Ebike investments empower start-up businesses in the future
Just in case you have been sleeping under a rock or hiding in your car, I am here to share the news - ebike investments are thriving. Just yesterday, Rad Power to name $ 154M funding round, bringing the money raised this year to over $ 300M.
But what drives investment growth? Why are e-bikes so hot right now? What makes a good investment for a company, and how does the market differ from Europe and the US?
I sat down with Clement Pointillart, Executive Director of the growth equity fund Verlinvest, and Bailey Morrow, Director of consumer and frontier technology at Silicon Valley Bank, to find out what's really happening in the world of ebike investing behind the headlines.
Famous ebike investments in 2022
And not just ebikes for the purchase by consumers raising money.
- March: Lime Micromobility (US) raised $ 50m
- Oct: Micromobility level (Germany) thog $ 200M
What caused the huge increase in ebike investment?
Both Pointillart and Morrow point to the dramatic rise in ebike investments to a number of factors:
COVID-19 got people back on their bikes to reduce the time they spend on public transport. Cities Make Cycling Safer: London Introduced temporary cycle routes, and New York limited seven miles of pedestrian and cycle streets.
From an investment point of view, all you have to do is go back to the guide numbers - where are e-bikes sold? What level of entry today? Take a look at the Netherlands, entry is at 42%. If you look at Belgium and Germany, it's 32%. If you turn your eyes to the US it is 2%.
Either you basically believe that Americans will never jump on an ebike for any reason or you have to believe in a catch that happens. And COVID has been to me the perfect civilian tool to drive that adoption curve.
COVID-19 has been a terrific accelerator, the movement that was hidden, but about to explode. Now, you see, especially in the US, infrastructure contracts in road bike infrastructure, allowing more and more people to take their bikes to work.
The efforts of government and employers
Legislative and infrastructural changes in the US mean that e-bikes are no longer classified as motor vehicles, so it can be ridden on the road. In February, the The E-BIKE Act introduced a 30% U.S. federal tax credit for the purchase of an electric bike.
Pointillart is also seeing a shift of ebike or subsidy purchases from employers to help retain employees.
They both agree that battery innovation has also accelerated interest in bicycles, with batteries being faster for charge, stronger, lighter and more durable than ever before.
- Companies like Cowboy are above the charge for fast lifetime batteries.
A new kind of consumer
Changes in consumer behavior also depend on ebike investments. According to Morrow, there is an important millennial movement where “the next generation of buyers are buying fewer cars and less desire to buy large purchases such as homes. They prioritize sustainability as a lifestyle choice. ”
Why is all the investment in direct-to-consumer bicycles beyond micromobility?
While micromobility continues to attract funding, the direct-to-consumer market has a number of advantages.
With micromobility, you are not brand bound. It's about anything that is closer to you and convenient. There is no brand loyalty. With VanMoof or Cowboy, you build brand loyalty.
In addition, there is a much higher margin from buying a separate auto. Microobility ebikes also have problems with declining life value and low resale value.
Morrow also notes that investing in consumer bicycles poses the political challenge of working with local governments to revoke a city's operating permit for a variety of reasons, such as bicycles. incorrectly parked and the behavior of a bicycle rider.
What kind of factors make investors invest their money in one ebike company over another?
I asked Pointillart what would make an investor choose a brand. He explained:
First, the question is, how big is that population? And how much price-conscious is that population? And then, if you want to expand to establish a proper distinction and a lasting presence, you are promising brand creation. For me, the final impact will be the community.
He gave the example of companies that offer group bike tours every weekend to build community around their brands. "Creating a community creates a sense of belonging, creates a sticky, and creates a word of mouth."
The importance of segmentation in the direct market to consumers
According to Morrow, your local market is crucial:
When you launch a direct-to-consumer brand with VC fundraising, you promote to your local market. Locally it is difficult to market bicycles. You can’t take these bikes to your local bike store on the corner and ask them to repair them for you.
So a lot of pain grows, thinking about how to maintain brand integrity and keep the customer happy.
There will still be a strong brick and mortar sales presence, as there is a need or desire to talk to a professional, get advice, and get your bike ready without having to pick it up.
If you are just competing online with little product difference, that's where we get a little concerned about how far the model is to generate profits. And for me, I'm excited about continuing with retail with a neat integration of direct sales to consumers.
America remains a holy grail for ebike investors
Expansion to the US is the next step for many ebike companies. Morrow explains:
Typically, you build a Series A, determine your local market, and you may encounter one more market. So if you are in Holland, you want to go to Germany. But in the end, all their goals will always be towards the US.
She notes VanMoof's intention to dispose of 10 million bikes and believes:
If they are not already in the US, they are completely going to the US with that kind of firepower. With that there will be more than 300 million potential buyers of their product with just two distribution centers on each coast.
When you see companies getting to the billion - dollar mark, they've figured out how to jump boundaries.
Investors' interest in e-bikes is not showing a decline. It is a highly competitive market and it will be interesting to see how brands use their money for R&D and to strengthen brand loyalty. In addition, I think we can expect to see a great deal of M&A activity in the first half of 2022.