Nextbike — (Bike) Sharing Is Caring
The rental bike market is on fire. Berlin alone is home to approximately ten providers: Obike, Mobike, Limebike, Ofo, Byke, Nextbike, Donkey Republic, Lidl Bikes (which is the Berlin “Call a Bike” version by Deutsche Bahn) and soon also Uber Bikes (Jump). Every day new players enter the market or leave it in a hurry — just as fast as they came. Everyone is talking about public rental bicycle systems, which have earned negative headlines in many places. The recent insolvency of Obike or surrender reports from various providers in various markets have kept the industry and the public in suspense.
It remains to be seen which company will dominate this vibrant and dynamic market on a global scale. Due to its differentiated business model, one company has very good cards — Nextbike.
With over 40,000 bikes in more than 120+ cities in 25 countries, Nextbike is not exactly a newcomer to the bike-sharing market. This hidden champion of the scene relies on a sustained, thoughtful, and cooperative model instead of the invasive market development, which is now increasingly common in the industry. The success of Nextbike’s approach is reflected in its sustainability. The model has been working, in this form, for over 14 years. And unlike its Asian competitors, Nextbike has not yet been forced to pull out of any market it entered. The system supports both pick-up stations and dock-less rental solutions. Such hybrid solutions which are used in Berlin or Munich seem to be winning due to their predictability and flexibility.
Nextbike is typically commissioned directly by the city. Its rental bike stations are installed in close coordination with city planning committees and public transportation. Every single solution is created with all stakeholders in mind — uniquely tailored to the city and its inhabitants. Over time, the media increases awareness of these rental bike systems, allowing the population to slowly get used to the new mobility provider in the urban landscape. After all, thousands of bicycles installed virtually overnight can easily upset a city and its population.
While Nextbike primarily relies on local service partners for the maintenance of its systems like most of its competitors, it seems to have found a better handle on it. The mix of partnership-based development, excellent service, and top-quality materials, not to mention prudent expansion, have had a positive influence on public’s treatment of the company’s bikes. Unlike its Asian competitors, Nextbike has not had to worry about finding its bikes piled up in rivers, trees or mountains. This has translated into vastly lower costs for maintenance and bicycle replacement — which other providers finance solely through venture capital. Obike from Singapore used customers’ deposits as operating cash to finance new bicycles. It is now insolvent and unable to pay back its customers.
Most rental bike systems earn revenue through rental fees that can vary from a few cents for a half hour to 6 euros a day. Many venture capital-financed providers try to monetize the collected data (e.g. movement patterns) which has put data-privacy advocates on the alert, especially in Europe and Germany. In light of Nextbike’s close cooperation with the city administrations and transport companies, it remains unlikely that the company will directly monetize its data.
Instead, Nextbike’s approach is to acquire additional revenue from sponsors, who use the bikes for outdoor advertising. In Berlin, the rental bike system is sponsored by Deezer. Furthermore, the system’s operation is usually subsidized by state or city governments. In view of the support paid by the state of Berlin to Nextbike to cover its operating costs for 5 years, the continued acceptance of invasive rental systems from Asia is quite surprising.
Founded in 2004, Nextbike is one of the front-runners among the current generation of rental bicycle systems. Nextbike currently employs around 50 people and also works with local service providers in every city. The company is not based in the startup strongholds of Berlin or Munich, but in Leipzig.
Since 2013, 50% of Nextbike has been owned by Wall, a leading street furniture and outdoor advertising company from Berlin. This already indicates one facet of the business model’s sophistication: The bicycles not only serve as advertising space but represent an extended service portfolio that provides Wall with a significant competitive advantage when applying for street furniture tenders. Both Wall and Nextbike demonstrate the strategic benefits of their commercial symbiosis.
Nextbike has also proven its strategic savvy in the crowd-financing campaign on Kapilendo, which was successfully completed in June 2018. It was all a matter of addressing the right audience at the right time. Within three weeks — just halfway through the campaign — Nextbike reached its milestone of raising 1.5 million euros to renew part of its fleet. In return, the company will repay the amount over three years at 8–15% interest. In one go, the campaign resulted in great PR, superb client acquisition, and fresh capital.
Around the world, partner management and integration have become an increasingly critical factor for business model success — and everyone wants a stake. However, the continuous enactment of laws and regulations as well as the issuing of limited licenses have created problems for scaling players across industries, from Airbnb to Uber. There are clear advantages for those who are able to team up with the right decision makers.
Nextbike has an established model that stands out against the prevailing venture capital madness. Their conscientious growth and sustainable partnerships not only reflect a successful business model, but one that is “made in Germany.”
This business model markedness served as a blueprint for New York based Motivate: founded in 2009 and today America’s biggest bike sharing system which has recently been acquired by ride-sharing giant Lyft for $250 million.
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