Esker Cycles Announces Equity Crowdfunding Campaign to Fund Prospective Growth

Nov 23, 2021 at 13:57
by Alicia Leggett  
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.

bigquotesThe 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.Esker CEO Tim Krueger

More information is available on Esker's StartEngine campaign page, here.


63 Comments

  • 79 4
 I've got an idea for crowdfunding. How about you sell some bikes to a crowd of people in return for bikes
  • 25 2
 Sounds a bit crazy but it just might work.
  • 9 2
 People dont buy anymore, they go into shops and take for free
  • 1 3
 Headline has all words I don’t know
  • 5 3
 Thanks Browner. We definitely have thought of that idea before as well :-). We have been doing that so far, but with our growth, our need for more units in stock, has far exceeded our ability to purchase them, since right now we are generally paying for our bikes 12-18 months before receiving them. We figured this was a better plan than expecting customers to wait 12-18 months after payment to get their bike.

-Tim @ Esker
  • 1 0
 Great looking bikes IMO. Would love to test ride one.
  • 29 2
 Out of curiosity I looked at their financials and offering docs on the startengine site. This is one of the all time worse 'investment' opportunities I've ever seen. It's frankly insulting for them to call it such. It's a donation, and a discount on a future bike at best - in fact that's where any return is going to come from, get the discount, and buy a bike expensive enough for the discount to exceed the amount invested.

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.
  • 4 2
 That’s right.
  • 14 1
 Pinkbike should consider some more critical reporting on "opportunities" like this IMO.
Otherwise one might consider that they are enabling unscrupulous companies to take advantage of naive PB users?
  • 4 0
 @chakaping: That's sick...
  • 26 5
 I like Esker, but am not a fan of this type of equity raise. In return for their money investors receive: no voting rights, no expected dividends, no way to sell their shares, and no foreseeable exit event. An IPO is super unlikely for a bike company. Maybe Esker gets acquired in 5 or 10 years, at which point these crowd investors *might* receive a return if there's anything left after the company's preferred shareholders take their cut.

These are best viewed as more similar to a Kickstarter-type contribution, and not an investment.
  • 8 1
 They wanna 4x in 3 years. Tall order given the other article today about slowing demand.
  • 6 1
 @MikeyMT: I don't know anything about this stuff, but if they want to bring 4X racing back to the World Cup, that'd be amazing.

(I can do armchair expertise in other fields though.)
  • 1 4
 There is a limitation to what I can discuss here, but just a note that we only have one class of shares, and that all are equal, so any participants in this raise have the same preference to returns that the rest of us do.

- Tim @ Esker
  • 1 1
 @MikeyMT: Well, we went more than 4x in the last 3 years, so......

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
  • 5 0
 @tk55407: They are not equal when the crowd funded shares don’t vote. Further, you want 2.31 per share now, while the most recent shares issued to others were .50/sh.

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.
  • 12 2
 I wish them luck and get not wanting to get in bed with corporate overlords.
  • 10 3
 How do you come up with a $6.5MM valuation from $1.7MM in sales projected for this year? Do they have a ton of assets used for manufacturing? I assume they are buying bike frames from Asia like everyone else. Unfortunately I have to add I’m not hating on them, I might invest.
  • 11 1
 I wondered the same. Seems uh..optimistic at best. Especially since recent capital from insiders was sold at 50 cents a share vs the 2.31 they are offering to investors. From d19j0qt0x55bap.cloudfront.net/production/startups/60763d797eb65b666307291d/documents/offering_details/edgar_1637678939_offering_memorandum.pdf "This valuation was calculated internally without a formal third-party independent evaluation."

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%?
  • 8 1
 @ACree: I'd be keen to invest in a loan at a 12% return.
  • 6 1
 @MikeyMT: count me in too then
  • 4 1
 It clearly explains that they will have "hypergrowth"... Big Grin
  • 1 3
 Im not allowed to specifically comment on valuation, but I would encourage you to look up other comparables in the cycling industry, and what the normal EBIT multiple for valuation is in outdoor sports.

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
  • 1 3
 @ACree: Yeah, starting up a business is hard unless you have a pile of cash to rest on. We have the skills and knowledge, but none of us are sitting on hoards of cash. So yes, finding money is a main challenge to growing this company.

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
  • 6 0
 @tk55407: But you can show the model used to determine the valuation. Valuation is all about the assumptions used, and disclosing that tells a lot.
  • 1 0
 @tk55407: thanks for the reply and good luck.
  • 1 0
 @ACree: No, unfortunately I am not allowed to discuss that. It pains us for sure, as that would obviously make sense.
  • 11 1
 Do I get the owners price on a bike if I buy in?
  • 6 1
 hey @eskercycles - for the dummies in the room:

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.
  • 2 4
 Thanks. There is a significant limitation from the SEC from what we are allowed to talk about while "seeking investors" within the timeframe of the raise. But the main reasons we are choosing this path over others is -
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.
  • 9 4
 Nice looking stuff. Hope they get the investors. Like the geo numbers they've chosen, not too many companies doing middle of the road sizing.

I wouldn't say no to a 140mm Rowl eskercycles.com/products/rowl
  • 6 3
 'As we capitalize and grow, the addition of new models and customization choices will help further increase these unit sales and profit margins simultaneously.' Complicating the product model yet increasing bottom line is impressive, even with the scale economies they mention. With that said, I cant get my head around these one pagers. I want to know how . . . I wish there was a full forecast model for us to understand what they are planning to do here.
  • 2 1
 Yes, we would love to. This always becomes a fine balance of giving potential investors an idea of where we are headed, but not giving our competitors full knowledge of what we are doing (since this info is now public), and there are also some SEC limitations on giving "projections".

- Tim @ Esker
  • 4 1
 If you told me a few years ago that mountain biking will get so popular that the demand would out number the supply i would tell you theres a bridge in Brooklyn for sale. Love that more people are riding but I hate that more people are riding
  • 3 0
 Why does it seems like Esker is always trying some “benefit” scheme? When they were Advocate it was all about the non-profit bike company idea, then when they wanted to grow they ditched that and now they are trying crowd funding? Who knew that standing out in a crowd of hundreds of brands with premium products was hard?
  • 2 1
 The Advocate model was a bit different. In the two years we ran than, $84,000 was put back into various trails and advocacy organizations.

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.
  • 3 0
 Rant: I bought an Esker Rowl last year and was super excited to race local enduro races on it. The suspension design is plenty efficient. But boy is it hard to live with! No mud clearance, their little zip-tied plastic flap sucked and actually snagged on pebbles and leaves. In the fall, I had to stop every 2 minutes to clean out leaves. The pivot bolts were proud by like a mm, so water/dirt ingress was super easy. After every enduro race I had to disasemble all the pivots and bolts and regrease/reassemble, otherwise all I would hear grinding. The way the lower link rotates directly around the bottom bracket meant that dirt, little pebbles, etc would always get in there and would be impossible to fish out without disassembling the whole bike. I sold the frame and got another brand bike with similar travel and didn't have to touch the rear suspension in 6 months. The Rowl sounds good on paper, but I would not recommend it to anyone that is not riding on just concrete or rock slabs.
  • 4 1
 You know, Esker should really take the time to reply on here and maybe explain their crowd funding scheme. Otherwise, PinkBikers left to their own devices will explain it for them.
  • 2 0
 Im here. We just have to be really careful because anything we write here can be construed by the SEC as info used to attract an investor, and there are a lot of restrictions on what we can say. Mostly, all the info is on the StartEngine page that is what is approved by regulators to say, and we mostly just have to direct people back to that page for info.

-Tim @ Esker
  • 1 0
 @tk55407: awesome brother! i understand. Just assumed Esker would be in the screen name. Just was trying to say its always really cool when companies reach out on here, to me it shows they care. Thanks for the reply, and best of luck to you. hope your plans workout for everyone!
  • 7 3
 Clearly they looked at the results of the pinkbike survey and thought 'there's some suckers who'll buy in'.
  • 2 1
 I was in for 100 grand until I read the term “front suspension mountain bike.”
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
  • 3 1
 Not all investors will be shredders. It was written for all investors some of which could very well be outside our industry. I’m calling BS on your 100 grand by the way.
  • 2 0
 @txcx166: how’s life on Zarknon?
  • 8 4
 Have they heard of shark tank?
  • 2 2
 @foggnm I don’t think Shark Tank would take the bait!
  • 5 2
 nice im interested. wil do my dd
  • 1 0
 Just go with the flow build it slow, earn it, scrounge from the bank, theres plenty of other bike brands to choose from, therfore I'm out
  • 3 5
 Hard to tell exactly, but is this effectively a DW-link bike that circumvented the patent by adding a 3rd link connecting the chainstay to the mainframe? The layout looks so similar to an Ibis, with one added link below the BB.
  • 14 2
 its weagles Orion suspension design!
  • 4 1
 It's a different weagle patent. Supposedly he designed it for motorcycles / dirt bikes but it never got used for that purpose.
  • 2 0
 The Orion Dynamics link that we use is another patent from Dave Weagle that we license. Its another part of his portfolio along with DELTA and DW-6.

- Tim @ Esker
  • 3 2
 "Name of the game, move the money from your clients pocket, into your pocket"

www.youtube.com/watch?v=xbBD7VIJ4cc
  • 4 2
 Is @notoutsideceo investing?
  • 11 2
 We have had the team look at this opportunity but we were unable to figure out how to make a bike brand into a recurring revenue stream based on subscriptions...While the Eskar CEO Tim Krueger is a good friend it simply does not fit into the revenue model here at Outside. Be safe be well, Incognito Robin
  • 4 1
 I'm out
  • 2 1
 That fully...."Eskermo"

Do it.
  • 6 5
 Buy high sell low!
  • 2 2
 Mark Cuban: "I'm out"
  • 1 2
 Crowdfunding….yeah….but do maintain social distancing please…..
Below threshold threads are hidden

Post a Comment



You must login to Pinkbike.
Don't have an account? Sign up

Join Pinkbike  Login
Copyright © 2000 - 2021. Pinkbike.com. All rights reserved.
dv56 0.011943
Mobile Version of Website