New York City, home to more than 60,000 delivery workers, has been cracking down on cheap, uncertified electric bikes that have sparked battery fires across the city.
Some e-bike providers may see these regulations as a problem for companies. But the start of electric bike subscription Buzz He sees it as an opportunity.
“I think the market is moving from the Wild West to a mature market,” Mike Peregudov, CEO and co-founder of Whizz, told TechCrunch. “We are lucky to be here right now because after all the regulations are put in place, it will be very difficult to enter this market.”
The New York-based startup claims to offer workers access to safe, high-quality electric bikes for between $139 and $149 a month. Couriers from Grubhub and DoorDash, Whizz’s official partners in New York, can access subscriptions and rent-to-own plans at a 15% discount. Subscriptions include service, maintenance, anti-theft protection and more.
Founded in 2022, Whiz this week raised $12 million to build more electric bicycles, begin producing electric mopeds, and expand beyond New York to other cities, including Boston, Chicago, Miami, Philadelphia, and Washington, DC. The round was split at $5 million. in equity led by Leta Capital and $7 million in debt from Flashpoint VC.
Ultimately, Whiz wants to launch nationally. In the short term, the startup aims to manage 40,000 e-bikes in the New York area over the next three years, up from the 2,500 e-bikes Whiz currently has deployed in New York and Jersey City.
There are few players in the electric bike subscription space in the US. Whizz’s main competitor is zoomo, an Australian startup with a presence in New York and a handful of European cities. Zoomo subscription costs, on average, are around $49 per week or just under $200 per month. Uber Eats couriers get a better deal at $24 per week, or just under $100 per month. Zoomo also works with enterprise customers to offer full fleets.
The lack of disruption in the e-bike subscription space could mean that Whiz is perfectly positioned to gain first-mover advantage. Or it could mean that the e-bike subscription model is hard to get right.
Other consumer-facing micromobility subscriptions in New York have come and gone, such as Beyond’s electric scooter rental offer and charging infrastructure company Revel’s attempt at an electric bike subscription. And as we’ve seen from the numerous failures of shared micromobility companies like Bird and Superpedestrian, hardware as a service (HaaS) is a capital-intensive business. That doesn’t always coincide with the most attractive aspect of subscriptions: an affordable price. The combination of the two opposing forces often results in unimpressive margins.
On the other hand, subscriptions have the benefit of generating repeat revenue, which can be leveraged to improve margins as long as a company keeps its operations agile and efficient.
Whiz says this is where he can shine. The startup has relied on its proprietary software that streamlines operations and a bootstrapping culture to grow 3.5x year-over-year and reach annual recurring revenue (ARR) of more than $8 million in May. ARR is a revenue projection for the year based on the number of current and expected customers.
Peregudov also says Whiz will be EBITDA positive in two to three months and fully profitable in nine months.
The CEO and his co-founders came to New York from Russia a few years ago after founding and selling subscription-based businesses. Peregudov built Partiya Edy, a meal kit delivery service, and I sold it to Yandex in 2019 for 25 million dollars. Its co-founders, Alex Mironov, Ksenia Proka and Artem Serbovka, built and sold an e-bike subscription platform, Moy Device, to a private equity firm in Russia.
“We never raised hundreds of millions and I think in this kind of business that could be dangerous,” Peregudov said. “We’ve seen companies that have raised $100 million and then try to scale up. “This business is not about lightning scaling.”
Using software to improve unit economics
Peregudov says the most important part of Whizz’s business is its proprietary “enterprise resource management” (ERP) system, the software that powers the back end and protects Whizz’s assets. The CEO says this software helps Whiz reduce costs by 35%, achieve an 85% fleet utilization rate and “improve margins at every step.”
The software provides analytics on everything from how long it takes to complete a repair to how IoT can help manage warehouse logistics, from information about all bikes and customers in the system to revenue and payment management. Whizz’s system can even remotely control parts of the bikes to lock them in case of theft.
Another aspect of Whizz’s software is its internal scoring model, which the startup uses to ensure it rents bikes to responsible people. “This scoring system is based on artificial intelligence with more than 50 parameters and is like a bank credit score,” Peregudov said. “These people are mostly immigrants and we are probably the only company in the market that can qualify them because banks don’t do that. That’s why these guys don’t have credit scores. “Our bikes are often the only affordable transportation option for them.”
Electric bicycles, batteries and quality service.
Whizz e-bikes are also designed in-house specifically to service food delivery workers. Peregudov claims the bikes are reliable enough to travel up to 1,000 miles per month and have large batteries to allow couriers to drive further and therefore earn more. The batteries, he says, are UL certified and built with Samsung cells.
Workers in New York can visit one of five Whizz centers to pick up bikes and have them repaired or replaced in 30 minutes or less. The centers are located in Midtown, Union Square, Harlem and Brooklyn, with a fifth coming this week to Jersey City.
Whiz also says it offers customer service in six languages: English, Spanish, French, Turkish, Arabic and Russian.
The biggest hurdle in Whiz’s future plans is the fact that all of its bikes and batteries are assembled in China. The Biden administration recently announced new tariffs on Chinese imports, including electric bikes and batteries, which will be subject to a Price increase of 25%. Peregudov says he is not worried because Whiz owns its intellectual property and can move production to a new partner in India or Vietnam.
Can Whiz’s model scale across the United States?
While the e-bike subscription market aimed at delivery workers is still new, it’s no guarantee that Whiz can scale in the U.S. Zoomo, the incumbent, so to speak, has a respectable presence in Europe, but its market share in the United States has declined recently. The startup used to offer its services in San Francisco, but closed there in 2022. Zoomo did not respond to TechCrunch to explain what went wrong.
Whizz’s expansion strategy is two-fold: make its way up the East Coast before expanding nationally and offer new form factors to reach a broader range of delivery workers.
Whizz’s latest round of funding will help the company get on the road by taking on more territory in New York and building a new electric moped. Long term, the startup sees itself potentially adding electric vehicles to the platform for delivery drivers who don’t live in bike-friendly cities, which are few and far between in the US.
Sergey Toporov, a partner at Leta Capital who led Whizz’s equity round, said he invested in the startup because it was able to achieve a large contribution margin on a small scale.
Toporov noted that Leta invests primarily in software companies, so Whizz’s ERP system appeals to him the most because it will help the company stay efficient and organized as it expands its fleet, customers and employee base and incorporates new types of vehicles.
“The hype around micromobility and rapid delivery has passed, and most venture capitalists have turned to other industries. However, we strive to focus on companies with fundamental business value in markets that are not inflated by excess capital,” Toporov said. “We believe Whiz is a hidden gem that will continue to surprise the market.”
