{"id":9720,"date":"2023-10-17T21:58:45","date_gmt":"2023-10-17T21:58:45","guid":{"rendered":"https:\/\/imsfund.com\/?p=9720"},"modified":"2023-10-17T21:58:45","modified_gmt":"2023-10-17T21:58:45","slug":"why-losing-a-fight-with-walmart-was-the-best-thing-to-happen-to-this-e-bike-start-up","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2023\/10\/17\/why-losing-a-fight-with-walmart-was-the-best-thing-to-happen-to-this-e-bike-start-up\/","title":{"rendered":"Why Losing A Fight With Walmart Was The Best Thing To Happen To This E-Bike Start-Up"},"content":{"rendered":"


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Why an e-bike company is suddenly betting on Detroit.<\/em><\/p>\n

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. \u201cI wanted to be cool and European and stop at different espresso shops,\u201d he says with a laugh. But a chance meeting with an e-bike entrepreneur from Brazil turned Kosmides\u2019s 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.<\/p>\n

The pandemic was in some ways great for business. (Remember how hard it was to get any<\/em> bike?) But then came a speed bump: Vela\u2019s 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\u2019t 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\u2014which they did, much closer to home. In the fall of 2022, the company moved its production line to Detroit, a few miles from Ford\u2019s River Rouge plant.<\/p>\n

Making a small-run, luxury product in the U.S. seems counterintuitive. But as Kosmides explains in the new Forbes series \u201cCereal Entrepreneur<\/a>,\u201d the move has given Vela\u2019s 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.<\/p>\n

MICKEY RAPKIN:<\/strong> What are we eating today?<\/p>\n

<\/p>\n

Vela CEO Justin Kosmides<\/p>\n

<\/fbs-accordion>Courtesy Vela <\/small><\/figcaption><\/figure>\n

<\/p>\n

JUSTIN KOSMIDES:<\/strong> I brought a mug full of granola\u2014a 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.<\/p>\n

RAPKIN:<\/strong> Eric\u2019s got Fruit Loops. I brought Honey Nut Cheerios\u2014because it reminds me of childhood and riding a bike. Justin, you met your business partner at a wedding in Italy. Couldn\u2019t you just relax and just enjoy an Aperol spritz?<\/p>\n

KOSMIDES:<\/strong> There were definitely some Aperol spritzes involved in our conversations\u2014and some boats and some music. But there was way too much bike talk.<\/p>\n

ERIC RYAN:<\/strong> That\u2019s always a sign that you\u2019re 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.<\/p>\n

KOSMIDES:<\/strong> (laughs) Is this a circle of trust?<\/p>\n

RYAN:<\/strong> Absolutely. It\u2019s just us. And the readers of Forbes.<\/em><\/p>\n

KOSMIDES: <\/strong>I have no shame in letting this be known. I was working for the bank and<\/em> launching this brand and becoming CEO. But my investors let it be known that if we\u2019re going all-in, we need to go all-in together. It was a scary jump. It brings up a lot of insecurities. I didn\u2019t grow up with any means. Both my parents were entrepreneurs.<\/p>\n

RAPKIN: <\/strong>How tight was money when you were a kid?<\/p>\n

KOSMIDES:<\/strong> 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\u2014because 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.<\/p>\n

<\/p>\n

CEO Justin Kosmides takes one of Vela’s bikes out for a spin<\/p>\n

<\/fbs-accordion>Courtesy of Vela<\/small><\/figcaption><\/figure>\n

RAPKIN:<\/strong> Where were you getting shoes? You went to school in Vermont at the dawn of e-commerce.<\/p>\n

KOSMIDES: <\/strong>I built a mini network from Japan and from Brazil and South America and Europe. There\u2019s 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.<\/p>\n

RAPKIN:<\/strong> Is there anything you miss about your investment banking days?<\/p>\n

KOSMIDES: <\/strong>The expense account. (laughs) First class for flights over four hours. I miss structure and knowing how my day\u2019s roughly going to go.<\/p>\n

Vela Vs. China<\/h2>\n

RAPKIN: <\/strong>OK, so you go all-in. But then the Chinese factory producing Vela\u2019s bikes basically fires you to work with Walmart.<\/p>\n

KOSMIDES:<\/strong> We got kicked out of the factory because Walmart came in and bought up the entire supply chain for two years or whatever. I\u2019ll preface this with: I didn\u2019t 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.<\/p>\n

RAPKIN: <\/strong>Making a small-run luxury product in Detroit can\u2019t be cheap though. I read that it costs you something like $300 dollars more per bike. Did you pass that cost along to customers?<\/p>\n

KOSMIDES:<\/strong> We split it. We took a hit and we passed half of it onto the customer. It\u2019s definitely more expensive to produce in Detroit. But that\u2019s 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\u2014relying totally on the outside source\u2014is 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.<\/p>\n

RAPKIN:<\/strong> Is \u201cMade in the USA\u201d 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?<\/p>\n

KOSMIDES:<\/strong> Great question. Look at Gen Z and their approach to fashion\u2014where thrift and vintage is so popular. They\u2019re so in tune with this idea of the quality. It\u2019s something we [as a country] used to do really well. With moving production to the United States comes higher quality. It\u2019s really just making sure that that message is present.<\/p>\n

RYAN: <\/strong>What\u2019s keeping more Americans from adopting e-bikes? Is it the price?<\/p>\n

<\/p>\n

Vela’s Vento model retails for $2,499 and is Made in the USA. The bike’s hidden (and removable) … [+]<\/span> battery offers a 40-mile range.<\/span><\/p>\n

<\/fbs-accordion>Courtesy of Vela<\/small><\/figcaption><\/figure>\n

KOSMIDES:<\/strong> We always trail Europe in our biking stats. Obviously there\u2019s price point. But you look at Europe and you have some markets like Switzerland and Germany\u201450, 60, 70% of the bikes being purchased there are e-bikes. In the United States we\u2019re 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\u2019ve been reading a lot of the early automobile industry. There\u2019s a lot of similarities. People are looking at their bikes from a consumption standpoint instead of from an asset standpoint.<\/p>\n

RAPKIN:<\/strong> Meaning we should be thinking about the resale market?<\/p>\n

KOSMIDES:<\/strong> 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\u2019s both sustainable small-S but sustainable big-S from an economic and environmental standpoint.<\/p>\n

RYAN:<\/strong> 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\u2019ve now all switched over. It\u2019s so much more fun.<\/p>\n

RAPKIN:<\/strong> Yeah, but you\u2019re in Marin County. I\u2019m in L.A. Everyone here drives a giant SUV while staring at their phones. I\u2019d love an e-bike. But I would also like to not die.<\/p>\n

KOSMIDES:<\/strong> It\u2019s a shame that\u2019s even a factor. When I was in the banking days, I had an e-bike in L.A.\u2014<\/p>\n

RAPKIN: <\/strong>When you were here on business?<\/p>\n

KOSMIDES: <\/strong>I would bike from Venice to Century City. And I would beat my co-workers to the office\u2014in a suit. It blew people\u2019s minds. I would go out on dates and show up with a bike. Girls would be like, \u201cWait a second, I thought you worked in banking?\u201d I\u2019d be like, \u201cIt\u2019s the most efficient way to get around the city.\u201d<\/p>\n

RAPKIN:<\/strong> Were women into this?<\/p>\n

KOSMIDES:<\/strong> Jury\u2019s 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\u2019ll continue to get better and better.<\/p>\n

Learning Curve<\/h2>\n

RAPKIN:<\/strong> Would you tell us about a mistake you made? And what you learned?<\/p>\n

KOSMIDES:<\/strong> Starting a new company takes a toll on your relationships\u2014both friendships but also your closest relationship with your partner. And I would say not giving more attention and more care to that fragile relationship\u2014 It\u2019s a tough toll with everyone around you. You don\u2019t realize it. But it\u2019s like the splash zone at SeaWorld. Everyone feels it.<\/p>\n

RYAN:<\/strong> Thank you for sharing that. It\u2019s so true. I think as an entrepreneur, you\u2019re always so influenced by place. What has Detroit taught you?<\/p>\n

KOSMIDES:<\/strong> 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\u2019t feel like a coincidence.<\/p>\n

RYAN:<\/strong> There\u2019s that old clich\u00e9 that a failed entrepreneur is just one who gave up too soon.<\/p>\n

KOSMIDES:<\/strong> Henry Ford built bikes before he built cars. There\u2019s no reason why the U.S. can\u2019t 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\u2019s a real opportunity for Detroit.<\/p>\n

RYAN:<\/strong> 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\u2019t 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.<\/p>\n

RAPKIN: <\/strong>What’s Vela\u2019s end game? Do you sell to Schwinn? What\u2019s the offramp?<\/p>\n

KOSMIDES:<\/strong> The offramp is to have a beautiful brand that scales slowly\u2014stable, solid, profitable. That is really all I can ask for.<\/p>\n

RAPKIN:<\/strong> OK. If I\u2019m in Detroit, on a Friday night, where is Team Vela getting a beer?<\/p>\n

KOSMIDES:<\/strong> (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\u2019ll rerun it on the flight\u2014when I\u2019m tired of reading about the early automobile industry.<\/p>\n

RAPKIN:<\/strong> Coming back to cereal, what\u2019s your morning routine? Do you meditate ?<\/p>\n

KOSMIDES:<\/strong> 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\u2019t want to talk to me before coffee.<\/p>\n

<\/p>\n

“Cereal Entrepreneur,” a new interview series from Forbes hosted by Method co-founder Eric Ryan and … [+]<\/span> journalist Mickey Rapkin<\/span><\/p>\n

<\/fbs-accordion>Courtesy of Eric Ryan<\/small><\/figcaption><\/figure>\n<\/div>\n


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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. \u201cI wanted to be cool and European […]<\/p>\n","protected":false},"author":5,"featured_media":9721,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/imageio.forbes.com\/specials-images\/imageserve\/6518af7601ecdd3e1e6c804f\/0x0.jpg?format=jpg&height=900&width=1600&fit=bounds","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-9720","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/9720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=9720"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/9720\/revisions"}],"predecessor-version":[{"id":9722,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/9720\/revisions\/9722"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/9721"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=9720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=9720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=9720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

This conversation has been edited and condensed for clarity. In <\/em>episode three<\/em><\/a>, Blank Street founders Issam Freiha and Vinay Menda talk cold brew, the surprising reason they\u2019re not opening in Los Angeles, and\u2014yes\u2014the trolls.<\/em><\/p>\n