E-bike drive system brand Revonte was forced to file for bankruptcy one year ago. Since the launch of the product 5 years earlier, the company received a lot of positive feedback from industry peers. OEM's welcomed the Revonte ONE as the next generation drive system for e-bikes. Still Revonte didn't make it, even while the e-bike market was thriving. For the first time, co-founder and former CEO Otto Chrons shares his Revonte story and the lessons learned.

Can you take us through the various stages of Revonte from start-up to bankruptcy?

Revonte operated with a very small team, a maximum of 15 people. The talented team was very eager to make this successful. As a bunch of bike enthusiasts we wanted to make a difference in the e-bike industry. None of us had ever built anything like this before and we did not come from the automotive industry. None of us had ever worked on e-bike motors or transmissions. On the other hand, we were not prepossessed, which was good. We had a very fresh outlook of how to get things going. Our first big obstacle was that we had no good working product to show. We just had some very early prototypes to demonstrate the principle. With that we had to find funding from venture capitalists as we were unknown in the industry. We couldn't really get financing from industry players at that time.

 Together with some government support the first investment was just enough to build our first functional prototype which we presented a Eurobike 2019. It worked well enough that we could demonstrate it to a few people. We were also able to raise some more money. Sometimes it surprises me to read that other companies invest €10 million to develop a standard e-bike motor. How could you spend so much money on such a simple product, when ours came with very complicated software?

How did COVID impact the introduction of your production on the market?

Our initial success in 2019 made it possible to continue the development effort. We also came across our first major problem: how and where to find a good manufacturer. As I said, we had no experience or background in this, and it became a quick learning process. The bigger manufacturing companies were not interested in working with a start-up. The only option we were left with were suppliers in China who typically don't care about you as long as you pay the bill. It was our only solution to get products on the market.

Due to our relatively small financial base we had to move fast, and usually Chinese companies can help you quickly. Sometimes the quality is not so great, but in the prototyping phase that's not super critical. When we wanted to move forward in the beginning of 2020, the world was hit by corona. Especially many of our suppliers in China had to shut down their factory for months. This created a huge problem for us. The availability of electronic components went down and the prices sky-high. For example, some components we used were supposed to be around €5. These went up to €100. Nobody was prepared for this situation. 2020 became an incredibly challenging period for us because we were hindered by external factors, preventing us from getting the next generation of the motor up and running. We were not even able to visit potential bike OEMs and demonstrate our product. Because we could not move in any direction, and we were running out of money quickly without the support of a big company or the possibility for another funding round. We knew from others in the industry that their product development was also heavily delayed. It all comes down to having all the stars aligned in the right way. However, our progress in product development and the confirmation we received from brands testing the system kept us convinced that we were moving in the right direction.

With your background in software, could you assess the differences between the software and e-bike industry?

These two industries are quintessentially different. As a software developer you make a minimum viable product quite fast. Usually, you just do the features that are the most important and you can start generating revenue. From there on you can start adding features. In the case of physical products and especially in the e-bike industry, you need to come up with a 100% tested and finished product. Another challenge for this industry is the small size of the companies. Even the big brands and component manufacturers are small compared to other industries. As a result, start-ups always need to find more than one customer, otherwise you never can make enough volume.

In 2022 the e-bike market already started to cool down, although the industry was still growing bit by bit. The venture capital market was also slowing down and 2022 turned out to be the most difficult year to get funding. At that time, we were in a position to generate sales, but our potential customers were avoiding risks by making sure that whatever they have in stock could also be shipped to the market.

In 2022 hGears became the production partner of Revonte. Having them as a manufacturing part was super important from a validation point of view. Until than we were a small startup from Finland that had never manufactured anything and had not considered the manufacturability of the drive system. Together with hGears we made sure it could be manufactured easily and at lower costs.

In late 2022 we could start to work on the 2.0 version and that is what we told our investors and potential customers. Eurobike 2023 was our last opportunity to visit our contacts with the product, offering them for testing. Everybody was very interested, but the industry was already in such bad shape and our financial situation so difficult, that filing for bankruptcy in September 2023 was our only option. How big the interest from the industry was became clear when we put the IP on auction. More than 50 parties reported an interest, and it was finally sold to a bicycle industry player. 

What time schedule did you initially have to take the Revonte ONE to the market?

We definitely expected everything to move a lot faster. At Eurobike 2019 we projected to be ready for production in late 2020. But of course we were also expecting to make iterations to get to that point. In retrospect we can say that our expectations were probably not very realistic because, like I said, we didn't have the experience of working in this kind of industry. It surprised us how slow everything is. I mean it's not slow because it needs to be slow. The whole industry works at a certain kind of pace. As a start-up you need to adjust all the time to avoid that investments are becoming too high.

Probably the bigger manufacturers who are entering the e-bike market have sufficient financial resources. DJI who launched its e-bike product at Eurobike is such a big company. They come from the drones and camera industry and are used to making improvements at a high pace. But even for them I doubt if that background will make them successful. The slow pace in the industry is also the reason why so many new system suppliers presented themselves at Eurobike. Many of them don't make it.

 You could ask yourself what has changed since 2019? Nobody has really pushed the envelope. 2-3 big players are very dominant on the e-bike motor market. For a product manager it is a safe bet to specify Bosch or Shimano. It is like in the old days with IBM, nobody got fired for buying them. It might not have been the best, but it was always the same choice. Bosch and Shimano have the same kind of position. Some brands, like Specialized, designed their own system in cooperation with Brose. But honestly said, they are too small to run and develop their own platform. Even Giant specifies customized Yamaha's drive systems, even though they are among the biggest players.

How important was putting up a service network for OEMs?

The number 1 question from the OEMs was: how do you handle the service? For us it would not have been possible to have a physical service network. So we started building a virtual service network in such a way that there were no serviceable parts in the motor itself. The only service was to replace the broken system. A diagnostic app would be available for dealers to check the motor locally first, but we never got that far. A lot of issues can be diagnosed remotely, there are a lot of examples from the automotive industry that the e-bike industry could follow. Even for the automotive industry it is not easy, let alone for the e-bike brands, because they don't take the software approach in their product development. The e-bike brands are too small for that and it is not in their DNA. I predict that software will become more and more important for e-bikes. Although they failed, the software features were already a big selling point for VanMoof. Despite their initial success, not many in the e-bike industry are taking software seriously.

What would you have done differently with Revonte in retrospect?

We should have reacted faster to finding alternative suppliers when COVID started creating delays. We also should have realised in an earlier stage that we needed an industrial partner. The validation by hGears was super important to be taken seriously by the market. If we had done this two years earlier, it would have helped us a lot. Next is that making prototype parts with Chinese suppliers is something different than building 100,000 units a year. It was also complicated for us to find the right partners. These are not available in Finland and we had to go to central Europe. We talked to a lot of companies in Finland to have the kind of global sourcing, but none of them could help us.

 We were also trying to do too many things ourselves with a small team of 15 people: the motor, the mobile apps, the software services, the handlebar controller, a battery project and so on. That was too ambitious, we should have focused on our main selling point. In the end, the Revonte ONE was produced in a small series and distributed to a few customers in Finland. These e-bikes are mainly used by municipalities and kindergartens.

Lessons learned from Revonte's demise:

• Focus on your unique selling points
• As a start-up, don't try to do everything yourself
• Find validation partners in the industry
• Adapt your start-up to the introduction pace of the e-bike industry
• Be prepared for any disruption as the industry works with long distance supply chains