Finnish employee bike benefit service Vapaus secured a €15 million loan earlier this year.
Two weeks ago, the firm got another €10 million in equity.
With €25 million in the space of six months, coupled with sixfold growth in two years – what is Vapaus’ secret recipe for growing a new mobility startup today?
Zag turns to CEO Tero Era to find out.
Zag Daily: Can you take us through Vapaus’ business model?
Tero: “Our business model is B2B2C. Companies are our first clients and their employees are our end users. We give companies the whole package from financing the bikes, insuring them, to handling the permissions, information and integrations to payroll, and the HR system. We’re building this scalable model and developing our own software to serve different stakeholders in the value chain, from employees to bike shops that provide the bikes and annual service. In Finland, we’re already serving over 1,600 companies ranging from small SMEs to big international firms.”
Zag Daily: If I’m a business owner, how does your platform work in practice then?
Tero: “You would choose the benefit bike service scope that best suits your employee’s needs, and a framework agreement is made with Vapaus to launch the bike benefit. Your employees can then create a personal account on the Vapaus User app and order a bike through our extensive network of bike shop partners. Our partner bike shops have individual access to our system on the Vapaus Partner app. This access means employees can get their dream bike on the same day. They don’t need to wait for permissions because there’s already an agreement in place and they’re immediately eligible for the benefits.
“I want to stress that we only cooperate with reputable manufacturers and suppliers who represent known brands. The bicycles and equipment of these manufacturers are sustainably produced and can be either repaired, reused, or correctly recycled at the end of their lifespan. The employer always has up-to-date information and reports of the active bike contracts in the Vapaus Admin app, including the coming and expired benefit bike contracts. Vapaus bears the risk of the leasing contract and offers flexible terms which lets employees return the bike to us or exchange it for a fee of €260 without any compelling reason. We’ve also developed a unique PreCycled concept for returned bikes which are then refurbished and sold in our own webstore (precycled.io).”
Zag Daily: Is this PreCycled concept one of your core differentiators in the market?
Tero: “Yes, we started this concept in 2021 because we wanted to give a new life to returned benefit bikes. Vapaus stands behind its values of continuing to make the world a better place by extending the lifespan of bikes, and that means ensuring resource efficiency by keeping the bikes in active use once produced.
“We take very good care of the returned bikes before listing them as PreCycled on our webshop. We mainly sell them as benefit bikes, and the employee has the opportunity to get a top-of-the-line bike at a lower price than the market price. However, people can buy any Vapaus Precycled bike as a direct purchase too, to use as a personal bike rather than a benefit bike with a leasing contract.”
Zag Daily: Presumably the second-hand bikes are given a checkup?
Tero: “Right, all bikes go through maintenance checkups and worn parts are replaced ensuring a smooth ride for the next user, and all PreCycled bikes come with a 12-month warranty regardless of their manufacturing year. The condition of the PreCycled bikes varies, so we implemented a ‘Precycled condition rating’ to make it easier for customers to find what they’re looking for. The PreCycled concept, the warranty, and flexible returns, makes Vapaus a unique player in the Nordic markets and across Europe too.”
Zag Daily: Now the big question – how have you achieved sixfold growth?
Tero: “It’s been a combination of the right people, a scalable business model and a relentless focus on software development for efficient operations.
“Let me break that down a bit more. On the software side, we have successfully automated the sign up process, which covers payroll, invoicing, logistics, insurance, and financing. So it is a super slick process to bring a new customer on board and doesn’t take up much bandwidth. And we can take on customers of any size. When you scale up to thousands of bikes you need to ensure smooth operations to serve all the different stakeholders. Our software supports us as we move into new international markets too, easily streamlining it to follow local incentive models, currencies and tax codes. Those national policies can be challenging for international expansion, but we have a platform that lets us modify the product offering and smoothly scale up.
“Finally it is about good timing. The company was founded when the bike trend, e-bikes and company bikes were starting to take off and before the incentives for employee bike benefits were introduced in Finland. Now, the new mobility sector offers great possibilities for companies who can develop a scalable business model and demonstrate a clear path to profitability – that is the key.”
Zag Daily: Vapaus plans to invest part of its latest €10 million funding into its PreCycled concept. Where else will you be focusing your efforts with this funding over the next six months?
Tero: “This equity-based funding will support our international expansion, software development, and platform automation. During the next six months, we will continue scaling up in Finland and Sweden, develop our platform, strengthen our team and make decisions about the next markets with targets already in place.”
Zag Daily: You’ve said this new €10 million round can unlock a total of €50 million funding for Vapaus. How?
Tero: “Earlier this year Vapaus secured a €15 million loan for 2024. It’s intended to drive growth and international expansion in employee benefit bikes. This loan arrangement for scaling up in Finland and Sweden can be complemented by optional extensions in years beyond 2024.
“We’re concisely transforming our financing model, with the primary goal of enhancing our overall customer experience. This means taking more bikes into our own balance sheet instead of relying too heavily on providing bike-based leasing through third parties. Simplifying contract requirements and total stakeholder counts streamline our processes and allow us to offer better experience for our business customers.
“The loan arrangement was a significant proof-point for our PreCycled based business model’s ability to create and service employer liabilities. Going forward, it is about capital structure balance and liquidity levers. Our €10 million equity A-round in August, combined with solid operative performance in coming years, can potentially with future debt arrangements unlock a total of €50 million funding for Vapaus.”
Zag Daily: Where is Vapaus looking to expand?
Tero: “For example Austria, France and Belgium. We haven’t made any decisions yet but they’re interesting markets. Cycling is strong in those countries, and there are incentives in place and room for growth and new players.
“Overall, company bikes is a fast-growing space and I think we’ll all be surprised by the role they play in the near future. Interest among companies and also within the public sector is increasing in Finland with cities, municipalities and universities wanting to highlight Environmental, Social and Governance (ESG) in their operations, and improve their sustainability credentials. Company bikes are great for every level of ESG. With a bike benefit the organisations can easily influence an individual’s work and leisure time mobility choices and there’s a direct impact on one’s health and traffic emissions. Employees get to feel the benefits on the first day they start commuting by bike, from the exercise and fresh air they get to the mental improvements and starting the day with a more innovative mind.”
