New York City, home to more than 60,000 gig delivery workers, is cracking down on cheap, uncertified electric bikes that have been causing battery fires across the city.
While some e-bike providers might see such restrictions as a business problem, e-bike subscription startup Wiz sees it as an opportunity.
“I think the market is transitioning from the Wild West to a mature market,” Whizz CEO and co-founder Mike Peregudov told TechCrunch. “We're fortunate to be here at this moment, because it's going to be very hard to break into this market once all the regulations are in place.”
The New York-based startup claims to provide gig workers with safe, high-quality electric bikes for $139 to $149 per month. Delivery drivers for Grubhub and DoorDash, Whizz's official partners in New York City, can enjoy a 15% discount on subscription and rental purchase plans. The subscription includes servicing, maintenance, and anti-theft protection.
Founded in 2022, Whizz raised $12 million this week to build out its fleet of electric bikes, begin production of electric mopeds, and expand into other cities beyond New York, including Boston, Chicago, Miami, Philadelphia and Washington, D.C. The round was split between $5 million in equity led by Leta Capital and $7 million in debt from Flashpoint VC.
Wiz eventually wants to expand nationwide: In the short term, the startup aims to manage 40,000 e-bikes around New York City over the next three years, up from the 2,500 that Wiz currently has in New York City and Jersey City.
In the U.S., there are few players in the e-bike subscription market. Whizz's main competitor is Zoomo, an Australian startup with a presence in New York City and several European cities. Zoomo subscriptions cost $49 a week, or just under $200 a month, on average. Uber Eats delivery drivers get a better deal at $24 a week, or just under $100 a month. Zoomo works with corporate clients to provide their entire fleets.
The lack of disruption in the e-bike subscription space could mean Whizz is in the best position to gain first-mover advantage. Or it could mean that an e-bike subscription model is difficult to pull off.
In New York, consumer micromobility subscriptions have come and gone, such as Beyond's electric scooter rental service and charging infrastructure company Revel's attempt at an electric bike subscription. And as the failure of many micromobility sharing companies like Bird and Superpedestrian has shown, hardware as a service (HaaS) is a high capital expenditure business. This doesn't always align with the most attractive aspect of subscriptions: affordability. The combination of these two opposing forces often leads to disappointing profit margins.
On the other hand, subscriptions offer the advantage of repeat revenue, which can be leveraged to improve profit margins as long as companies keep their operations lean and efficient.
Whizz says this is where the company excels: Relying on its proprietary software to streamline operations and a bootstrap culture, the company has grown 3.5x year over year, reaching more than $8 million in annual recurring revenue (ARR) as of May. ARR is a forecast of annual revenue based on current and forecasted customer numbers.
Peregudov also said Wiz should be EBITDA positive within two to three months and fully profitable within nine months.
The CEO and co-founders all came to New York from Russia a few years ago after starting and selling subscription businesses: Peregudov started the meal-kit delivery service Partiya Edy, which he sold to Yandex for $25 million in 2019. Co-founders Alex Mironov, Ksenia Puloka, and Artyom Serbovka started the e-bike subscription platform Moy Device, which he sold to a Russian private equity firm.
“We've never raised hundreds of millions of dollars, and I think that can be risky in this kind of business,” Peregudov said. “I've seen companies raise $100 million and then try to grow exponentially. This is not an exponential business.”
Using Software to Improve Unit Economics
Whizz's software manages the backend, helping e-bike subscription startups achieve strong unit economics. Image credit: Whizz
Peregudov says the most important part of Wizz's business is its proprietary “enterprise resource management” (ERP) system, the software that runs the back end and protects Wizz's assets. He says the software has helped Wizz cut costs by 35 percent, increase vehicle utilization to 85 percent and “improve profit margins at every step.”
The software provides insights into everything from how long repairs take to how IoT can help manage warehouse logistics, to information on every bike and customer in the system to managing revenue and payments. Whizz's system can even remotely disable bike parts if a bike is stolen.
Another aspect of Whizz's software is its in-house scoring model, which the startup uses to make sure it's renting out bikes to responsible people. “This scoring system is AI-enabled, has over 50 parameters, and is like a bank's credit score,” Peregudov says. “We're probably the only company in the market that can score them, because most of these people are immigrants and banks don't do that. So these people don't have a credit score, and our bikes are often their only affordable transportation option.”
High quality electric bikes, batteries and services
Whizz co-founders (l-r): Alex Mironov, Artem Serbovka, Ksenia Proka, Mike Peregudov Image courtesy of Whizz
Wizz's electric bikes are also designed in-house specifically for food delivery workers. Peregudov claims the bikes are reliable enough to travel up to 1,000 miles a month and have larger batteries to help drivers extend their range and earn more. He says the batteries are UL-certified and made with Samsung cells.
Gig workers in New York City can visit any of Wizz's five hubs to pick up a bike and have it repaired or replaced within 30 minutes. Hubs are located in Midtown, Union Square, Harlem and Brooklyn, with a fifth opening in Jersey City this week.
Whizz says it provides customer service in six languages: English, Spanish, French, Turkish, Arabic and Russian.
A big stumbling block for Wizz's future plans is that all of its bikes and batteries are assembled in China. The Biden administration recently announced new tariffs on imports from China, including electric bikes and batteries, which will increase prices by 25%. Peregudov says he's not worried because Wizz owns the intellectual property rights and can move production to a new partner in India or Vietnam.
Can Whizz's model be scaled across the US?
The market for electric bike subscriptions for gig delivery workers is still new, and there's no guarantee Whizz will be able to scale in the U.S. Incumbent Zoomo has a respectable presence in Europe, but its U.S. market share has shrunk recently. The startup once offered a service in San Francisco, but closed down in 2022. Zoomo did not respond to TechCrunch's request for comment to explain what went wrong.
Whizz's expansion strategy is two-fold: first to operate on the East Coast, then go national, and offer new form factors to reach a wider range of delivery drivers.
Wizz's latest funding round will help the company grow its business by expanding in New York City and manufacturing new electric mopeds. In the longer term, the startup also looks to potentially introduce EVs to its platform for delivery workers who don't live in bike-friendly cities in the US.
Sergey Toporov, a partner at Leta Capital, which led WiZ's equity round, said he invested in the startup because it was able to achieve large contribution margins despite being small.
Toporov said Leta invests primarily in software companies, and that With's ERP system was the most attractive because it will help the company stay efficient and organized as it expands its vehicle, customer and employee base and introduces new types of vehicles.
“The hype around micromobility and fast delivery has passed, and most venture capital has pivoted to other industries. But we strive to focus on companies with fundamental business value in markets that aren't bloated by excess capital,” Toporov said. “We believe Wizz is a hidden gem that will continue to amaze the market.”