two weeks with around 20 current investors and conference calls with another 30-40 possible investors, Blue Duck was only able to garner 2% of the desperately needed new funding.
“We gave it a herculean effort,” said Vassallo.
“The core debt holders are really in the driver's seat right now,” he said. “I'll be responding to their wishes to protect — to keep the most value for the assets.”
Blue Duck was founded by San Antonio father and Son Paul and Eric Bell in 2018. The two effectively bankrolled the early venture with family and friends. It then took a $5 million loan from now deceased Florida billionaire David Straz. It isn’t clear how much money the Straz estate and its partners have invested or loaned to the venture. TPR reviewed the loan outline in 2019. It gave significant protections to Straz and partners, assuring them that they were the first to be paid out.
Vassallo declined to comment on the Straz estate.
The company’s scooters were barred from San Antonio streets in 2019 after failing to respond in time to the city’s contract application. The public failure coincided with a months-long 2019 TPR investigation that found numerous complaints about workplace behavior and strife throughout the startup.
TPR reported on a host of issues in the company under CEO Eric Bell. The startup poured money into in-house app development as well as scooter engineering that it would then abandon, outsourcing the work. Blue Duck was sued by multiple vendors for nonpayment. Ultimately Eric Bell would cede the CEO chair to longtime friend of the family, Michael Keane.
Last December, Blue Duck made a surprise pitch to the City Council to return to San Antonio streets. Keane and two other employees showed up virtually for a city council committee hearing during the “Citizens to be Heard” time, when anyone can sign up to talk about any item.
“We would love to have the opportunity to be able to operate in San Antonio. We think the city would benefit from a local operator,” said Keane.
Keane promised more jobs and a new national training center to be housed in the city where it called home. Council never took them up on the offer — which would have been difficult as the current exclusive contracts lasted until the following winter.
The company’s headquarters had been at the Pearl with a warehouse across the highway in the Wittigs building. "Blue Duck. Fly Wild." signage still adorns the side of the building but the company no longer houses scooters there. Vassallo confirmed the company hasn’t had an office in San Antonio since the spring.
Paul and Eric Bell still were listed as governing partners of Blue Duck Operating LLC, which is an associated entity as late as 2021. Vassallo said the two haven’t played a role in management in 18 months. Keane exited as CEO in February of this year.
The company had been quietly working to expand into new markets, though it had a history of lacking enough devices to satisfy the markets it already had. It announced it had launched services in cities like Greensboro, North Carolina, Winston-Salem and Spartanburg, South Carolina this year.
Scooter companies have been battered by the pandemic, and Blue Duck has paid a heavy toll.
Ultimately the company —which struggled from the beginning — could not withstand the stress of the pandemic.