E-scooter start-ups are annoying and wildly overvalued, say the skeptics.

E-scooters are super fun and poised to change urban transportation as we know it, say the optimists.

Investors bidding up scooter prices are motivated not by fundamentals but by FOMO (fear of missing out), say the bears. But we all want fewer air-polluting cars on the roads, say the bulls.

It’s one of the hottest debates in Silicon Valley. With Lime valued at about $1 billion and Bird reportedly raising money at twice that valuation, venture capitalists are betting that this fledgling market will grow rapidly as people working downtown and attending college on big campuses recognize a new affordable and efficient way to get around.

“It is actually the closest thing we have today to last-mile autonomous transportation,” said Kyle Lui, a principal at DCM Ventures, which invested in Lime. “It can get you to a location faster than any other form of transportation.”

But for every promoter of this futuristic view, there’s a dissenting voice saying that the unit economics will never work, and e-scooters will go the way of the Segway, not the skateboard.

Residents of San Francisco, San Diego and Santa Monica have seen so many scooters pop up that the market already feels saturated. But in the vast majority of U.S. cities — the ones that Uber took years to hit — the idea of residents opening up an app that’s linked to their credit card and flying down sidewalks and bike lanes on a battery-powered scooter for a couple bucks remains a completely foreign concept.

The market for last-mile transportation is rapidly evolving.

Before 2017, municipalities were signing big deals with companies like Motivate, which provides bike-sharing systems that require docking stations spread across the city. Then a dockless system, first popularized in China, landed in the U.S. The main players in that market are Lime and two Chinese companies, Mobike and Ofo, which are expanding their fleets across U.S. cities. While most dockless bikes are cruisers with a few speeds, some are e-bikes with motors inside — Uber recently acquired e-bike maker Jump Bikes for about $200 million.

In 2017, investors plunged $2.8 billion into bike-sharing start-ups, up from $343 million the prior year, according to CB Insights.

Plenty of problems have popped up. China’s Wukong Bike closed last year after reportedly losing 90 percent of its bikes.

“Operationally, the biggest hurdle for any bike-share operator (dockless or otherwise) is not losing bikes,” CB Insights wrote in a March report.

Bikes are now giving way to scooter mania.

In addition to Lime and Bird, there’s Spin and Skip (from the creators of Boosted electric skateboards). Just last week, Ofo said it will be deploying tens of thousand of e-vehicles in U.S. cities over the next few months, with scooters hitting markets including Atlanta, Austin, San Francisco and Santa Monica.

Rides typically start at $1 and can go up to a few dollars depending on the distance.

No matter how popular scooters are in certain places and how enjoyable they are to ride, the industry is going to be dogged by critics, at least for a while, for four main reasons:

• Valuation — Based on any reasonable numbers today, it’s hard to make the math work. The bet is on expansion, adoption and eventual profitability.
• Regulation — Every city is unique. They have different traffic rules for scooters, different ways of choosing which bike and scooter companies can operate and different requirements for the vehicles. For example, San Francisco forced all scooters off the roads earlier this month until they can get permits. And in Chicago, dockless bikes are being banned in favor of bikes that lock to racks.
• Sentiment — Images abound of bikes and scooters piling up on street corners and being tossed in dumpsters, while scooter riders cruising at 15 miles per hour on sidewalks are angering walkers who are used to staring at their smartphones in peace.
• Glut — There’s too much money chasing a fairly minor problem when so many companies addressing major problems have trouble getting funded.

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Still, for those who have jumped on board the trend, there’s a certain sense of inevitability about its ultimate success. In downtown San Francisco, where traffic often brings cars to a standstill and a grid of one-way streets can turn a half mile car ride into a mile and a half, scooters provide the perfect mode of transit when walking isn’t an option.

“It’s not going to be the use case of how do I get to work in the morning?” says Chris Nakutis Taylor, who spent five years at Uber and was hired to run Ofo’s North America business in October. “It’s the case of how do I get to that burger shop for only $1?”

People who work downtown in cities of a few hundred thousand people may be a mile or two from their lunch spot. In the summer months it’s too hot and takes too long to walk. Public transit is often slow or unreliable, an Uber ride is more expensive and could get you stuck in traffic and driving may be a nuisance because of parking.

Taylor used the tech industry’s favorite sports metaphor in saying the market is “still in the first pitch of the first inning.” He looks at cities in states like Indiana, where he was once an Uber general manager, and sees an abundance of opportunity.

He also said that if you’re getting the business right, spending a couple hundred dollars on a vehicle that gets 20 rides a day (in the best markets) for $1 to $3 a ride, it doesn’t take that long for each one to turn profitable.

“Transportation in cities is a big problem not solved completely by ride share and even autonomous cars,” said Alexis Ohanian, the Reddit co-founder who is now a venture investor at Initialized Capital. Scooters are “fun and frictionless to ride.”

Ohanian’s firm invested in Skip, which currently operates in Washington, D.C. In the true spirit of the e-scooter market, where participants are simultaneously allies and bitter rivals, Skip CEO Sanjay Dastoor told Business Insider last week that his company is the only one “without a cease and desist order.”

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Vivek Ladsariya, a partner at SineWave Ventures, invested in Jump before the Uber deal. He believes e-scooter ventures can prove a mainstream success. But he’s skeptical of bike and scooter companies that have reeled in huge piles of cash before getting a clear view on how the economics will work and where they can operate.

“All the problems that scooters face in cities still need to be figured out,” he said.

To Ofo’s Taylor, the arguments about round sizes and valuations sound a lot like what Uber heard early on from the naysayers, who were shocked when the ride-hailing company was commanding even a $1 billion price tag. Its most recent reported valuation is $62 billion.

The key, Taylor said, is moving beyond the coastal hubs and proving that sharing bikes and scooters is going to be an accepted model for transportation in every city where last-mile options make sense.

“Uber didn’t become a $60 billion company by winning on the coasts,” he said. “If you don’t win Main Street in Anytown, USA, you’re going to be relegated to the edges.”