By: Laura Belmar
President + Chief Commercial Officer at Electric Bike Company
I’ve exited multiple consumer goods companies and taken 100s of investor meetings over the years, and all buyers and investors want to know the same things:
- Are you solving a serious pain point in a massive market?
- How will you compete…aka how big is your moat?
- What’s your exit strategy?
I know how present these questions are for you, so I’m going to send you a few emails this week to answer them.
Let’s start with the last one, since it’s always a good idea to begin with the end in mind: What’s Electric Bike Company’s exit strategy?
Valuations and Exit Multiples in Our Sector
If you’ve invested on and off Start Engine, your deal flow has probably ranged from SAAS to drone technology, from consumer apps to AI. So let’s start with a little valuation 101 for consumer goods as a sector. Multiples tend to range from 3x-12x EBITDA, with recurring revenue, brand strength, IP, and of course timing, all being key factors. As an industry comp, a competitor of ours, Pedego, exited for about a 10x multiple in 2021.
How did they command the upper end of this range? Well, high recurring revenue thanks to their dealer based model, for one. Timing, for another—money was cheap and both consumers and investors were going for it. But most importantly: a stellar brand. In a world of 1 year warranties, they offered 5; in a world of buying online, they were in person; in a world of surly cycling bros, they were approachable.
What factors will allow EBC to drive a large multiple?
EBC has its own cocktail of unique differentiators- recurring revenue off bike dealers, e-bike tour companies, corporate accounts, and new product launches.
Brand strength- as the only brand that allows customization, we’ve niched down to scale up. In a cycling culture that likes to tell folks what they should want, what is cool, what will perform; we do the opposite. We don’t intimidate, we empower. Customization is not only part of our moat, it’s also a big driver of EBITDA. Designing your own bike is pretty delightful, and folks are willing to pay a premium to do it. (We also differentiate on safety, US manufacturing, and a host of other points I’ll get into more later, but you get the idea for now).
Exit Timing and EBITDA
So what about timing? Exits in our sector tend to be acquisitions by PE, larger brands, or even multinational conglomerates like PON group, which holds many transportation brands ranging from cars to bikes. M+A activity in our sector is forecasted to really pick up steam over the next few years. You can read more about that here.
Whether we exit in two years or five, our path is the same: drive strong EBITDA. This enables us to be well positioned to sell or to hold and scale at all times. Strong EBITDA preserves optionality, so that we can time our exit for optimal market conditions. When we do, we know our buyer will help us scale our mission.
Among us, our founding team has bootstrapped quite a few ventures to exit. We know how to be agile and profitable. We’ve planned to the dollar how we’ll use the proceeds of this raise, and know exactly what EBITDA to expect when we put your capital to work.
But wait-
So that’s a consumer goods/e-commerce view to Electric Bike Company’s exit strategy…but, there’s a caveat…At Electric Bike Company, we take a page from the car industry and we see ourselves, particularly in our cargo e-bike line, as being a transportation company at heart.
How does the car industry drive margins? Service and financing are the obvious ones. These are nuts that our competitors in the D2C e-bike industry haven’t even considered cracking. But our roadmap is all over these opportunities. It includes monthly IoT tracking subscriptions for theft prevention and bike health, recurring maintenance plans, even leasing. All these additions build an ecosystem of revenue streams around our core product, helping customers care for and extend the life of the e-bikes they love so much.
When our competitor’s idea or recurring revenue is selling you a cheap bike…and then another one a few years later when that one is spent…we’re doing it differently. And we know that when we go to exit, these differentiators will drive up our multiples.
Up next- our moat. An exit plan is table stakes, but the moat. That’s where it really gets interesting….
Competitive Landscape and Moat
Our industry’s “Cambrian moment”
I mentioned that at EBC, we like to look outside of e-bikes for transportation generally, and we try to take a page from the car industry: where is it a useful model? Where can micromobility massively disrupt it?
Back in the early days of the car industry, there were 100s of brands. We know which ones survived, and we’ve become familiar with this pattern: new technology leads to “Cambrian moment” where tons of competitors emerge, until (1) competition and (2) market forces, and (3) regulation go to work…until only the strongest survive.
Market Forces
Let’s talk about each these 3 factors, starting with market forces-
The e-bike industry’s Cambrian moment is coming to an end, and the survivors are emerging. 115 e-bike companies either went out of business or left the e-bike industry last year. And import records show about 300 companies imported e-bikes in 2023, so we estimate that more than one third of our competitors were eliminated in 2024, and this trend will continue in 2025.
Why is that? Are e-bikes a bad business to be in? Not at all. The pandemic boom + bust buying cycle tested the mettle of our industry. It separated agile brands from the slow.
So why has Electric Bike Company been able to survive and thrive when others have not? We’re incredibly fast acting. Most e-bike brands scaled up massively to meet the pandemic demand, but when the writing was on the wall that the bubble had burst, they were reluctant to adapt. They let massive overhead remain, and didn’t make the hard choices fast enough.
At EBC, our P+L talks, and we listen. This has allowed us to adapt to market forces ahead of competitors.
Competitive Landscape
And speaking of competitors, let’s talk about them too. I’m usually outnumbered 20:1 as a woman at most bike industry and micromobility industry events. A similar ratio would apply to the backgrounds of my fellow executives vs. mine as an e-commerce entrepreneur. So as a double outsider, here’s one of the first things I learned about our niche:
Most bike brands are run by former competitive racers or professional cyclists. This makes them loath to innovate on e-bikes where they favor “acoustic” bikes and romanticize sport. A huge advantage for me, coming at this problem as a mom thinking about the much larger market of household transportation. Our models make more sense for daily life. Our colors and design possibilities intentionally speak to both genders instead of being an after thought.
Our Long Term Approach Stays Ahead of Regulation
Our perspective also puts us way ahead of the curve on safety and regulation. Regulation. Driver #3 of the selective extinction that follows any Cambrian explosion.
Low-cost, high-risk brands with shoddy oversight on battery production have been responsible for most e-bike fires, sewing the seeds of their own demise. The CPSC regulation and push for UL-certification has forced many players out—either because they’re unwilling or unable to bear the costs of testing to these standards.
Electric Bike Company’s founder happens to have a product liability attorney for a partner, so consumer safety and brand risk management have always been at the forefront of our thinking. A key long term play for our mutual long-term interest. Where other brands have had high profile accidents tarnish trust with consumers, Electric Bike Company has taken a different approach.
Our Safety focus mitigates risk and builds brand equity
We ship our e-bikes fully inspected and built…while our competitors ship bikes 85% assembled and cross fingers that their manuals and Youtube videos will be enough for a consumer to safely complete that last 15%. That last 15% includes a lot of critical tuning, like putting on the front wheel, and ensuring it is properly locked in place and has perfect contact with brake calipers. Brake failure and front wheel incidents are two very key drivers of e-bike accidents.
We’ve insured against the most important risks to human life, but we’re also building brand value as well. Because not only is e-bike self assembly risky for a “lay person,” but it is also insanely frustrating for the average consumer. As e-bikes go from early adopter bike enthusiasts, to everyday people, self assembly becomes an increasingly larger risk to brand and safety.
Why doesn’t everyone ship assembled? Because it costs more. Why does it cost more? Because all our competitors manufacture in Asia, and every inch of density counts when you’re packing a container. (There are other factors too, but book a call with us if you want to go deep here.)
Our Moat
So what’s our moat? Sure, it’s customization. No one else does that. Sure we have IP, like registered trademarks for “E-cruiser, E-helmet and The Electric Bike Company, as well as proprietary hardware and software that enables our unique customer experience. But the way these things work together in tandem with our decade head start in American manufacturing…and how all this dovetails with our leadership on consumer safety. The sum total puts us in a league of our own.
We’re not forced to race to the bottom on price, or to one up each other with tiny feature upgrades that can be copied the next season. We’ve built a lasting brand that’s synonymous with quality, safety and putting the consumer first. It’s why our customer acquisition costs are so low, and our organic traffic is so high. Our customers have let the word out, and now our investors have the opportunity to turn up their volume.
Customer Pain Points and Market Size
We’ve now arrived at the last of the big three questions: How big is the market opportunity? To contextualize this question, we’re going to look at some macro trends in mobility to get a view to where the sector is headed, as well as hard data on where we sit right now
The Micromobility Market Today
McKinsey published an updated view of the Micromobility space just a few weeks ago. McKinsey’s report valued the total market value of micromobility in North America alone 2022 at $20 billion, and forecast it will nearly double by 2030 to $35 billion.
So what are the factors pushing up the market size so quickly? We’ll cover some of the macro trends in mobility that are driving the growth of this sector.
Macro Trend #1- Rising Costs of Car Ownership
Tariffs notwithstanding, the cost of car ownership is increasing dramatically. It’s not just the price of vehicles themselves. It’s the cost of maintenance, fuel, insurance, and more.
My next door neighbors have 3 kids, 2 cargo bikes, and 1 car. Why is that when they make good money in professional careers? For them, a second car just doesn’t provide enough utility or improvement in quality of life to justify the cost.
#2- Urbanization and Quality of Life
My neighbors are emblematic of changing consumer preferences of the millennial generation: urban living, quality time over stuff, a concern for the environment, and their own physical health. For them, e-bikes answer a lot of key questions:
“Do you want to opt out of traffic, but still live in a vibrant city?”
“Would you like to get more exercise in your day and have a bit more time outside?
“Would you like to buy something that not only makes your life easier, but is also good for the planet—oh and your pocketbook too?”
#3 Cars are Losing Their Prestige
Like homeownership, car ownership used to be part and parcel of the American Dream. But as the younger generation grows up in the age of app-based mobility, not only are they less interested in owning a vehicle, they’re less interested in driving period:
Micromobility options like scooters and e-bikes play a big role in changing consumer preferences, as the car goes from status symbol, to just one of many ways to get around.
So between rising costs of car ownership, urbanization, and changing consumer preferences, etc…what kind of growth can we expect for e-bikes specifically?
People for Bikes, the main industry advocate in our space, updates their forecasts regularly, as do e-mobility advisor like Ecycle Electric. Both forecasts look about the same: in a conservative scenario, e-bike sales double by 2030. In an optimistic scenario, nearly 4x growth is projected.
Given the rapid expansion of this market, we’d love for you to come along on the ride with us.
