The e-bike market in America is getting a brave new player. Off the back of its $7.4 million Series A funding close, Velotric announced this week that it will be doubling down on U.S. expansion with its privately owned e-bikes.
The new round boosts the one-year-old startup's total financing to $12 million. The amount seems paltry compared to the $320 million that more established player Rad Power has raised, taking into account that this is a cash-intensive manufacturing business. But Velotric believes it has the secret sauce for managing cash flow while producing competitive products.
The startup, which makes premium electric bicycles for commutes and off-road adventures for less than $2,000, didn't come from nowhere. It's the new venture of Adam Zhang, the hardware co-founder of Lime, the shared e-scooter company that is gearing up for an IPO; Eric Xiao, who managed Lime's hardware R&D; and Jerry Sun, former chief designer of Chinese ride hailing giant Didi's shared-bike program. The team also consists of former employees from leading bike brands Giant, Specialized and Decathlon.
Zhang's co-founders at Lime are also vouching for the young startup. Brad Bao and Toby Sun, who served as the CEO of the mobility startup at different points, both participated in Velotric's Series A financing round. Other investors included Redpoint China Ventures, Fosun RZ Capital and Uphonest.
The investors are counting on the team's deep experience in managing hardware design, production and supply chain for Lime in China to create a competitive edge.
"Most e-bike companies [that] raised a lot of money in the past years were way too optimistic about stock management and market growth," Zhang tells TechCrunch.
"Given our proven experiences at Lime, we have tighter control of our supply chain compared to most of our competitors, which means more efficiency in logistics, stock management, manufacturing management and cash management," he continues. "These are all important factors that are key to a successful consumer business with a healthy cash flow."
For example, it takes just 85 days from the point that Velotric places orders with factories to when it starts shipping to customers, compared to the typical cycle of 150-180 days from other plug-in bike makers, Zhang claims. It also directly manages its bikes' core components -- parts that cost more than $10 and with a lead time of more than 30 days. That means it can bypass the manufacturer to directly control the quality of bike parts and order planning.
"We also have relatively good payment terms with our suppliers so we can achieve rapid growth with less capital," he adds.
Lastly, Velotric prides itself on its proprietary technologies, which it argues make a noticeable difference in rider experience. With half of its 74 employees working on R&D, the company develops its motor and battery management system (BMS) in-house, setting itself apart from most brands that assemble parts from original equipment manufacturers (OEMs).
This suite of self-developed components, coupled with Velotric's booster algorithm, leads to "more torque, range and power efficiency" in its bikes, Zhang claims. Velotric's current e-bike models boast a 50% longer range than similar products on the market.
Velotric's heavy R&D investment is likely putting a squeeze on profit margins, but the team seems pleased with its growth so far. It booked revenues of $15 million from May through December last year, selling over 10,000 units. The brand manages to attract a higher-than-average female user base -- 38%, which it attributes to its more aesthetically appealing color options. About 60% of its buyers are from the age of 35-54.
Velotric has been selling bikes through direct-to-consumer channels like its website but is increasingly tightening ties with independent bike dealers. Between November 2022 and February 2023, its number of retail partners grew from 21 to 144. By 2023, it expects its bikes to hit the shelves of more than 600 stores in the U.S.
Updated on March 2, 2023 to correct Brad Bao's title.