Why Losing A Fight With Walmart Was The Best Thing To Happen To This E-Bike Start-Up

Why an e-bike company is suddenly betting on Detroit.

A couple of years ago, Justin Kosmides was working in investment banking and (in his words) hating life. The one bright spot was his daily commute: an e-bike ride from Brooklyn to midtown that evolved into a coffee-hunting expedition. “I wanted to be cool and European and stop at different espresso shops,” he says with a laugh. But a chance meeting with an e-bike entrepreneur from Brazil turned Kosmides’s hobby into a side hustle and then something more: a leap of faith. In late 2021, Kosmides quit his cushy banking job to become co-founder and CEO of Vela, which makes handsome, high-end e-bikes that start at $1,800.

The pandemic was in some ways great for business. (Remember how hard it was to get any bike?) But then came a speed bump: Vela’s Chinese producer dropped them in favor of Walmart. In some ways it was a good sign. If Walmart was getting into e-bikes, the category probably wasn’t a fad. (An estimated one million e-bikes were sold in the U.S. last year; the market is expected to reach $46 billion dollars by 2026.) But Kosmides and his business partner, Victor Hugo Cruz, now had to find a new supplier—which they did, much closer to home. In the fall of 2022, the company moved its production line to Detroit, a few miles from Ford’s River Rouge plant.

Making a small-run, luxury product in the U.S. seems counterintuitive. But as Kosmides explains in the new Forbes series “Cereal Entrepreneur,” the move has given Vela’s team better control over quality. Over breakfast, Kosmides talks big banking, bigger mistakes, and what women really think when he rolls up on an e-bike.

MICKEY RAPKIN: What are we eating today?

JUSTIN KOSMIDES: I brought a mug full of granola—a personal favorite. And sure, you can eat cereal out of a bowl. But something about eating out a mug just kind of brings me back to the college days.

RAPKIN: Eric’s got Fruit Loops. I brought Honey Nut Cheerios—because it reminds me of childhood and riding a bike. Justin, you met your business partner at a wedding in Italy. Couldn’t you just relax and just enjoy an Aperol spritz?

KOSMIDES: There were definitely some Aperol spritzes involved in our conversations—and some boats and some music. But there was way too much bike talk.

ERIC RYAN: That’s always a sign that you’re onto something. When did you make the leap to Vela full-time? People take different approaches to crossing that chasm. Some really need the security net of a salary while chasing a dream. Others subscribe to the belief that the hungriest wolf hunts best.

KOSMIDES: (laughs) Is this a circle of trust?

RYAN: Absolutely. It’s just us. And the readers of Forbes.

KOSMIDES: I have no shame in letting this be known. I was working for the bank and launching this brand and becoming CEO. But my investors let it be known that if we’re going all-in, we need to go all-in together. It was a scary jump. It brings up a lot of insecurities. I didn’t grow up with any means. Both my parents were entrepreneurs.

RAPKIN: How tight was money when you were a kid?

KOSMIDES: My mother was a yoga teacher. She started her own practice. My father had a number of computer companies. I like to say 90% of them failed, one did OK. Then one went really, really bad. My sister is only a couple of years older than me but she had a very different experience growing up—because of the timing of when his companies were successful or not. I supported myself through most of college with student loans. I was also buying, selling and trading sneakers.

RAPKIN: Where were you getting shoes? You went to school in Vermont at the dawn of e-commerce.

KOSMIDES: I built a mini network from Japan and from Brazil and South America and Europe. There’s still kids who come up to me and comment on the days when I had 160 pairs of sneakers piled up in the dorm room.

RAPKIN: Is there anything you miss about your investment banking days?

KOSMIDES: The expense account. (laughs) First class for flights over four hours. I miss structure and knowing how my day’s roughly going to go.

Vela Vs. China

RAPKIN: OK, so you go all-in. But then the Chinese factory producing Vela’s bikes basically fires you to work with Walmart.

KOSMIDES: We got kicked out of the factory because Walmart came in and bought up the entire supply chain for two years or whatever. I’ll preface this with: I didn’t see it coming. But literally from day one we had issues getting inventory into the United States. We had quality issues. It was everything from brake pads being turned around to the wrong componentry being installed. We would bring the bikes to Brooklyn, rework the bikes, then send them out from here. It was a very costly endeavor.

RAPKIN: Making a small-run luxury product in Detroit can’t be cheap though. I read that it costs you something like $300 dollars more per bike. Did you pass that cost along to customers?

KOSMIDES: We split it. We took a hit and we passed half of it onto the customer. It’s definitely more expensive to produce in Detroit. But that’s such a small piece of the puzzle when you look at the life cycle of a bike. Or you look at inventory management and shipping and tariffs. More and more industries are starting to realize that maybe globalization—relying totally on the outside source—is just not a good idea. Onshoring, nearshoring, all of these terms are becoming more popular in the manufacturing world. As we scale, that cost will come down naturally.

RAPKIN: Is “Made in the USA” a selling point for Gen Z and Millennials the way it is for Boomers? Or do young people see that as some kind of jingoistic thing?

KOSMIDES: Great question. Look at Gen Z and their approach to fashion—where thrift and vintage is so popular. They’re so in tune with this idea of the quality. It’s something we [as a country] used to do really well. With moving production to the United States comes higher quality. It’s really just making sure that that message is present.

RYAN: What’s keeping more Americans from adopting e-bikes? Is it the price?

KOSMIDES: We always trail Europe in our biking stats. Obviously there’s price point. But you look at Europe and you have some markets like Switzerland and Germany—50, 60, 70% of the bikes being purchased there are e-bikes. In the United States we’re still in the low teens. Yet 94% of the country knows how to ride a bike. You have this huge growth opportunity. In my trips to Detroit, I’ve been reading a lot of the early automobile industry. There’s a lot of similarities. People are looking at their bikes from a consumption standpoint instead of from an asset standpoint.

RAPKIN: Meaning we should be thinking about the resale market?

KOSMIDES: These are incredible devices that should stay on the road. We have a unique opportunity because we have production here 1697579925 to keep those bikes on the road. It’s both sustainable small-S but sustainable big-S from an economic and environmental standpoint.

RYAN: I was a really early adopter of e-bikes. I bought an electric mountain bike. It was amazing how many of my purist friends on analog mountain bikes scoffed at it. They’ve now all switched over. It’s so much more fun.

RAPKIN: Yeah, but you’re in Marin County. I’m in L.A. Everyone here drives a giant SUV while staring at their phones. I’d love an e-bike. But I would also like to not die.

KOSMIDES: It’s a shame that’s even a factor. When I was in the banking days, I had an e-bike in L.A.—

RAPKIN: When you were here on business?

KOSMIDES: I would bike from Venice to Century City. And I would beat my co-workers to the office—in a suit. It blew people’s minds. I would go out on dates and show up with a bike. Girls would be like, “Wait a second, I thought you worked in banking?” I’d be like, “It’s the most efficient way to get around the city.”

RAPKIN: Were women into this?

KOSMIDES: Jury’s out. It’s a good reason why I moved back to the East Coast. But back to the point: Cities like L.A. are absolutely incredible biking cities. Bike lanes and safety is only increasing. It’ll continue to get better and better.

Learning Curve

RAPKIN: Would you tell us about a mistake you made? And what you learned?

KOSMIDES: Starting a new company takes a toll on your relationships—both friendships but also your closest relationship with your partner. And I would say not giving more attention and more care to that fragile relationship— It’s a tough toll with everyone around you. You don’t realize it. But it’s like the splash zone at SeaWorld. Everyone feels it.

RYAN: Thank you for sharing that. It’s so true. I think as an entrepreneur, you’re always so influenced by place. What has Detroit taught you?

KOSMIDES: Resilience, staying in the fight no matter what. Moving to Detroit was a little bit of a Hail Mary. The brand was not doing well relying on China. But it doesn’t feel like a coincidence.

RYAN: There’s that old cliché that a failed entrepreneur is just one who gave up too soon.

KOSMIDES: Henry Ford built bikes before he built cars. There’s no reason why the U.S. can’t be an absolute leader in electric mobility. For an industry that’s projected to be over $94 billion by the end of the decade, there’s a real opportunity for Detroit.

RYAN: When we were building Method, Adam Lowry and I were trying to do it in Detroit. I grew up in Grosse Pointe, I still have strong roots there. The city was going through bankruptcy, they were showing us the wrong sites. They just couldn’t get their act together. We went with the inner city of Chicago instead. But it sounds like Detroit now understands how to really invite businesses in.

RAPKIN: What’s Vela’s end game? Do you sell to Schwinn? What’s the offramp?

KOSMIDES: The offramp is to have a beautiful brand that scales slowly—stable, solid, profitable. That is really all I can ask for.

RAPKIN: OK. If I’m in Detroit, on a Friday night, where is Team Vela getting a beer?

KOSMIDES: (laughs) UFO Bar. Funky, awesome records, dollar beers. I will say, the Anthony Bourdain episode on Detroit is a must-watch. It still gives me chills. I’ll rerun it on the flight—when I’m tired of reading about the early automobile industry.

RAPKIN: Coming back to cereal, what’s your morning routine? Do you meditate ?

KOSMIDES: As the son of a yoga teacher, getting a good stretch is definitely important. My combination is a nice stretch, coffee as soon as possible, and then take the dog out. You don’t want to talk to me before coffee.

This conversation has been edited and condensed for clarity. In episode three, Blank Street founders Issam Freiha and Vinay Menda talk cold brew, the surprising reason they’re not opening in Los Angeles, and—yes—the trolls.