Rollercoaster on a Bike: Zagster CEO Tim Ericson (Part 4)

Sramana Mitra: What kind of average deal size were you experiencing?

Tim Ericson: On the campus and city fronts, it was anywhere from $50,000 to $300,000. In later stages, we were doing $500,000. We also had some smaller deals like $20,000 apartment complexes, but again they had parent companies that were buying it for multiple properties, so in aggregate they were larger. 

Sramana Mitra: Can you describe the growth trajectory? From 2013 to 2014, you were starting to close deals in your segments. How long did it take you to get to $1 million ARR? How was the revenue tracking?

Tim Ericson: We hit $1 million ARR in mid to late 2014. We were growing at about 150% y-o-y by this point. From 2015 to 2016, we were growing 300% y-o-y. Those were our super high growth hay days in terms of sales. Ultimately, the bike-share business went to about $12 million before it collapsed. 

Sramana Mitra: Which was when?

Tim Ericson: This was in 2016 to 2017. 2017 was when Ofo bikes came out of China and disrupted our market. From charging universities, we ended up with a free program in universities.

Sramana Mitra: Why did the market collapse?

Tim Ericson: In China, it looked like this might work. Their model was to roll out a ton of inexpensive bikes. The usage was through the roof there. What ended up happening was that Ofo, Mobike, and some of the largest bike share companies coming out of China had raised over $1 billion in venture capital and just started going all over the world.

My gut from the beginning was that this wouldn’t work in the US because the labor cost and safety requirements would be a problem for them. I figured that they wouldn’t make enough money on the bikes by charging consumers to make the model work quickly enough.

Ultimately, these companies were operating in 75 countries around the world. They spread themselves thin and were never able to make a profit in any of the markets that they were in. By the end of 2017 and the beginning of 2018, all of them collapsed. 

Sramana Mitra: What did you do when this collapse happened? By this time, did you raise more money besides the $1 million in the early days?

Tim Ericson: We had gone through a series A and a couple of extensions and raised a $10 million series B at the end of 2016 from Edison Partners in Princeton, New Jersey. We were going into 2017 with a bunch of capital because we have been growing 300% year by year and we had a huge pipeline.

We had become the standard of bike share in the smaller communities in the city, so if you wanted bike-share in your university or your cities that weren’t New York, Zagster was the only option for you. We had raised our series B and tripled our sales team because our pipeline was just growing quicker than we were able to close.

This segment is part 4 in the series : Rollercoaster on a Bike: Zagster CEO Tim Ericson
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