Deal focus: L Catterton hitches a ride with Tenways

Private equity’s last love affair with bicycles in China propelled bike-sharing players such as Ofo and Mobile to unsustainable highs, which were followed by painful adjustments. The most recent iteration involves a technology upgrade: bicycles have gone electric.

While the likes of Didi and Hellobike have dabbled in this area, Tenways, which recently secured CNY 300m (USD 44m) across a Series A round and a Series A extension, takes a different approach. The e-bike maker is headquartered in the Netherlands with a view to targeting European end markets and relies on Asia for manufacturing and supply chain capabilities.

Tenways was founded in 2021 and initially relied on crowdfunding sourced through the US-based platform Indiegogo. When institutional players came in, they were primarily Chinese. GL Ventures provided a pre-Series A round and then Meridian Capital was among the participants in the Series A. Tencent Holdings is also represented in the cap table.

This is not an isolated case. Two US-based e-bike players have received Chinese funding – Sequoia Capital China and Gaorong Capital backed Aventon, while Lightspeed China Partners and DCM invested in Urtopia. Hillhouse Capital, which controls GL Ventures, entered the Netherlands in 2021 to lead a USD 128m Series C for VanMoof.

“We find the global e-bike market attractive as it is already fairly large and expected to continue growing on the back of increasing demand amid consumers’ ongoing pursuit to utilise greener modes of transport, and to conduct a more active and healthier lifestyle,” said Scott Chen, an Asia-based managing partner at L Catterton, which led the Tenways Series A extension.

For Chen, Europe is the key differentiator. It accounts for the bulk of the global e-bike market, with sales reaching an all-time high of 5m units in 2021. The Confederation of the European Bicycle Industry projects that sales will hit 10m units by 2025 with a market penetration rate of 50%. Global sales are on course to be worth USD 40bn by 2030, according to Precedence Research, a market research group.

Europe’s attractions go beyond a longstanding cycling culture and well-developed cycling road networks and highways. Notably, regulations underpin stronger economics than in markets like China.

E-bikes have two modes: manual, where forward momentum is created by users working the pedals, and e-power, which relies sensors to detect when there is a need for supplementary power from the battery. Price points are therefore typically higher than for low-speed electric motorbikes that operate under a single mode.

Low-speed electric motorbikes dominate the China market thanks to this cost advantage and because they are classified as non-motorised vehicles. In contrast, European nations require e-bike riders to obtain licenses and insurance and to wear helmets. Subsidies are also available for e-bike purchases.

Tenways grabbed L Catterton’s attention through its ability to straddle both markets – Europe for branding and design and Asia for supply chain management. Crowdfunding helped the company accumulate customer feedback and build its brand, which led to the speedy release of a debut product in 2021. There are now two e-bike models, priced at EUR 1,499 (USD 1,624) and EUR 1,899, respectively.

“These models have gained a reputation for being high-performing products at mid-range, value-for-money price points. In addition, they are known for a smooth riding experience, ergonomic design, long battery life, a quiet motor, an attractive appearance, and being relatively lightweight,” said Chen.

He noted that online reviews by members of the e-bike community and leading media, as well as celebrity endorsements, have helped enhance the brand’s credibility. Fans include Suzanne Schulting, a Dutch three-time Olympic gold medallist and seven-time world champion in speedskating.

L Catterton will leverage its global consumer experience and network to develop the Tenways brand and augment its sales capabilities across online direct-to-consumer and offline third-party retail channels. The private equity firm owns Italian premium road bike manufacturer Pinarello as well as outdoor and personal mobility companies such as Airxcel, RealTruck, and Taxa Outdoors.

It sees considerable upside for a differentiated operator in an e-bike industry that remains highly fragmented. No single incumbent has a market share above 10%.

“User experience is key and there is room for a strong brand that is well regarded in these aspects to capture market share,” said Chen. “The diverse market has substantial capacity to embrace a wide range of players, and a differentiated one like Tenways can build on the foothold it has already established in the region to emerge as a leader over the next few years.”

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• Topics
• Europe
• Greater China
• Industrials
• Consumer
• Asia
• China
• L Catterton
• Transportation
• manufacturing
• Meridian Capital
• GL Ventures