Max Gurvits (VVP), Marin Iliev (VVP) and Galin Bonev (CEO Econic One)
Why do bicycles hold this attraction for people?
Hundreds of years after being invented, this not too complex piece of engineering, designed to unite machine and human still fascinates and inspires. Is it the sense of freedom and the convenience of being able to move around? Or the joy of watching the changing scenery and feeling the wind in your face while your whole body participates, so you feel alive and it gives a boost to your mood? Is it the nostalgic memories of carefree childhood? Seems like bikes have a lot going for them.
In recent years and decades, riding a bike has been mainly a popular hobby and workout activity in the Western world. Of course, for places like Amsterdam or Copenhagen cycling has been a major transportation mode but almost everywhere else it’s a leisurely pursuit or a niche lifestyle of a hipster kind of cool. This is about to change. And just like with many other things that have long made sense but required a forced change of habits to implement on a large scale, it took a seismic global event like the pandemic to kick start a new age.
Many people didn’t notice and hear about it but bicycles had a toilet paper moment last year. By mid-April, many stores had seen a quick surge in demand and by the end of the month some had sold out most of their stock. There were news stories and photos from both Europe and the US showing long lines of customers in front of bike shops. As some commuters tried to avoid public transit and others were seeking a fun, yet safe thing to do outside their homes during lockdown, biking enjoyed a global resurgence. Disrupted supply chains and closed factories and stores prevented vendors from getting the most out of it but still many big players were reporting 50% year-on-year growth. Cities and governments tried to help this shift by quickly building bike lanes or drawing pop-up ones and offering fiscal incentives.
A much wider use of bicycles, especially for some locations and people, has been hindered by the fact that it might involve tiring effort, climbing hills, going against the wind, sweating, etc. But there has been a cool solution for that: e-bikes. Battery assisted peddling takes the strain off while allowing for speeds of 30 km/h and range of 50 to 100 km. This stress free ability to cover long distances, keep up with your partner, go up the hill or pull cargo made e-bikes sales grow even faster than conventional ones. What’s more, they are increasingly being used for deliveries in urban areas where they have substantial advantages in cost, noise and pollution reduction and even speed.
Both big manufacturers and investors took heed of this trend and are betting it will continue. Share prices of Giant and Shimano doubled in 2020 with the former trading at 25 times earnings and the latter at 35. Venture capital firms stepped up investments in start-up e-bike companies. Amsterdam based Van Moof had a 12.5 million euro round led by leading early-stage investor Balderton and Brussels based Cowboy attracted a 23 million euro B series round led by Index Ventures in July.
In the midst of all this, I was approached to consider an investment in a relatively young Bulgarian e-bike company. I knew about it from hearing of an earlier round which was done by local investors but I never bothered to find out more even though I had easy access to some of those who organized it. I didn’t think it was such a great idea. I thought, what chance does a small upstart have in a manufacturing industry with billion dollar companies where economies of scale and access to suppliers and channels were very essential advantages. Things looked different upon closer inspection. It turned out some of my assumptions were incomplete, others were incorrect and there were a bunch of things I did not know. Except for the basic types, e-bikes are far from being a commodity and can be very differentiated. Most of the exciting new tech and features are being developed by newcomers while, much like with electric cars, most established companies are yet to shift focus. The market is still very fragmented with no clear leaders yet. The process of making one thousand bikes per month is very similar to making a hundred thousand. More importantly, manufacturing capability is not such a critical factor and you can be a leading player without even doing any of it in-house. Technology, design, performance, brand, services, business model can set you apart from the rest of the crowd.
That Bulgarian company, I found out, had many of those advantages. The founders had worked for a few years to figure out a way to make batteries that gave their bikes a range of up to 150 kilometers - far more than most. The bikes were versatile and could perform up to best standards in both urban and mountain environments by just switching mode. The company had attracted a product designer with three Red Dot awards and an exceptional CTO with rare IoT experience gained in GE and VM Ware who was stitching built-in sensors and electronics with a control panel, back-end platform and mobile app turning Econic One into a true smart bike – one of only few on the market. This cool tech provides GPS and fitness tracking, speed control, experience and data sharing, app enabled locking and unlocking, theft protection, crash detection and emergency calling, preventive maintenance and over-the-air software updates like Tesla. On top of this cool tech, the company was putting together unparalleled service offering: global insurance through Allianz, financing pans through Klarna, network of service locations, etc. The vision is to re-design ownership, so it’s more accessible, hassle-free and safe for consumers and so it fits perfectly the needs of business clients who can integrate a bike fleet into their existing systems and apps and open exciting new possibilities for urban logistics. Big names like Takeaway and Delivery Hero are among the happy B2B customers. Econic One is currently being sold in 10 European countries through 105 connected retailers and has 96 certified service points with the goal of reaching 700 points of presence and more than 1000 service providers by the end of this year.
Max with an Econic One bike
After an intense diligence and negotiation process, we ended up leading the round of 1.6 million euros and structuring the deal which included several other sophisticated investors. In the few months since, Econic One has bumped up its team with important key hires, made big strides with its technology and the new bike model to be released this year and added new dealers and distributors who keep giving great feedback and asking for exclusivity over big European geographies, while the company prepares to enter the US market later this year.
The broader shift to electricity powered bicycles is happening and will be gaining speed. It will be driven by brave new upstarts like Econic One that redefine the product, the use cases and the experience. We’ve all become big believers in the future of e-bikes in the changing landscape of urban mobility and logistics. And it’s not only because of the environmental, economic and health benefits that biking brings. It’s also because of that e-bike smile – the joy one feels when trying one for the first time. If you haven’t tried one yet – do so and you’ll know what I mean.