New York City, home to more than 60,000 delivery workers, has cracked down on cheap, uncertified e-bikes that have led to battery fires across the city.
Some e-bike providers may see such regulations as a problem for business. But e-bike subscription startup Whistle he sees it as an opportunity.
“I think the market is moving from a wild west to a mature market,” Mike Peregudov, CEO and co-founder of Whizz, told TechCrunch. “We’re lucky to be here right now because after all the regulations, it’s going to be very difficult to break into this market.”
The New York-based startup claims to offer gig workers access to safe, high-quality e-bikes priced between $139 and $149 per month. Couriers for Grubhub and DoorDash, Whizz’s official NYC partners, can access memberships and rental 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 e-bikes, start producing e-mopeds and expand beyond New York to other cities including Boston, Chicago, Miami, Philadelphia and Washington. in equity led by Leta Capital and $7 million in debt from Flashpoint VC.
Eventually, Whiz wants to go national. In the short term, the startup aims to operate 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 e-bike subscription space in the US, Whizz’s main competitor is Zoom, an Australian startup with presence in New York and some European cities. Zoomo’s subscription cost, on average, is about $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 provide entire fleets.
The lack of disruption in the e-bike subscription arena could mean Whiz is perfectly positioned to gain a first-mover advantage. Or it could mean that the e-bike subscription model is hard to get right.
Other micromobility subscriptions facing New York consumers have come and gone, such as Beyond’s e-scooter rental offer and trying to charge infrastructure company Revel for an e-bike subscription. And as we’ve seen from the many failures of shared micromobility companies like Bird and Superpedestrian, hardware-as-a-service (HaaS) is a high-capital business. This doesn’t always equate to the most attractive aspect of subscriptions: an affordable price. The combination of the two opposing forces often translates into unimpressive margins.
On the other hand, subscriptions have the advantage of recurring revenue, which can be leveraged to improve profit margins as long as a company keeps operations lean and efficient.
Whiz says this is where he can shine. The startup has built on its proprietary software streamlining operations and bootstrapping culture to grow 3.5x year-over-year and reach annual recurring revenue (ARR) of more than $8 million as of May. ARR is a projection of revenue for the year based on current and expected customer numbers.
Peregudov also says Whiz will be EBITDA positive in 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 founding and selling subscription-based businesses. Peregudov built Partiya Edy, a meal kit delivery service, and sold it to Yandex in 2019 for $25 million. 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 risky,” Peregudov said. “We’ve seen companies that have raised $100 million and then try to scale. This business is not about blitzscaling.”
Use of 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 every step of the way.”
The software provides detailed information on everything from the time it takes to complete a repair to how IoT can help manage warehouse logistics, from information on all bikes and customers in the system to revenue and payment management. Whizz’s system can even remotely control parts of the bikes to brick them in case of theft.
Another aspect of Whizz’s software is its internal rating model, which the startup uses to ensure it’s renting bikes to responsible people. “This scoring system is AI-enabled with more than 50 parameters and is like a bank credit score,” Peregudov said. “These guys are mostly immigrants and we’re probably the only company in the market that can win them over because the banks don’t do that. That’s why these guys don’t have credit scores. Our bikes are often the only option for affordable transportation for them.”
Quality e-bikes, batteries and service
Whizz e-bikes are also designed in-house specifically to serve food delivery workers. Peregudov claims the bikes are reliable enough to ride up to 1,000 miles a month and have large batteries to allow couriers to ride longer and therefore earn more. The batteries, he says, are UL certified and made with Samsung cells.
Gig workers in New York can visit one of Whizz’s five hubs to pick up bikes and have them repaired or replaced in 30 minutes or less. Hubs are located in Midtown, Union Square, Harlem and Brooklyn, with a fifth coming this week in Jersey City.
Whiz also says it offers customer service in six languages: English, Spanish, French, Turkish, Arabic and Russian.
The major obstacle to Whizz’s future plans is the fact that its bikes and batteries are all assembled in China. The Biden administration recently announced new tariffs on Chinese imports, including e-bikes and batteries, which will be subject to 25% price increase. Peregudov says he is not worried because Whiz owns its IP and can transfer production to a new partner in India or Vietnam.
Can the Whizz model scale to the US?
While the e-bike subscription market aimed at gig delivery workers is still new, it’s no guarantee that Whiz will be able to scale to US-based Zoomo, the so-called incumbent has a respectable presence in Europe, but market share of the US has recently shrunk. The startup offered 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: Move to the East Coast before expanding nationally, and offer new form factors to reach a wider range of delivery workers.
Whizz’s latest round of funding will help the company hit the road, breaking ground in New York and building a new e-moped. Longer term, the startup sees itself potentially bringing EVs to the platform for delivery workers who don’t live in bike-friendly cities, of which there are few in the US.
Sergey Toporov, a Leta Capital partner 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 mainly invests in software companies, so Whizz’s ERP system is the one it liked best because it will help the company stay efficient and organized as it scales its fleet, customers and employees, and brings in new types of vehicles.
“The hype around micromobility and fast delivery has worn off and most VCs have turned to other industries. However, we try to focus on companies with fundamental business value in markets that are not bloated by excess capital,” Toporov said. “We believe Whiz is a hidden gem that will continue to surprise the market.”
