VanMoof bankrupt because of non-scalability

The famous design e-bike brand VanMoof is now declared bankrupt following legal suspension of payment (“surséance”) as it is burning annually as much cash as it has revenues: 85 million euro approximately. The $200 million that it had collected from investors has gone up in smoke. The founding brothers Carlier, Taco and Ties, were great in creating a sexy, high-end mobility brand. But, they appear to have lived in their own distorted reality in which problems have to be fixed with ever growing cash amounts.

Not scalable

The investor cash became part of the problem. Because the management postponed the hard needed business improvements, time after time. The most basic one, is the fact that VanMoof has a negative margin on every bike sold of around -11%. This is already a red flag for scaling the business because more sales will automatically increase the losses. Often believers will argue that there will be purchase benefits when more sales is realized. But, as often that is a pipe dream and a very risky one as well.

The other major red flag was persistent quality problems and a bad after-sales service. One can’t scale a business where bikes, spare parts, and service hours have to be spent on a too high percentage of broken bikes. A Van Moof-specific problem was that its software platform was unstable leading to problems of bikes that couldn’t restart. A local joke to VanMoof bike owners was that they need to be sure at all times that their public transport wallet was loaded.

Apple stoned

Another peculiarity of VanMoof bit them in the arse. They only work with their own VanMoof parts. Of course, this was to become the Apple of the e-bikes industry. The trendy bike brand, definitely had its fair share of believers. But, at the same time, this means that normal bike shops can’t service VanMoof bikes. It also means that they couldn’t rely on quality vendors like Shimano to avoid quality issues with bike parts. And, finally it made VanMoof highly unattractive for an acquisition by competitors during the past months. Because there are no economy of scale benefits of a merger since the bike platforms have no overlaps.

Blind arrogance and stupidity

As a self-made entrepreneur, I don’t understand that both the investors and the founders couldn’t see the very obvious: it is a deadly sin to scale a fundamentally, unprofitable business concept, especially if there are too many returns and other quality issues. Never do that. I also don’t understand that revenues and losses were still equal as it becomes highly unlikely that it creates future value. Clearly not.

It was blind founder arrogance to ignore the hard work of realizing operational excellence and improving the business case. And, it was investor stupidity to accept this.