What occurred to Rad Energy Bikes?
That’s the query on many minds in Seattle and past after the startup revealed Monday it’s going through a possible shutdown resulting from “important monetary challenges.”
Rad began as a scrappy {hardware} startup and grew into the biggest e-bike vendor in North America. The corporate’s co-founders received Younger Entrepreneur of the 12 months honors on the GeekWire Awards. Rad raised greater than $300 million in 2021 and hit a $1.65 billion valuation — a uncommon unicorn in Seattle.
However a sequence of missteps and macroeconomic challenges led to greater than seven rounds of layoffs and a exceptional downfall. Rad mentioned it might shut down as quickly as January.
“We’re nonetheless exploring each viable choice to protect the model and the group that helped construct it,” the corporate mentioned in an announcement to GeekWire.
Throughout a journey alongside the Burke-Gilman Path in Seattle this week, we met John Ward, who was cruising on his Rad Metropolis electrical bike.
“It’s a bummer,” Ward mentioned of the hometown firm’s struggles. “I’m 76 and I don’t like climbing up the hills anymore, and I received this Rad bike and I’ve been very pleased.”
Ward, one in all almost 700,000 Rad riders across the globe, is a longtime bicycle owner who mentioned he makes use of the e-bike for normal rides with buddies and in addition journeys to the swimming pool, the grocery retailer and the farmers market. He mentioned he’s involved that if the corporate goes out of enterprise it will likely be powerful to get elements or service.
We spoke with former Rad execs, trade specialists, bike store homeowners, and {hardware} startup leaders to know what went unsuitable on the firm.
Rad’s story is a case research in what occurs when a breakout {hardware} model bets its future on a once-in-a-century pandemic demand spike — after which will get hit with a provide chain storm and the realities of venture-backed client {hardware}.
Proper product on the proper second
Rad gave clients “that feeling like they have been a child once more,” co-founder Ty Collins instructed GeekWire this week.
The corporate, born from founder Mike Radenbaugh’s teenage tinkering, launched a direct-to-consumer mannequin in 2015 with an e-bike at an approachable worth.
“They made bicycles accessible to individuals that could be intimidated going into a motorbike store,” mentioned Peter Clancy, enterprise accomplice at Westside Bicycle in Seattle.
Rad opened up a brand new “way of life” market section — sub-$2,000 e-bikes for normal individuals, not hardcore cyclists.
“Rad form of constructed the e-bike house,” mentioned Justin Taylor, editor at Electrical Bike Report.
Marty Pluth, normal supervisor at Gregg’s Cycle, remembers commuting over Seattle’s 520 bridge and seeing “a ton of Rad bikes” owned by individuals in a ski jacket or dishevelled shorts — an indication the corporate had unlocked a brand new form of buyer.
Scrappy and scaling
The corporate’s early staff was a ragtag crew doing a number of jobs directly. It was additionally methodical. “We simply actually effectively scaled our spend,” Collins mentioned.
Rad shortly discovered product-market match after an preliminary crowdfunding marketing campaign. From there, gross sales saved booming, from Ballard to Berlin. “We’d promote hundreds of bikes in seconds,” Collins mentioned. “We actually couldn’t hold bikes in inventory.”
The corporate reported $100 million in income in 2019 and landed funding from Darrell Cavens and Mark Vadon, former Zulily and Blue Nile execs. Later that yr it inked a supply partnership with Domino’s.
“I see a enterprise with tremendous passionate clients, a cool product, and superior entrepreneurs,” Vadon instructed GeekWire that yr. “That’s what you need to be investing in.”
Pandemic enhance
Then the e-bike market exploded because the pandemic hit. Folks wished to get outdoors and have enjoyable. There was additionally a climate-friendly ingredient.
Rad cited a 297% enhance in demand in Could 2020.
COVID introduced the basic “is that this a blip or a brand new regular?” dilemma for Rad and plenty of different e-commerce corporations experiencing a surge of orders.
“The thought was that this was a catalyst within the electrical bike growth,” Collins mentioned.
It doesn’t matter what, “we needed to ensure that we had stock for it,” Collins mentioned. “If individuals wished to purchase bikes, we wanted bikes.”
Step on the gasoline
Rad raised greater than $300 million from buyers in 2021, doubled headcount to greater than 600 staff, and guess huge on sustained demand.
However like many different companies through the pandemic, Rad handled provide chain delays and disruption. The corporate went to nice lengths to fulfill demand — in mid-2021, it purchased 64 containers and chartered its cargo from Asia right into a non-traditional port close to Seattle.
Bike corporations over-ordered on lengthy lead occasions assuming COVID demand would hold going, based on Pluth. However he mentioned the surge slowed dramatically by the summer time of 2022.
“Costs have been pushed down, margins have been pushed down,” Pluth mentioned. “Rad was affected — all people was.”
Because the pandemic demand settled, Rad was saddled with a whole bunch of thousands and thousands of {dollars} of stock.
“We simply had an excessive amount of stock legal responsibility that we couldn’t be versatile,” mentioned Leah Hunkins, a former provide chain chief at Rad. “It’s like strolling round with a bowling ball round our ankles and going for a run — you’ll be able to’t transfer.”
Pluth pressured that promoting bikes beneath value to clear stock may be problematic.
“The extra you promote, the extra money you’re shedding,” he mentioned. “You’re in between this double-whammy of decrease demand and a number of product in inventory. The opposite corporations have been in a position to work by means of that, given they’ve lots longer observe report and extra diversified product. I’m simply undecided Rad was ready to do this.”
A growth-at-all-costs mindset might have made sense whereas Rad’s bikes have been promoting sooner than they may very well be constructed. Nevertheless it ended up inflicting issues down the highway as the corporate began lacking income expectations.
“The one factor we’re in all probability responsible of is being overly optimistic that Rad was on this trajectory of development that may by no means cease,” Hunkins mentioned.
Collins, who stepped down in 2021, mentioned the shortage mindset started to shift as soon as the corporate began elevating outdoors capital. “When you’ve gotten extra money to spend … it does current much more doorways that, in principle, may very well be opened,” he mentioned. “It provides you a number of keys to a number of doorways.”
He added that the “inner secret sauce” to Rad’s success was permitting staff to “take actual possession over the model and really feel like they have been actually part of all the things.”
New youngsters on the block
On the similar time, Rad confronted an inflow of robust rivals — Lectric, Velotric and others — plus conventional manufacturers lastly transferring into e-bikes, all slicing off items of the pie.
As extra choices arrived — from low-cost Amazon imports to higher-end manufacturers — Rad was squeezed within the center: not the most affordable, not essentially the most premium.
“The differentiation of our product received more difficult,” Hunkins mentioned.
Ward, the rider on the Burke-Gilman, agreed {that a} saturated market might have created bother for Rad. Throughout his brief cease to speak to GeekWire, cyclists driving e-bikes from Aventon, Lectric, Emotion, Tremendous 73, Gazelle, City Arrow and extra handed by on a path that’s been dominated by Rad in recent times.
Clancy famous how simple it was for brand spanking new entrants to look. “It takes nothing to grow to be a motorbike model,” he mentioned. “When you’ve got one respectable bank card, you’ll be able to order a dozen bikes, and off you go.”
Lawsuits, layoffs, remembers
Rad confronted different velocity bumps together with a wrongful demise lawsuit, a lawsuit associated to property harm, and the recall of almost 30,000 models resulting from a security challenge. More moderen on-line posts about Rad spotlight customer support points.
Whereas Rad’s direct-to-consumer technique was a bonus early on (shorter provide chain, bypass bike retailers), it carried long-term service obligations. Rad’s scale meant there have been tens of hundreds of riders in search of service in markets the place unbiased retailers needed to juggle labor prices, elements sourcing and guarantee expectations on bikes they didn’t promote.
“It labored to start with, till individuals began having issues with proprietary elements,” mentioned Matt Thomas, proprietor of The Polka Dot Jersey bike store in Seattle.
Over time Rad needed to arise its personal shops and repair community to help a whole bunch of hundreds of bikes within the wild — an costly, operationally complicated layer on prime of already skinny {hardware} margins.
Rad shut down its cell companies arm in 2022 and reduce 100 jobs. Later that yr, Radenbaugh stepped down as CEO. Rad pulled out of Europe beginning in 2024 and closed some service retailers.
In the meantime, the corporate went by means of a number of rounds of layoffs underneath new CEO Phil Molyneux, the previous Sony president who departed earlier this yr. The corporate is now led by CEO Kathi Lentzsch, who beforehand ran Bartell Medication as CEO earlier than the corporate bought to Ceremony-Help in 2020.
Exhausting occasions for {hardware}
Rad’s challenges replicate broader difficulties going through client {hardware} startups within the post-2022 funding local weather.
“{Hardware} success requires affected person capital as it’s going to take a very long time and cash to construct a permanent model,” mentioned Clayton Wooden, former CEO of Seattle-based cooking automation startup Picnic. “That capital may be very scarce in the previous couple of years.”
Wooden famous that pre-2022, enterprise capital targeted on creating unicorns, and {hardware} corporations might elevate on excessive valuations due to excessive worth factors and gross earnings. “In 2022 the sport modified, leaving anybody who raised prior with overvalued corporations,” he mentioned. It’s simpler to pivot in software program, he mentioned, however {hardware} has excessive manufacturing setup and growth prices.
Amish Patel, managing director at Conduit Enterprise Labs, a hardware-focused startup studio, additionally identified structural challenges.
Patel mentioned client {hardware} corporations with unit-margin-based enterprise fashions face specific challenges. {Hardware} manufacturers promoting $250+ merchandise rely virtually solely on client demand and scale, he mentioned, and when margins tighten — with no software program, service, or subscription income to offset — the enterprise turns into extraordinarily fragile.
“Add collectively over-ordering from the growth, stock danger as demand cooled, excessive curiosity and debt servicing prices — and also you get basic {hardware} scaling ache,” Patel mentioned.
Rad’s funding rounds might have been seen as an indication of power. However others see it otherwise.
“It simply appeared bizarre that an organization like that couldn’t stand by itself with out large money influxes,” mentioned David Johnson, proprietor of Electrical & Folding Bikes Northwest. “It simply didn’t appear sustainable.”
Thomas, the proprietor at Polka Dot, shared the same sentiment.
“I don’t fairly perceive why anybody thought through the pandemic that they have been going to maintain a 500% enhance in enterprise year-over-year for 5 years,” he mentioned. “I imply, I personal a motorbike store. I’m not an analyst. However that one didn’t appear too exhausting to determine.”
GeekWire contacted Vadon and Cavens for remark, however haven’t heard again. The corporate’s different buyers embody Constancy Administration & Analysis Firm, Counterpoint World (Morgan Stanley), Cercano Administration, Sturdy Capital Companions LP, The Rise Fund (TPG’s multi-sector world influence investing technique), and funds and accounts suggested by T. Rowe Value Associates.
The way forward for e-bikes
Rad wasn’t the one e-bike maker to battle. Europe’s VanMoof filed for chapter in 2023, whereas Belgium-based Cowboy and different rivals have struggled to seek out footing after pandemic-era highs. Some cite tariffs as a headwind.
However bike store homeowners say e-bike demand stays robust. “We had three individuals in the present day are available asking about e-bikes,” mentioned Clancy of Westside Bicycle.
The U.S. e-bike market is predicted to succeed in $87.1 billion by 2032, up from $54.1 billion in 2025, based on MarketsandMarkets.
Rad says its staff is working to “stabilize the enterprise” and discover choices for a long-term path ahead. The corporate continues to be promoting bikes and is selling a Black Friday sale on its web site.
“They’re an excellent high quality firm that makes good bikes,” mentioned Taylor, of Electrical Bike Report. “And I do suppose the trade is healthier with them right here.”
