Tech giants Uber and Google-parent Alphabet offered their blessing to the red-hot electric scooter industry this week. The companies announced on Monday that they are leading a group of investors pumping $335 million into scooter-sharing startup Lime in a fundraising round that values Lime at a whopping $1.1 billion. The news came on the same day as reports that rival scooter startup Bird had raised roughly $300 million, for a valuation north of $2 billion. Another scooter company, San Francisco-based Spin, is reportedly raising $125 million in blockchain-based funds. Between those massive valuations and a deluge of recent media attention, Lime and Bird are two of the biggest names in the burgeoning scooter market. But are these buzzy startups really worth billions of dollars? Lime, Bird and Spin all offer similar services, with users paying anywhere from 15 cents to $1 per minute to rent electric scooters that are distributed throughout an urban area and travel at speeds up to 15 MPH. The three California-based startups have apps that allow users to activate any stray scooter nearby and pay to ride it for as long as needed (or as long as the scooter’s battery lasts, which can be anywhere from 18 to 37 miles per charge, depending on the scooter). The scooters are "dockless," which means they can be picked up and dropped off pretty much anywhere. Bird has put over 1,000 of its scooters on the streets throughout 18 U.S. cities, including Los Angeles, Dallas and Washington, D.C. In April, Bird said its scooters had already been taken for over 1 million rides since launching in September 2017.

Bird and Lime scooters sit parked in front of a building on April 17, 2018 in San Francisco, California. Justin Sullivan | Getty Images

Meanwhile, Lime rolled out its first electric scooters in May and now has scooters in more than 65 U.S. cities as well as five cities overseas, such as Berlin and Zurich. In June, Lime deployed over 200 scooters in Paris. The company, which launched its bike-share service a year ago, says it has seen over 6 million total rides across its bikes and scooters overall.

Millennial-friendly

The scooter startups have not released any information on the average age of their riders, but it would seem to be no accident that they all are zeroing in on urban areas (Austin, Los Angeles, San Diego and Washington, D.C., for example) with large concentrations of millennial residents, a coveted consumer demographic. And young people are also more likely than older generations to seek out alternatives to cars for their commutes. "Casual observation suggests their users skew a little younger," U.S. News and World Report reported in April about the scooter trend. The scooter market is even creating extra earning opportunities for "teens and young professionals," who can get paid anywhere from $5 to $20 per scooter by companies like Bird to charge any scooters whose batteries have died, according to The Atlantic. Both Lime and Spin also tout the number of college campuses where their scooters are currently in use (18 schools for Lime and roughly 30 for Spin) on their websites.

Why Uber's on board

In the wake of its investment, Uber says it plans to start putting its logo on an unspecified number of Lime’s scooters as part of a new partnership between the startups. That move by Uber reveals at least one other big reason why scooter startups are a hot attraction for the investors that are boosting the companies’ valuations. Ride-sharing rivals Uber and Lyft are competing to lead the market for all modes of local, urban transportation, which means everything from car rides to bicycles to scooters. Uber even developed a "new modalities" business unit dedicated to eventually making alternative types of urban transportation, such as bikes and scooters, available to its 75 million users worldwide.

Uber acquired the bike-share company JUMP for an undisclosed amount in April. JUMP also offers scooter rentals, while Lime also offers bike rentals — which shows that Uber is serious about adding both services to its already popular app to give users multiple options for getting around a city. Meanwhile, Lyft followed suit on July 2, announcing it would buy Motivate, the company that operates New York's Citi Bike and San Francisco's GoBike bicycle-sharing services, for a . The interest from big-name transportation companies like Uber and Lyft is pumping up the valuations of scooter startups, while proponents of the scooter-sharing business model simply see them as a fun, affordable and efficient way to get around highly-congested cities. "The investors love the growth ... and the numbers, but I think they also like the mission of Bird," Travis Vanderzanden, Bird's CEO and founder (and also a former executive at both Uber and Lyft) told CNNMoney on Monday. "People have been trying to find ways to get Americans out of cars for a long time, and we think Bird can have a big impact."

Will they make money?

New York Times business columnist Kevin Roose wrote in June that he “wanted to hate the scooters,” but they’re actually “pretty great.” “If liking fun, inexpensive, short-distance transportation is wrong, I don’t want to be right,” Roose wrote. And the fact that millions of people have already given the scooters a try suggests that there is certainly a market for the services of companies like Lime, Bird and Spin. In terms of whether the companies actually make money, Quartz estimates that Bird makes about $11 per day per scooter in Santa Monica, while Lime reportedly makes more in a city like San Francisco, in the “mid to high twenty-dollars” range, according to Quartz. Most estimates suggest that these scooter startups average about $2 to $3 in revenue from each ride, which means a company could pull in more than $14 million in annual revenue based on the number of rides Bird reported in April, according to an analysis by Crunchbase News’ Alex Wilhelm. Even with growth in terms of riders, Wilhelm thinks a valuation in the $400 million range for a company like Bird makes more sense than in the billions. However, another analysis from InvestorPlace estimates that Lime could pull in more than $760 million annually by extrapolating the 55,000 rides the company announced for its first three weeks in San Diego across the entire U.S. market. Without more time and data, it's hard to say exactly how much revenue potential there is for these scooter startups, but there are plenty of other skeptics who say these companies are attracting unrealistic valuations. For instance, one potentially major obstacle to the wave of scooter startups is the fact that several cities already seem fed up with the craze, with some regulators even moving to ban the electric scooter businesses.

Cities respond