Rad Power Bikes founder Mike Radenbaugh on fueling the e-bike revolution

Rad Power Bikes founder Mike Radenbaugh grew up among the Redwood trees on the Lost Coast of Northern California with “tree hugger parents and tree hugger neighbors,” and a life connected to nature. This exposed the founder not only to alternative ways of living that are more responsible to the planet but also to alternative energy. As a young teenager watching the electric vehicle space, Radenbaugh became energized seeing electric motorcycles and cars popping up but was impatient with their slow commercialization.

When Radenbaugh was 15, he built his first e-bike hacking together parts he ordered from Radio Shack and eBay with the money he saved from his job as a bellboy at the one hotel in town. This was back in 2007, and despite his young age, Radenbaugh says this is the year Rad Power Bikes was founded.

“I started advertising in the local newspaper and they gave me the first ad free I think because I went in as this punk kid and they felt sympathy for me,” Radenbaugh told TechCrunch.

Over the next few years, Radenbaugh continued as a sole proprietor building bespoke e-bikes for people who’d reach out looking for something fast and powerful to replace their car journeys. Along the way, he says he really got to understand what it was customers wanted and what was missing from the marketplace.

With all this knowledge and hands-on experience buffering him, in 2015, Radenbaugh relaunched Rad Power Bikes as a direct-to-consumer business. He and his growing team set to work perfecting the business model, adding in company-owned retail stores and mobile service centers around the country, partnering with a big network of bike shops and building a massive-scale supply chain.

Now, the company has 615 staff members with plans to hire more, over 350,000 customers and is producing bikes in six countries. The company’s getting big, and it’s getting big fast, with reported sales in 2019 of $100 million.

That number only increased in 2020, in large part due to the COVID-related boom in e-bike sales generally. Earlier this year, the company raised $150 million to scale globally, the largest funding round of a U.S. electric bike startup. But as the world begins to wrangle coronavirus to a point where cities are opening up, will this boom in e-bike sales last?

We sat down with Radenbaugh to talk about the e-bike revolution, diversifying the supply chain and building a product that’s made for how people want to use it.

The following interview, part of an ongoing series with founders who are building transportation companies, has been edited for length and clarity.

What would you say is different about your business model compared to the competition? Companies like VanMoof have also been scoring large funding rounds lately.

Being user-friendly is consistent across the whole lineup. We popularized fat tires on e-bikes, we popularized throttles on e-bikes, so our customers could have more power. None of those things really existed; they were just super nascent and more part of the DIY community until we commercialized them. So both of those features I think are kind of pivotal to the DNA of our business, and it just so turns out that we just knew something early on that a lot of people didn’t by listening to the customer — that the bike shouldn’t only be pedal assisted. They should be more substantial and really move your butt from point A to point B.

We have a lot of data on competition, and there are a lot of e-bike brands that spend a lot of time on marketing and advertising their businesses. I think we spend more on supply chain, innovation, R&D, team building, expansion and then after-sales service and support. The Rad business is now more than 600 people and more than half of those are customer-facing folks.

The way we think about fueling the revolution is based on building a really robust operational business that can get a lot of bikes out there. That’s why, like I said, we already have 350,000 customers and that number more than doubles every year, so I think that framework is playing out in adoption and the approachability of our brand.

The Rad differentiation is we’re pure direct-to-consumer, so you have that consistent experience across our stores, vans, in person. Value, innovation and standardization on all of our products give you bikes that are designed for the way people want to use them, not the way bikes have been designed for the last hundred years. And then on the standardization you’ve got similar parts across all of our models so that we can bring down the cost for the customer, make our operations more streamlined and ultimately have better, higher-quality and smoother operating products.

The mission-driven nature of business is that this stuff is in my blood. It flows through everyone in this organization; we are all here on that same mission. There are a lot of new entrants into the space that are trying to replicate what Rad does at a much smaller scale, or are in it for more mercenary reasons, and it’s a very different business. It’s just the way we think about building something that really can solve the climate disaster.

How do you think about the full lifecycle, specifically the end of life, of these vehicles? I mean 350,000 customers doubling every year. That’s a lot of bikes that will one day go to landfill.

We are owning that whole chain, all the way to the secondary and tertiary use. Today our mobile service centers and our retail stores service the bikes and get them back out to customers, often as a resell. Longer term we’ll be offering more and more refurbished bikes available for sale, so that’s one piece.

Another thing is just our recycling programs and leadership around battery recycling. These are industries that have grown as fast as the adoption has. We’re placing a lot of our commitments through our service team’s leadership around after-sales support and then finally end up “life-ing” products.

You have raised $150 million this year and $25 million last. Have you raised enough?

I think what’s special about this business is that it’s largely profitable year after year, so we’re able to stand on our own two feet, and that’s all just additive. This isn’t a sort of fund-to-finance inventory like I think most brands would need to do. We use our funding to expand in key growth vectors, so that’s expanding our retail operations, investing more in R&D and new product development, after life and care of battery recycling and taking care of the bikes long term.

Are you saying you are profitable, then?

We don’t want to speak to this year’s profitability because we’re midyear, but we’ve been profitable almost all years of operation.

Do you have plans to raise more in the future?

Being at a strong financial footing and then having the sort of folks we have around the table to support us from the capital side, I think we have a lot of optionality about how we raise and how much we raise in the future. What I would expect is that we will continue to invest big and lean big into hundreds going on thousands of physical locations to go along with our rocking e-commerce experience.

That whole group of investors that we brought around the table are there for the long haul. They have a track record of being with companies for decades and supporting them through different phases of growth. I think it’s really special that we had the first institutional investment ever in an e-bike company of that size, and I think it shows the level of Rad’s maturity where you’ve got a lot of other companies taking on money from sometimes great venture investors but venture investors nonetheless that invest in earlier stages of companies.

It seems like the COVID era was what really pushed the e-bike game forward. Now we’re opening up a little bit and things are going back to some semblance of normalcy. Are you still bullish on e-bike sales going forward?

We’ve been growing triple-digit percentages every year since 2015 and that continues today. This is still an inventory-constrained business, and the industry as a whole is really struggling with supply chain. We’re definitely a part of that, but we’ve just opened up so much diversified supply. I think we’re just forging ahead at a time when others are severely challenged so much so that their growth is slowing this year compared to last.

The European market is 10 times the size of the North American market today, and they are currently relying on a broken supply chain that was never designed to support what’s happening to e-bikes, which is a consumer product revolution. E-bike growth is more like the modern day smartphone of transportation, and the bikes are finally being designed in the way that consumers want to be using them. If you look at an e-bike in Europe, it looks largely like an e-bike but 20, 30, 40 years ago. It’s similarly configured, it’s less about utility, it’s more about basic day-to-day commuting and daily errands. The way we’re thinking about it is through the direct-to-consumer model, through highly utilitarian e-bikes at a great price and through a supply chain that’s super scalable. Then e-bikes can make up not just the majority of people’s trips but almost all of them today. 60% of trips a day are less than five miles. And so, I think you’re just seeing the tip of the iceberg of the bike revolution.

How is your supply chain particularly scalable in comparison to others?

In all countries of production we have Rad-employed product managers, engineers and sourcing professionals on the ground in our factories. We also have director-level leadership across Asia across those same disciplines. So I’d say that’s a big piece of it, just having actual boots on the ground versus consulting or third party. We are heavily involved in our process and invest as such.

Second big one is the diversified and dedicated supply chain. Our factories are Rad only for the most part. There are no other competing brands manufacturing in those facilities, and that allows all focus on Rad. And then on the diversified side, every component we put onto our bikes, we have multiple sources for that part. When the Delta variant was really challenging one of our production facilities in Southeast Asia, we pivoted to a different vendor that’s in a different country of origin. That’s allowed us to ship a phenomenal amount of product this year in a time when e-bikes are missing parts, stuck in ports or stuck somewhere in the supply chain.

The third is just our variety of manufacturing partners … from Tier One electronics manufacturers all the way up to more traditional bike component manufacturers. For any given part we go to a variety of vendors rather than just relying on one format of supply chain.

Are you suffering at all from the semiconductor shortage?

This year field-effect transistors, battery cells, a number of other electronic components have been severely constrained. We’ve done validation work to bring additional components into our footprint, so I think we’ve done a very good job at not letting it affect us like you hear about with automotive companies that shut down entire North American production while they’re waiting for chips. So, it has not affected us as badly as I think some other industries.

What would you say your strategy is at the moment for continuing to grow as a company?

This has been a year of rapid expansion of our customer-facing organization. Each time we open a retail store there’s 40 more people. When we open a mobile service center there’s 10 more people, and that’s a big area of focus for us, just making sure that we can meet customer demand with our customer service teams.

The biggest bottleneck in the supply chain is definitely logistics, so we have a team expansion happening there, so we can keep our bikes highly affordable, highly accessible and in stock. Those are two big areas for us right now.

The innovation engine within the business continues to crank on. We’ve launched dozens of new accessories and multiple new bikes this year. This is a year where you see most e-bike companies clamp down; they’re moving to 18-, 24-, 36-month product release cycles, and we’re launching multiple bikes every single year. We’re able to innovate and launch products in a period where the industry is shuttered compared to years past.

Is there a specific approach to logistics that you’re starting to take or any interesting tech you’re going to use to help you keep track of the supply chain?

We began chartering vessels rather than relying on traditional steamship lines where you lock in containers onto a certain single vessel, which we found to be more futile. Most of our logistics stuff is a bit more proprietary, and it’s another area to sink our sails, providing great tailwinds to our business in this time and why we’re capturing more and more market share every year and especially this year, when other folks are, I think, completely locked out from moving freight. Logistics is becoming one of our secret sauces, but I don’t want to share too much.

You just launched the RadCity 5 Plus, your next-gen city bike, at $1,700. Are you thinking of making a premium bike at some point or does that go against your ethos?

Our Plus lineup is our premium lineup, so if you were to get on this bike and then go get on some bikes of $4,000 or $7,000, the RadCity 5 Plus is better across the board. With the pricing, I think you’re getting the right kind of sticker shock, which is — Wow, it’s so affordable, I can’t really believe it! And that’s why we found retail stores and word of mouth so important to this business. People have been surprised we’re able to build something quickly that’s profitable, that is delivering so much value in an e-bike product. But it’s true, it’s real. I promise.

Do you have any plans to go public?

We have a lot of flexibility, just because of our shareholder base, so we don’t want to announce anything yet, but we have a lot of flexibility in the path that this business takes. We have a really strong shareholder base now that believes deeply in the mission and continues to support us through, before, after, during COVID and these wild times to be operating a business.

Where do you expect to be a year from now?

I hope with the pandemic behind us completely!

When you’re in this stage of growth, there’s so much being built that the world hasn’t seen yet, so that’s what I’m really excited to think about. This time next year we’ll have announced many new business and product innovations. The team is working so hard here, more than 600 strong and that team will be doubled or more by then. All the great work that those people are doing now will be with our customers and helping transform the way people move from point A to point B.

Where will we be specifically in a year? We’ll continue to be the clear front-runners in this space, the clear leaders in the North American e-bike space and we’ll be making a big dent in the e-bike adoption in Europe, as well.