The e-bike market in America has become a brave new player. On the back of closing its $7.4 million Series A financing, Velotric announced this week that it will double expansion in the United States with its privately owned e-bikes.
The new round boosts the year-old startup’s total funding to $12 million. The sum seems paltry compared to the $320 million that most famous player Rad Power has amassed, considering 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 excellent electric bikes for off-road commuting and adventure for under $2,000, didn’t come from anywhere. It’s a new project for Adam Zhang, hardware co-founder of Lime, the shared e-scooter company that’s gearing up for an IPO; Xiao Xiaotao, who managed the research and development of Lime Devices; and Sun Chen, the former chief designer of the Chinese ride-on company, praising bike giant Didi’s shared program. The team is also made up of former employees of leading bike brands Giant, Specialized and Decathlon.
Zhang’s founders at Lime also believe in the young startup. Brad Bao, current CEO of Lime, and Toby Sun, former CEO of the mobility company, participated in Velotric’s Series A funding round. Other investors include Redpoint China Ventures, Fosun RZ Capital and Uphonest.
Investors rely on the team’s deep experience in Lime’s hardware design, production and supply chain management in China to create a competitive advantage.
“Most of the e-bike companies [that] Raising a lot of money in the past years was overly optimistic about stock management and market growth,” Zhang told TechCrunch.
“Because of our proven expertise at Lime, we have tighter control over our supply chain than most of our competitors, which means more efficiency in logistics, inventory 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 Velotric delivers orders to factories until they start shipping to customers, compared to the typical 150 to 180 day cycle of other bike makers, Chang claims. They also run the core components of their bikes outright—parts that cost more than $10 with a lead time of more than 30 days. This means that the manufacturer can be bypassed for direct control over bike parts quality and order planning.
“We also have relatively good payment terms with our suppliers so we can achieve rapid growth with less capital,” he adds.
Finally, Velotric is proud of its proprietary technology, which it says makes a noticeable difference in the rider’s experience. With half of its 74 employees engaged in research and development, the company develops its motor and battery management system (BMS) in-house, distinguishing itself from most brands that assemble parts from original equipment manufacturers (OEMs).
This set of self-developed components, along with Velotric’s enhanced algorithm, results in “more torque, range and energy efficiency” in its bikes, Zhang claims. Current e-bike models from Velotric have a range that is 50% longer than similar products on the market.
Velotric’s heavy investment in research and development is likely to put pressure on profit margins, but the team seems happy with its growth so far. It booked $15 million in revenue from May through December last year, and sold more than 10,000 units. The brand has managed to attract an above-average user base — 38%, which it attributes to its more aesthetically pleasing color options. About 60% of buyers are between the ages of 35-54.
Velotric has been selling bikes through direct-to-consumer channels like its website, but it’s increasingly working on closer relationships with independent bike dealers. Between November 2022 and February 2023, the number of retail partners has grown from 21 to 144. By 2023, it expects its bikes to hit the shelves of more than 600 stores in the United States.