Ownership and the future of transportation
Earlier this week, e-bike DTC brand Cowboy announced Jeremy Le Van is joining the team as VP of Product. Jeremy co-founded (and later sold) calendar app Sunrise to Microsoft, so he is kind of a big deal.
Cowboy has raised a €10 million Series A funding round from Tiger Global, Index Ventures, Hardware Club and others, and is available in 5 European countries.
In June, another European e-bike company named VanMoof raised millions in a few hours in one of the most successful crowdfunding campaigns ever.
Why have we barely heard about them?
A few years ago, European tech was smitten by Uber, Bolt, Cabify, the ridesharing economy and their fight against a local government. Now, as with everything, the novelty has passed.
But we’ve found a new, shinier toy to be captivated by – scooters. I covered them in one of my first write-ups, and again a few months later.
Scooters are a fascinating topic. After all, the scooter biz is an all-out war and, quite frankly, wars are fun to watch. You never know when a company is going to raise a gazillion dollars, eat up a competitor, or go head to head with a local government.
Tech has been focused largely on ride-sharing – scooters, bikes, cars. But we are forgetting the essence of capitalism: ownership.
Yes, we can still own stuff. It seems we just don’t care about it that much. Why?
The unsexiest DTC brands
The global e-bike market is growing at a substantial rate.
In 2018 it was valued at $14.7 billion and is expected to grow ~6% annually over the next few years.
Europe itself is not staying behind. Shortly before publishing its 2019 half-year results Merida Industry Co. ltd also announced that it is investing heavily in a substantial expansion of the production of e-bikes in Europe. In The Netherlands, 40% of all bicycle sales last year were e-bikes.
But why aren’t these transportation DTC brands – Cowboy, VanMoof, Mate, even Casey Neistat’s darling Boosted – not sexy enough?
They have fantastic products, beautiful packaging and they are incredibly fun to use. They follow the DTC playbook to the dot – beautiful websites, powerful social media, and active communities.
And for god’s sake, Boosted even launched a SCOOTER that’s 10x better than anything Lime, Bird or Circ are putting out.
I mean... look at that bad boy.
But when you think about it for a minute, you start to get it.
It all comes down to customers and barriers to entry
You might not know this, but I worked with an electric bike company for years as their Director of Marketing.
During my interview with the CEO, I talked about all the cool things we could do to ‘wow’ young 20-something tech bros so they would buy more e-bikes.
Boris, the CEO, stopped me on my tracks: “Yeah, yeah, cool ideas. But you know who is our biggest customer? Baby boomers. Old folks over 60 who want to use the motor to do what they could do 10 years ago but can’t anymore.”
Right there and then, I learned one of my biggest lessons in marketing: don’t assume who your best customer might be. Do your research. It’s usually not who you are expecting it to be.
I don’t even know how on earth I got that job...
The second lesson I learned is that journalists are humans, so they don’t give a fuck about a product unless they can relate to it in some shape or form. It’s the same reason why men journalists don’t cover female health startups.
The market for cool millennials who commute to work on a $3,000 e-bike is fairly limited and 30-something tech journalists fail to understand how an e-bike can change someone’s life. They can’t relate to e-bikes because they aren’t the ideal customer.
The second reason why these electric DTC brands are unappreciated in comparison to ridesharing startup is the barrier to entry for ownership.
Full disclosure: I love e-bikes and own a Boosted board. But they are also a pain in the ass. And there’s a single culprit to that barrier to entry: batteries.
First, lithium batteries are incredibly expensive, accounting for a significant percentage of the hardware cost.
Ridesharing startups spread the cost of the hardware over hundreds of rides by different riders. As a single owner, you can’t do that.
Second, lithium batteries are stupidly heavy. Imagine carrying your 25kg e-bike on an elevator. And if you live in cities like Paris or Barcelona, you are lucky to have one.
Personally, I love my Boosted board. But that thing is *heavy*. It’s a pain in the ass to carry it around or store it when you are not using it.
In the end, e-bikes, electric scooters, etc. are incredibly fun to use, but not incredibly fun to own. For $1, you can ride a Bird and get most of what you’ll get from owning a Boosted scooter.
Cowboy’s website is so good, I had my credit card out and I was ready to spend €1,990. Then I realized I don’t want to own an e-bike.
Sharing > Ownership
Ultimately, I think that owning transportation is cool. But investing in ownership is a bad idea.
We mentioned they are incredibly fun to use, but not incredibly fun to own.
We talked about all the bad stuff - expensive, heavy, hard to scale. But there’s ONE big difference that I haven’t covered, and it’s in my opinion, the biggest one.
In Scooternomics, when talking about the scooter wars, I wrote:
... one [scooter] company will be forced come up with a new innovation, feature or use case to differentiate themselves, or lower prices enough to drive competitors out of the market so they can, eventually, reap the benefits of a new, expanding market by themselves.You could make the case that when a company significantly improves an offering, and creates new features, functions, experiences, price points, and even enable new use cases, it expands the market in the process.
It’s what happens with Uber, and what all great businesses aspire to. In ride-sharing, the path to expanding an already huge market is straightforward – easier access, less wait time, cheaper prices.
But for ownership? It’s not that easy. It’s hard to come up with an improvement that makes the product orders of magnitude better than before. Or cheaper. For instance, DTC brands have zero control over the price of lithium, which defines a big percentage of their product price.
As with most hardware products (vs. a platform) improvements are on the margins. And the harsh reality is that improvements on the margins don’t create new markets.