Public Failure, Internal Strife, Lawsuits: Blue Duck's Short Ride Through San Antonio
Eric Bell laughed and chatted with a group of tech workers on a sidewalk in downtown San Antonio. He was excited to tell them about his new company, Blue Duck Express.
It was March 23, 2018, a cloudy day less than three months before the first wave of thousands of rentable electric scooters would flood San Antonio streets.
Bell told anyone who would listen that electric scooters were the future of urban transportation, and Blue Duck – at that moment only two weeks old – was going to be part of that revolution.
Over the next 17 months, Bell would chase that ambition. Blue Duck would eventually raise more than $10 million in debt and capital. His staff would steadily grow, and together they faced competition from larger scooter companies. Blue Duck was new to this market but so was everyone else.
However, the ambitious CEO and staff had one quality those other companies lacked: Blue Duck was the only company founded in San Antonio.
On that March day, Bell was there to demonstrate his scooters to the group of young men.
“We’ll get these guys on a down and back and then we’re gonna cruise,” he said.
Bell and Jeff Mangold, Blue Duck’s fleet manager, whizzed down the sidewalk with their tour group, leading them towards the River Walk. Passersby examined the remaining scooters with puzzled looks on their faces. The more curious ones hopped on and tried them out. The scooters hinted at what was coming to the Alamo City.
Despite the hope, excitement and aspirations, the journey Bell, his workers and their company endured ended in a very public failure that would see its scooters banned from San Antonio’s streets next month. In news reports, Bell blamed the city. He blamed his team. He threatened to take the company and leave.
“The company has no plans to leave San Antonio, nor has it solicited any proposals from other cities,” said Jeff Modisett, the company’s lawyer, in a recent email to TPR.
Regardless, Blue Duck’s relationship with San Antonio lay in ruins.
But the question remains.
How Could This Happen?
This is not the story of a single catastrophic failure. It is a story of a struggling, disorganized startup with a history of missteps operating in a brand new industry. Despite its flaws, it is not outside the realm of possibility that this immature industry may still make a winner of Blue Duck.
“I wouldn’t be surprised if this company lasted longer than people think and made more money than people think,” said a former executive who spoke on the condition of anonymity.
Blue Duck did not make executives available to speak to Texas Public Radio for this story. But TPR did interview 13 current and former employees and contractors.
The inspiration for Blue Duck, the story goes, was hatched in Santa Monica, California, in early 2018 after Eric Bell and his father, Paul, rode a pair of e-scooters. The times were exciting for the new technology. Micro-mobility was quickly becoming the urban buzzword, and other scooter companies would soon garner billion-dollar valuations. The Bells joined the party, and Blue Duck was born.
Paul Bell’s company Group 42 provided early financial support and working space at the Pearl. According to company estimates in emails reviewed by TPR, the Bells and Group 42 poured more than a half million dollars into Eric’s scooter startup. Through the spring of 2019, the Bell family and trusted friends owned most of the company.
Blue Duck raised more than $4 million in its first year by selling future equity, giving it a $75 million valuation by the end of 2018.
From the beginning, the company marketed itself as the antithesis of Bird, the largest and most recognizable scooter company, currently valued at around $2.5 billion.
"We have a policy at Blue Duck that we don't go into markets without getting explicit approval from the local government,” said Casey Whittington, former Blue Duck national director of government affairs, in a February interview with the San Antonio Express-News. “Some of our competitors like to operate in a different model. They like to break it and try to fix it afterwards, much like Bird did here in San Antonio."
Bird dumped scooters without regard for locals. But Blue Duck said it would work with cities to craft policies that accommodated everyone.
“There is also a sort of good citizen advantage that comes with being somebody willing to work with city leaders, with communities,” said Farooq Malik, former chief strategy officer, during an interview with TPR in November 2018. Malik has since left the company.
Many of the Blue Duck employees interviewed spoke of being attracted to this mission along with an aggressive vision.
Blue Duck talked about buying 35,000 to 40,000 scooters, being in hundreds of markets, raising millions in funding and then going public.
“I thought it was an exciting project,” said one former employee. “[Blue Duck] had a good team. It was a new industry with a lot of potential.”
But almost from the beginning, the company’s ambitions slammed into cold reality.
Hardware Is Hard
Problems for the company emerged early with its chief asset — the scooter.
For most U.S. urban dwellers, scooters came out of nowhere. One day they just showed up, crowding city streets and sidewalks. Most of those scooters came from one Chinese company, Xiaomi. When the rentable, dockless scooter business model took shape, companies were desperate to get their hands on them.
Blue Duck — at this point still more of an idea than a company — resorted to scrounging batches online. There was so much demand for Xiaomi that a secondary counterfeit market cropped up, and at least once Blue Duck found itself inadvertently supplied with a batch of the knockoffs.
And getting the scooters was just the first major problem.
Blue Duck’s first flock of scooters was riddled with hardware and software issues. The company paid a contractor more than $170,000. One executive described it in an email as “subpar,” and payments “were not warranted for the product we have.”
In addition to wasted time and money, Blue Duck lost its first-to-market advantage in San Antonio to Bird and Lime, which arrived on city streets in June and July. Blue Duck couldn’t launch the scooters until August 2018.
Once launched, they had a hard time keeping the first 20 to 25 scooters on the street because of the software and hardware problems.
“After the first week or so, we started having problems,” said one former manager. “We dropped down to 16 to 15. I think we were able to maintain 12.”
The scooter fleet would grow, and along with it, the number requiring maintenance.
It eventually became clear that the scooters would have to be replaced.
Following the delayed rollout, the company hired Michael Keane in October 2018 as chief business officer. Keane, 59, had a working relationship with Paul Bell going back three decades. He agreed to commute from his home in California each month.
“He was a seasoned professional. It was nice to have an experienced leader come in at the executive level,” said one former manager who noted at the time most of the staff were 20-somethings, early in their careers.
Keane was brought in to straighten out the company. Emails from the time he was hired demonstrated the company’s need for additional procedures for billing, operations and human resources. At the time, some of this was handled by someone working with both Group 42 and Blue Duck. The individual often had little knowledge of why invoices were coming in. Keane helped bring on a controller position to manage the financials and keep tabs on spending.
Keane was also brought on to negotiate the terms of a large loan for hardware and the purchase of additional scooters on a tight timeline.
"I think he came in and saw that it was a bit of a playground and not focused on mission... and he defined a mission."
"I think he came in and saw that it was a bit of a playground and not focused on mission... and he defined a mission," said the same former manager. Keane wasn’t shy about calling people out when they didn’t deliver, he said.
While some on staff enjoyed his direct personality, others described Keane as distrustful, aggressive and dismissive. Some talked about public dressing downs and public insults.
“I think the guy is an [expletive] but he may be a good business person,” said a former Blue Duck contractor.
By the time Keane came on board, the company had raised millions from future equity sales. With that – and the promise of a sizable loan – Blue Duck was bullish. Executives knew they needed a new round of scooters. But they also decided to own the software that ran them.
Eric Bell told the Rivard Report in November 2018 that his company planned to buy 35,000 to 40,000 scooters and deploy them nationally in six months.
Blue Duck was hiring developers to resolve ongoing software issues and design the back-end software it wanted. It also looked for new scooters.
At the time, most scooter companies bought from the same company, Xiaomi. Demand was high in the exploding industry, and the costs and wait times were too much for Blue Duck. It had to find a new company for its newer and better scooter, The Maverick, as they would dub it.
Several Blue Duck employees were in China for weeks. And return trips would be required to ensure quality and negotiate contracts.
“It’s tough,” said a former manager about working in China. “Whoever is yelling the loudest this week is who they are going to be listening to.”
After starting in late October, Keane and Blue Duck were able to line up the supply and interim software solution in a month.
“I am very pleased to announce that today Blue Duck placed an order for a significant quantity of scooters,” Keane wrote to the staff in late November email.
The contract with the Chinese manufacturer was dated Dec. 4. Blue Duck had committed to pay $5 million for 12,000 scooters. The manufacturer would start delivering the 2,000 scooters in 30 days, Keane wrote in his email. But after 30 days, no scooters had shipped. Keane assured staff in another email that the shipments would start soon, and all scooters, including another 2,500, would be there within another 30 days.
Many of the first 2,000 scooters arrived four months after the original order.
“We estimate lost revenues due to be $884,900,” said one draft of a breach-of-contract letter.
Blue Duck considered legal action against the manufacturer, according to documents TPR reviewed, due to the delivery schedule as well as problems with software and hardware.
Blue Duck’s rollout schedule continued to be delayed. Some on staff felt not enough was being done to get scooters.
“There was money to buy many more scooters,” said one former employee, referring to a $5 million loan secured for hardware. “But they were not doing anything,” he said. At least two other current and former employees TPR interviewed agreed with that assessment.
The company paid for 2,000 on a contract for 12,000 scooters. Because of delays, Keane put off additional deposits while they pursued other manufacturers.
“Why would we order with the company when they couldn’t deliver the first time?” asked one former manager.
But according to the company’s lawyer, they haven’t severed this relationship and may use its initial manufacturer again.
Keane began negotiating with a new manufacturer in April, according to emails reviewed by TPR, while continuing to push for delivery of the first 2,000 scooters. The new contract would not be signed until June, continuing the company’s struggle to meet projections.
Blue Duck always intended to diversify its manufacturing, according to statements from Blue Duck lawyers, and Keane played a key role.
While Bell boasted in November that Blue Duck would deploy 35,000 to 40,000 scooters across hundreds of markets in six months, after 10 months, Blue Duck has yet to deploy 10% of that number.
While some former employees said Keane delayed that process, Blue Duck — through its lawyers — said Keane’s efforts in negotiating did not result in any unnecessary delays but in fact protected the company from them.
In an industry that requires X number of scooters make X amount of money each day, having fewer scooters would seem like a problem.
“It should, but in reality, no,” said a former employee, a view confirmed by others at Blue Duck. “Because even when they had, I think, 800 to 1,000 scooters, they only had 400 out on the streets, max.”
For most of the first half of 2019, Blue Duck was operating in just two markets, San Antonio and Corpus Christi. The San Antonio scooter market was oversaturated, and Blue Duck only earned around $2 per scooter per day, according to weekly snapshots reviewed by TPR. Corpus Christi averaged as high as $11 per scooter per day. But the company continued to use projections as high as $20 per scooter per day in investor presentations.
The company declined to comment on why it continued to use the $12 to $20 per scooter per day projections.
The company had targeted the southeastern United States. Cities with universities and beach towns in Texas, Florida and along the Gulf Coast were prioritized. Blue Duck’s strategy focused its attention on second- and third-tier markets, where there was less competition. But they weren’t closing very many deals with cities.
'The Florida Debacle'
One current employee said Blue Duck scouted 85 to 90 markets. At various times, Amarillo, Biloxi, Tampa, Tallahassee and Columbia, South Carolina, were considered. Staff spent more than a year trying to build relationships.
But today the company is only renting scooters in three cities: San Antonio, Corpus Christi and Laredo. Some current and former employees pointed to Blue Duck's scooter footprint as proof of its failure to execute on strategy.
“It’s concerning to me that we have ‘open’ markets in both Texas and Florida that we should be prioritizing,” said Elizabeth Lyons Houston, vice president of communications, in an internal email. “Instead we keep starting conversations elsewhere without closing the deals we have already open.”
The delays in scooter deliveries as well as the delays in market rollout led the company to miss internal projections multiple times. For instance, a March 20 projection saw the company in 12 markets by August. One dated in May projected 10 markets by September. As of mid-September, they remain in just three.
Launching markets may have been delayed by the company’s approach — engaging with cities rather than just dumping scooters.
“There’s a reason Silicon Valley developed the ‘move fast and break things’ mantra,” said Michael Taylor, a financial columnist. The Blue Duck strategy inherently took more time.
It takes time to sell a city, one former manager said, and the projections provided by Blue Duck’s young “inexperienced” staff were overly optimistic. That made it hard to plan when a deal would close and when scooters would be needed.
That inexperience also led to what the former manager called “The Florida Debacle.”
Blue Duck has scooters in both Daytona Beach and Pensacola, but isn’t renting them there. The company launched in both cities in April. In Pensacola, its scooters were pulled off the streets after two weeks, according to news outlets.
“We will be confiscating all your scooters within our city limits by 1 p.m.,” said a Daytona Beach code enforcement official in an April 23 email, asking the company to get in touch immediately.
The situation caught everyone off guard, according to emails. The launch had been talked about extensively, and people assumed everything was in order.
“This is out of left field. Let me see what I can find out,” said Casey Whittington, the former national director of government affairs, in an email.
Whittington had been a key player in the launch. He flew to Daytona Beach to try to salvage the situation.
“Apparently, we didn’t have local business permits to operate,” said the former manager. “When you look at a situation like Florida, to me, that’s easy stuff.”
Pensacola recently voted to allow scooters, but Blue Duck still isn’t operating there, according to individuals with direct knowledge.
When asked about why their scooters weren’t on the streets in these Florida markets, Blue Duck, through its lawyer said, “The company has no comment on any pending or potential litigation,” referring to the company they contracted to deploy those scooters.
Its scooters would also be pulled off the streets of Seaside, Florida, in May, when again company officials failed to obtain proper authorization to operate.
“The company sees no issues with its ability to open new markets,” said Blue Duck through its lawyer. “And indeed has recently brought on board a senior executive to focus on new specialized fleet markets for the company.”
What's It Worth?
The lack of markets and scooters was a major obstacle to the company becoming profitable.
According to documents reviewed by TPR, the company lost between $330,000 and $450,000 per month from February through April 2019.
But Eric Bell told a reporter in May 2019 that Blue Duck was now worth $300 million, four times its value six months earlier. The company made no announcements it had sold equity at that valuation, as it did previously. It launched in Laredo, but contrary to its investor presentations, it lost hundreds of thousands of dollars a month.
"Entrepreneurs are allowed to say it. Early stage investors are allowed to believe it. Everybody's free to value something how they value it, but it's not valid."
In an email to a contractor, one Blue Duck executive said the new value was based on certain aspects, including projections of markets and profitability as well as leadership.
“That’s just an un-validated claim – to be a little bit flip, it’s vapor,” said Michael Taylor, the financial columnist. “Entrepreneurs are allowed to say it. Early stage investors are allowed to believe it. Everybody’s free to value something how they value it, but it’s not valid.”
When TPR sought clarification on how the company valued itself, Blue Duck, through its lawyer, responded: “The company does not publicly comment on its valuation or on the markets it is operating in.”
Skyrocketing valuations are typical for the immature scooter industry. Both Lime and Bird acquired lighting-fast $2 billion valuations, and Bird is trying to raise $300 million after losing $100 million in the first quarter of the year.
In the first quarter of 2019, Blue Duck refocused its business model. After a few months and considerable hiring and staff time, it dropped the plan to develop its own scooter software. Executives purchased an off-the-shelf system, which cemented Blue Duck as a service company, not a technology company.
“Blue Duck made a strategic decision to pivot to an outsourced IT/app solution as being a more rational and cost-effective solution for a company this size,” said the company’s lawyer — something, he noted, was not unusual in this line of business.
From emails it is clear there was no love lost between Keane and the development team, and killing the proprietary software meant he thought he no longer needed it. He set to work trying to reduce the team and the amount of money the company was spending.
“I want to go through our IT team like Sherman went through Georgia,” said Keane in an email, referring to the Civil War general's scorched-earth policy. “The only thing delaying me is trying to get the app across the finish line without too much disruption.”
Bill Neely, a consultant who helped lead the effort to develop the company’s proprietary software, is suing Blue Duck for failing to pay him, according to court records.
'Tech Startups Aren't Perfect'
Despite Keane’s unpopularity with many staff, he enjoyed the confidence of the Bells. But there were some border skirmishes for control. Several former employees reported Keane and Eric Bell would give conflicting orders. When either was made aware of the situation, they would say to ignore the other's instructions.
Many former employees criticized company culture and morale. One of them called it toxic.
But many placed the blame for the quality of Blue Duck’s workplace not with Keane but with Eric Bell. Some blamed Bell’s lack of forethought, vision and recruitment strategy for the company’s changes, which eventually led to many of the terminations and resignations.
“[Bell] can be a great guy,” said one former employee, who was fired. “At some points, I really liked him. He is a very charming, very kind, very generous, but when you are running a company and you hire 33 people, it’s not a game anymore. People’s livelihoods are in your hands. You hired people who have kids, who have aspirations.”
"When you are running a company and you hire 33 people, it's not a game anymore."
In a May 2019 feature story in the Express-News, Bell seemed to compare himself to Apple’s Tim Cook, Amazon’s Jeff Bezos, and Berkshire Hathaway’s Warren Buffett. The article portrayed a brash, 35-year-old shooting for the moon. For many of Bell’s colleagues, the article was embarrassing. One current employee described it as “the cringiest thing I have ever seen.”
Several current and former employees described Bell’s behavior as inappropriate, distracting and obstructive.
“Eric is — long story short — childish and unprofessional,” said Jose Allende, a former senior developer for Blue Duck who left for a new job in May.
Two people described an incident where Bell arrived at the office with toys and started pelting the developer team with balls, saying people weren’t having enough fun.
He then started shooting at one developer with a toy gun that fired foam balls.
“She said, ‘Please don’t shoot me. Please don’t shoot me,’” recalled a former employee who witnessed it.
When Bell continued, the woman froze and teared up.
Bell then left.
He may not have known the woman was a combat veteran.
The incident lasted about two minutes. She was granted the rest of the day off. She gave her two week’s notice soon after.
Blue Duck said it wouldn’t comment on personnel matters but through its lawyers said it is “committed to a work environment in which all individuals are treated with respect and dignity and are free from all forms of abusive conduct, including bullying.”
Between February and August, 14 people resigned or were terminated, around half its current workforce.
TPR asked Blue Duck nearly 40 questions about its business model, culture and executive leadership.
“Many of your questions clearly could only come from former employees or others who are not interested in the truth, but only in settling scores,” said Jeff Modisett, Blue Duck’s lawyer.
But not all of its employees left under a cloud. Some left for better offers. Magda Gonzalez, who described herself as Blue Duck’s first employee, said very positive things about the company in a statement: “We all know tech startups aren’t perfect, but I can assure you the overall good nature of that company is the dominant factor in my mind.”
One former employee’s termination garnered media attention, including a story in the Express-News. It began when Trevor Whitney, Blue Duck's regional director for government affairs, began an unsuccessful run for city council in February 2019.
Whitney’s behavior in the race was detailed as crass and volatile. In one debate he simulated masturbation with one hand while his opponent, District 7 councilwoman Ana Sandoval, spoke about the city’s climate plan. In another incident he had an angry confrontation with the councilwoman’s boyfriend, making a crass sexual remark. When Express-News Columnist Gilbert Garcia wrote about it, Blue Duck acted.
Whitney, who was on unpaid leave through the campaign, denied the substance of the column to company officials.
But Keane fired him via a text message.
“Pretty dishonorable move by a cowardly lot,” said Whitney in the texted response. “Too bad you believe propaganda and not a person who worked his ass off for you.”
The problems with growth, with planning, with projections, with Keane and with Bell may have set the stage for the end of Blue Duck scooters on San Antonio streets.
Left Out To Dry
Ten companies competed for one of three exclusive contracts with the city. Winning one of those contracts could be a make-or-break moment for any of the scooter companies that were struggling financially in the Alamo City. They were of supreme importance to Blue Duck, the only company boasting hometown credentials. Failure was not an option.
Blue Duck worked with other city governments on their operational plans. They even provided draft pilot program ordinances to smaller cities. San Antonio’s Request for Proposal, or RFP, on Dockless Vehicles was 112 pages – by far the largest proposal they took on.
For nearly two months, starting in June 2019, Akeem Brown, Blue Duck’s director of government partnerships, said he asked every department for its responses to the RFP. And for two months he said he got very little back from his colleagues.
“I set a deadline for those questions to be answered by July 12. Only one department responded appropriately at that time,” Brown said.
Before long, two months turned into two days. One key group of employees finally started to respond.
“Most of those answers needed to come from executives,” Brown said. As a subordinate, he felt he couldn't hold them accountable.
Ultimately, Brown received the necessary information to finish the RFP. But a late start on the document meant a late printing. That didn't start until Monday, July 22, the day it was due.
Nothing seemed to go right. The local print shop did not have the required holepuncher, which meant Brown and his team had to prepare more than 15,000 pages themselves. His team raced by car to City Hall to personally deliver it. Red lights... traffic... the team’s stress level was high as they raced to City Hall. When they arrived, Brown said he didn't even look for parking. He just launched himself from the passenger seat.
At first, Brown couldn’t find the right office. But he finally made it. Blue Duck formally submitted its RFP to the City of San Antonio.
But the city staff recorded the submission as one minute late. Brown disputed the judgment. He believed the RFP should have been accepted.
Blue Duck, the only San Antonio scooter company, would not get to compete for an exclusive San Antonio scooter contract.
"It's kind of like the Wild West right now [for the scooter industry]," said one former contractor. "It's a big land grab, and ultimately there's going to be a group of winners."
Bell blamed Brown and then-VP of communications Elizabeth Houston for the RFP failure in an Express-News article, despite indicating the city was still at fault.
When later reached for comment, Houston told TPR she no longer worked for Blue Duck. Many current and former staffers were surprised by her exit, given her husband Hunter Houston has invested hundreds of thousands of dollars in the company, based on January documents reviewed by TPR.
Brown, who still works for Blue Duck, said he felt like a scapegoat.
“I’m not mad about the bullshit story about me,” he said. “I’m mad that this is what people will remember about how hard my teammates worked.”
Brown and others described working 12- to 15-hour days to gather the necessary information for the city leading up to the final delivery. But for Brown, that had been only the latest example of what he considered to be a good team working hard to build something great for more than 10 months.
“It’s kind of like the Wild West right now [for the scooter industry],” said one former contractor. “It’s a big land grab, and ultimately there’s going to be a group of winners.”
Seven people TPR interviewed indicated the company had squandered an opportunity. All of them cited poor leadership as the issue.
“The worst part about a story like this is that people think it can’t be done here, and it can,” said one former senior leader. “The biggest success was building a team here in San Antonio.”
More than a year ago, where this story began, Eric Bell was on San Antonio’s River Walk, cruising on a scooter. It was a warm March day, and Bell was smiling. Smiling as he led the pack of young men — men he hoped would be future customers. He wore a reporter’s microphone — it had been as much a press opportunity as a tour.
He was in the lead. Whether he was traveling too fast — “showing off a little bit” — and lost control, or was trying to dodge something on the trail is unclear. But Bell flew off the River Walk and into the San Antonio River.
Bell was soaked. According to people present that day, he was embarrassed.
His staff made up a story, one where he didn’t fall in the river, one where he had to rush off to help his wife, who was experiencing some kind of emergency. One where he didn’t look foolish.
After Bell drove his scooter into the river, after he was helped out of the water and after the story was prepared, Eric Bell left.
When TPR asked about the incident, the company — through its lawyer — declined to comment.
Where To Go From Here
In spite of losing its home market, Blue Duck is currently trying to raise more than $20 million to continue expanding. The company sent an email to employees in August telling them they may be close to raising the large sum. But some workers expressed skepticism.
“I think we are very nervous about scaling because we don’t have consistent leadership,” said one current staffer.
The company opted to not answer most of the around 40 questions submitted by TPR. Blue Duck, through its lawyer, said that would be “particularly inappropriate” given their ongoing private capital raise.
Blue Duck scooters will be off San Antonio streets in the coming weeks because it missed the RFP deadline, but its scooters are still in Laredo and Corpus Christi. The company has plans to launch in Bryan, Texas, soon. Historically, it generates far higher scooter revenues in communities like these where it has less competition.
“Almost any business in any industry would do some things differently in hindsight,” said Blue Duck, through its lawyer. The company pointed out in a statement that two years ago this industry didn’t exist and there was no template, no off-the-shelf solution, manufacturer, business model or experienced managers. They need to learn and move forward, it said.
The company has started hiring new staff — some are seasoned veterans — as others move on. It has hired at least three workers in recent weeks.
That may mean the game’s not over for Blue Duck, said Michael Taylor, the financial columnist.
“They may end up perfectly fine and profitable. We just don’t know yet.”
[Transparency note: Group 42 was at one time a TPR funder.]