By Zag industry expert Lars Christian Grødem-Olsen, an Advisor for Movability on new mobility and former Country Manager at Tier
Soundcloud founder Eric Quidenus-Wahlforss faced a new set of challenges when he shifted from software to hardware to build e-bike subscription startup Dance.
Throw in the Covid pandemic, market education and all the financial pressures and it’s an entirely different ballpark for developing a company.
Yet with more than 10,000 members and a presence in five European cities, the German e-bike company is transforming the landscape and bringing ease to the cycling experience.
Zag: What were some of the greatest challenges you faced when starting Dance?
Eric: “Neither my co-founder Christian nor I, despite our passion for bikes, had prior experience in building them. When we started, we focused on the pieces that we were familiar with – software, brand building, growth strategies – and partnered with someone on the hardware side. When we ran a pilot in 2020, none of the bikes worked. This is when we realised we had to build our own. But doing that in 2020 was really tough because you had this massive bike boom. Everyone was backlogged. Global logistics was disrupted.”
Zag: How long did it take to build your own bikes?
Eric: “18 months. We started shipping to the first customers in Berlin two years ago. We launched across five cities, and properly launched Berlin in March and April of last year. In the first few months we had a bunch of running changes where we went back to the production line to alter things, make sure that it worked, then go and change it on the vehicles in the field. Christian and myself are experienced company builders, but this was hard.”
Zag: It’s really impressive how you built such a reliable product and service through small iterations. What are your current challenges?
Eric: “Now that we have the bike, it’s a market education challenge. How do we get people to understand there is a better way? If your e-bike breaks or gets stolen, it doesn’t have to cost you weeks of waiting to get a replacement. Very few people are even aware there is a solution like Dance out there.”
Zag: Is it just a matter of getting information out there, or is it also convincing users that ownership isn’t worth it?
Eric: “There are two levers we have been using. One is word of mouth. If a customer has an issue, how can we create delight around that experience? We have an NPS score over 65 and a lot of people telling their friends about us. This network effect is very powerful.
“The other lever is Dance for Business. In France, a very large share of members come through companies because there is an FMD (Fife Mobility Durable) benefit that employees are leveraging there. In Germany, we have framework agreements with every partner, including some big ones like Google, About You and HelloFresh.”
Zag: Can you break down the business model of subscription e-bikes? There’s the investment in vehicles, technology, operational delivery, and customer service. How does it work and how do you control costs?
Eric: “It is very complex when you get into the weeds. There’s the hardware itself. There’s a degree of financial engineering to bankroll that, and then to leverage debt for expansion. Most of our cost base, and our ability to improve it, comes through operations: delivering/picking up vehicles, moving them around, repairing them, servicing them, and insurance.
“For example, in Paris, we work with a tech-enabled garage company called Yes Park. Customers access the garage with an app, pick their bike up with a QR code, onboard using a video, and ride away. Until recently, we were using personnel. Now everything is contactless. We can optimise logistic routes, pick up and deliver to only a few spots, and do it in the off hours. We’re also constantly improving things like route planning and minimising the amount of people involved.
“Servicing is still in-field. The vast majority of our repairs are through mobile mechanics. If a vehicle cannot be serviced in the field, we replace it with a new one. We are also learning everything about every single repair, what breaks down, how we can improve it, so we can continue to iterate.”
Zag: I’m really curious about scalability, especially considering the density requirement for personnel-based services in big cities. How do you envision scaling to different cities, especially smaller ones, like Tier 2 cities?
Eric: “Big, dense, trendsetting cities are where the model works best and we’ve seen significant interest based on our waitlist. We’re becoming one of the biggest fleet operators in Paris with over 10,000 members. However, we are also looking at the trade-off between service level and footprint to make sure that the model can also work with a lower level of subscribers. In larger cities, it will be tens of thousands. In small cities, it might be low thousands, or even one thousand. I think over time, there needs to be different tiers of service levels.”
Zag: In other words, maybe in a smaller city, you go to the mechanic instead of them coming to you, or maybe having to pick up the vehicle in one area instead of five?
Eric: “Exactly. It’s about minimising fixed costs by having a smaller footprint and cutting variable costs by involving fewer people.”
Zag: What are your scale ambitions?
Eric: “We’re still focused on the cities where we are present. There’s financial pressure to prove unit economics and that the model works. We have learned a lot, but there’s more to refine before we reach a first level of scale where everything works as intended. The long-term vision could involve expanding to more cities, but that’s a journey for the future.”
Zag: Given your background with sustainability, have you conducted user research on how a subscription of an e-bike might replace car rides?
Eric: “There was a surprising amount of car owners who were replacing car trips. We think the early adopters are people who already ride a bike and are familiar with the pain points, which makes it easier to move into the subscription model. We’re planning another round of surveys for validation, but the biggest buckets we saw were already diversions from cars and public transport.”
Zag: The CEO of Ruter, mentioned in a recent conversation, the need for a near-car experience, which seems aligned with your approach. Could you share insights on how you minimise pains for users, especially with your focus on service?
Eric: “Riding an e-bike is generally a healthy, joyful experience. You’re outdoors, you get cargo space, you can even bring your kids. I ride with my three-and-a-half-year-old son every day to his Kita, even when it’s snowing. It’s actually really nice riding in winter if you have the right clothes. Overcoming the discomfort around the riding experience is crucial.
“A surprising amount of people also associate owning a bike with some level of pain. They’ve had bad experiences, or think bikes are annoying compared to cars. Except cars just have a slightly different set of problems. That’s why there are car subscriptions. We are trying to do the same thing, make it as simple as possible to have a great experience riding a bike. But individuals still have to get a little out of their comfort zones to make that commitment.”
Zag: Do you have an idea yet about how long these bikes last?
Eric: “From an accounting perspective, we depreciate the e-bikes over three years. In reality, they can last many more years if they are well-built and well-maintained, which gives our business model a lot of upside. We are also a circular economy company. We want to use these assets for as long as possible, so it’s in our interest to extend that lifespan.”
Zag: Some players find it challenging to obtain debt to pay for the vehicles. How do you make the argument about the resale value of the assets, especially in the event of a default?
Eric: “There is the residual value of the vehicles themselves, but there’s also the value of the customer base. In the case of a bankruptcy, a backup operator could step in and keep revenue flowing. That becomes much easier to sell once you’re a well-performing, recurring revenue business with high predictability. We’re building toward that. Eventually, we think it would have to be a large, asset-backed debt facility.
“But, it’s still early on in that journey.”