E-bike and e-scooter startups have been hit hard by the COVID-19 pandemic but some in the industry are wagering on a post-crisis rebound as people change their traveling habits.

Already suffering from market saturation and poor profitability, micromobility startups have struggled with reduced ridership caused by the global lockdown. Last year, venture capital investors funneled $1.9 billion into 64 deals in the space—a far cry from 2018's all-time high of $5.4 billion across 61 micromobility deals, according to PitchBook data.

As of May 27, VC deals in the sector have brought in $229 million since the start of March, a decrease of more than 26% compared with the same period last year. One of the biggest rounds during that period was for e-scooter startup Lime, which raised $170 million in early May, just a week after announcing it was laying off 13% of its workforce. Fellow e-scooter business Bird was also struck by layoffs. It reportedly shed 30% of its employees in late March, a couple of months after it tacked an additional $75 million onto its Series D, bringing the round total to $350 million.

"A lot of the more fragile or overextended companies are failing but this is one of those pivotal moments where the habits of generations are going to change and political will in cities will flow to permit micromobility growth," said Horace Dediu, an analyst at research company Asymco.

Dediu believes that once lockdown measures ease, the micromobility sector will be in a better position than other forms of transportation. Concerns about infection could push consumers to seek alternative modes of transportation to public transit, leading to a resurgence in e-bike and e-scooter usage.

Some ridehailing companies are already adjusting to this new reality. Last week, Estonia's Bolt raised €100 million (around $111 million), part of which will go toward further developing its e-scooter division. Around the same time, Indian ridehailing company Ola acquired e-scooter manufacturer Etergo through its electric vehicle business. The Dutch startup had reportedly raised more than €20 million since its launch in 2014, but it didn't have sufficient capital and was hoping to be bought, according to a February report by European tech news provider Silicon Canals.

Dediu added that setting up an in-house micromobility arm could prove to be more of a headache for many ridehailing companies, however, micromobility startups' short-term liquidity issues will mean that many of them could be attractive acquisition targets.

As such, ridehailing groups could emerge as bidders for struggling micromobility services to shore up their own operations under the COVID-19 crisis. Ridehailing businesses have experienced rider declines of up to 70% amid the coronavirus pandemic, according to management consultant McKinsey & Company. Even with an increase in travel, recovery will be slower because of the lack of social distancing offered by cars.

Some cities are going so far as to permanently close streets. London, for example, has restricted car use on some roads as lockdown policies are lifted, according to a Guardian report cited in a recent PitchBook analyst note, underlining the need for ridehailing providers to diversify their offerings.

However, evolving their company models will not come without challenges.

"The crucial matter as far as the business side is that [ridesharing companies] are going from a model where they have no assets on the balance sheet and low operating costs and have to jump into one where they have to buy equipment, put it on the street and keep people around to maintain it. It sounds great on paper but then you realize it's so asymmetric to the core business that you have to pull out," Dediu added.

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