Esker Cycles Announces Equity Crowdfunding Campaign to Fund Prospective Growth
Photo: Esker Cycles
Esker Cycles has launched an equity crowdfunding campaign on the StartEngine platform, selling company shares to support prospective growth.
Esker is a small Montana-based company that sells both direct-to-consumer and through dealers. The brand launched in 2018 and pre-sold 300 bikes, bringing in $300k in revenue that first year. The brand expects to sell 550 bikes by the end of 2021, earning $1.7M in revenue, and plans to keep pace with the rapid growth by selling a projected 2000 bikes in 2024. To do so, however, requires more capital than Esker can source on its own.
It remains to be seen whether this move is solely for the sake of expansion or if it's related to component access. Bike parts are scarce, and some component suppliers have tightened their terms. Sourcing components has become more difficult for small companies that don't have the same cash reserves as the bigger players, but whose inventory nonetheless relies on access to parts.
Demand for bikes has spiked throughout the pandemic, with sales of mountain bikes with front suspension (rear suspension unspecified) rising 150% in April 2020 alone. Esker says it cannot keep up with inventory and its sales channels consistently request more product than the brand has available, but that it will meet demand through an ambitious period of "hypergrowth."
Esker currently makes four mountain bikes, with four new ones scheduled for release in 2022 and an additional six bikes planned for 2023 and 2024.
 | The history of our company has been one built on the trust and excitement of everyday mountain bikers like us. When it came time to take our company to the next stage, it simply made sense to offer it to everyone through equity crowdfunding. We are passionate about being independent, and this is partly what makes our products so great. By allowing our ownership to be built up of riders like us at this early stage, we can maintain that independence and stay true to our roots, rather than taking on ownership from larger entities. |
More information is available on Esker's StartEngine campaign page, here.
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-Tim @ Esker
What investors get:
- no vote
- common stock, no pref
- no protection against dilution
- buy at 2.31/share while insiders have bought at .50/sh
- friends and family with 10-15% rates on loans get their money back before investors
- minimal, if any, means to exit
Makes Game Stop look like a utility.
Otherwise one might consider that they are enabling unscrupulous companies to take advantage of naive PB users?
These are best viewed as more similar to a Kickstarter-type contribution, and not an investment.
(I can do armchair expertise in other fields though.)
- Tim @ Esker
Yeah, the pandemic demand will not stick around forever, and we are not planning on that. Our growth is based on our models, dealers, and things returning to "normal" for demand.
- Tim @ Esker
Usually the newest issue in a loss company gets liquidation preferences over the older shares. Or a preferred return, or both. You’re offering a higher pice per share, no vote, no liquidation pref, no preferred return, and no protection against further dilution. Meanwhile your friends and family are receiving 10-15% on their loans.
I went to the site and read the docs because if it was anything short of terrible, I might have invested, I do like to support small brands. But this is throwing $ away, not investing.
What is very interesting is looking at the debt they have and the rates on it. I'd be crowd funding too if I'd funded a business with 20% credit card debt and 10-15% debt from friends and family.
Hey Esker - how about instead of selling shares, I loan you funds through prosper at say, 12%?
And yes, we do have a lot of manufacturing assets, which is why its so expensive to start up a bike co from scratch.
- Tim @ Esker
As for the valuation - that particular note on the CPA report is common language for any startup company with a speculative valuation. You really cant get a formal third-party valuation until you are a reasonably established, profitable company.
-Tim @ Esker
What exit pathways are there for people who take the jump. How does this make business better for Esker in the long run vs taking money from a traditional fund or larger investor/s? Is there a component of community involvement or is it just cheaper, easier money for Esker?
BTW - good luck, I want you to succeed.
1. We dont want to be owned and dictated to by a venture capital firm, we want to remain rider-owned, and that includes our customers.
2. We need additional capital to grow, as we have gone past what we all personally had available to start this up
3. We intend to have our ownership base "in the know" as we go into new things, and take feedback from them, as this is also a significant source of info for us.
For exit pathways, we are remaining loose on this, as for the next 5 years at least, we intend to keep it privately owned and grow it from there. Beyond that, typical exit pathways in our industry are selling to a larger company or merging with a larger company so they can acquire our technology or sales market, or staying private and paying dividends pro rata.
I wouldn't say no to a 140mm Rowl eskercycles.com/products/rowl
- Tim @ Esker
The reality with any mountain bike company out there, is that the money has to come from somewhere. Some of them, the founders start out with a large pile of their own money. Some go after large banks, investment funds, or venture capital. We prefer to keep it with regular people, and these methods are how we reach them.
-Tim @ Esker
Dafuqbro?
Imagine showing up to the Investors Ride n Hang in Whitefish and the ride leader’s saying “follow me on my front suspension mountain bike” hell no bro you’re an alien
- Tim @ Esker
www.youtube.com/watch?v=xbBD7VIJ4cc
Do it.