SpeedX’s ‘smart’ road bikes: The story of cycling’s most successful crowdfunding campaign
Earlier this year, Chinese technology brand SpeedX set crowdfunding records when it shared its Leopard and Leopard Pro ‘smart’ road bikes with the world. Promising an integrated cycling computer and data collection, all in a competition-level carbon frame, SpeedX caught the attention of cyclists around the world.
So where did SpeedX come from? Why has the brand’s smart bikes become so popular? And where to from here? Cam Whiting from Cycling iQ caught up with the co-founder and CEO of SpeedX, Li Gang, to find out.
For all the attention given to the premium road bike brands, the actual number of buyers these brands represent in the global market is very likely to be less than 1%. In the end, most consumers just want a given specification at the best possible price.
Chinese tech start-up Beijing Beast Technology Co., Ltd demonstrated an exemplary understanding of both price sensitivity and marketing hooks when it launched its SpeedX brand of ‘smart’ road bikes on Kickstarter earlier this year.
To say the campaign was successful is an understatement. Some 1,251 backers pledged US$2,319,876 (AU$3.2 million) to bring the SpeedX project to life. Not only did this set a new crowdfunding record for a bike–related project, it also ranks inside the top 50 Kickstarter campaigns of all time.
All this despite the use of a model with hairy legs. The sound of seasoned bike industry marketers dry-retching might well have been heard across the U.S. and Europe.
“They are shocked,” says Li Gang, co-founder and CEO of SpeedX, when asked how some of the big bike brands responded to his company’s crowdfunding success. “They cannot do this. We just came up with three innovations – a high performance bike, the Smart Control device and an app. Giant and Merida cannot do these last two things. They are too huge to change.”
But that’s jumping ahead.
From a fork in the road
Beijing Beast Technology Co., Ltd (abbreviated to Beast Bikes, now named SpeedX) was co-founded in December 2014 by Li and a buddy who had both experienced the highs and lows of corporate world excess.
“I didn’t feel happy in my work, because you just repeat yourself day after day,” says Li, who first interned as a university student for Bank of America Merrill Lynch in 2011 prior to joining financial services company Essex Lake Group LLC the following year. “I went back to China, found my best friend – a very good tech guy from Alibaba – and we built a very interesting smart button for every Android phone.
“It plugs into your phone and you can just click and take photos or video and quickly open up apps. We sold around five million in one year. It was the most successful hardware start-up in China in 2014.”
In the few frenetic years leading up to this achievement, Li (pictured left) and “tech guy” Gao Jiayang (a development engineer for Alibaba’s Taobao marketplace), had ignored what was happening underneath their collared shirts.
“After 2014, we met some troubles in our health,” says Li. “I gained around 50 pounds (22.6kg) in one year and my partner got diabetes. We realised without health you have nothing. So we picked up cycling and during our rides we thought of other things we could do. That’s why we started SpeedX.”
By all accounts, 2015 was a busy year. The company launched the SpeedX app – a Strava-esque platform with GPS and real-time riding data — in March, followed by the SpeedForce stem in October 2015. By the end of the year, Li and Gao had also flicked off their smart button company to Chinese cyber-security firm Qihoo 360, who had come on board as an investor earlier in the year.
The pair also proved to be dab hands at attracting the right investors for their new cycling project.
“We gained three rounds of investment,” explains Li. “First was the angel investment from Xu Xiaoping, who is founder of ZhenFund and also my mentor. This was around US$1 million (AU$1.4 million). We then gained Series A investment from Kai-Fu Lee (Innovation Works) who was formerly a VP at Apple and Microsoft.
“That round was around US$8 million (AU$11.1 million). Most recently, we received around US$4.5 million (AU$6.23 million) in Series A+ financing. In total we have around US$15 million (AU$20.7 million). We will offer our next round around June 2016.”
By the time the third financing round was in the bag, the SpeedX app had one million users. “I think this year we can reach 3 million cyclists,” says Li, confidently.
With the app humming along and stem in the field-testing phase, SpeedX launched its most ambitious project on March 24 this year.
The SpeedX Leopard and Leopard Pro ‘smart’ road bikes featured composite frames with full internal cable routing, full Shimano drivetrains, carbon wheels, and a variation of the SpeedForce stem, called ‘Smart Control’. Pricing for the 105-equipped Leopard and Ultegra Di2-equiped Leopard Pro was US$1,499 (AU$2,100) and US$2,499 (AU$3,460), respectively.
Ultimately, more than 1,200 people opened their wallets for the road bikes whose frames could suspend the weight of a Lamborghini.
Technical features aside, what is it that makes these bikes ‘smart’ in the first place?
“Specialized, Cannondale, Trek, these are very good brands but they don’t care about how you can improve your performance and whether you ride well, why you ride or where you ride,” says Li. “When you have our bike, we will give you a 360 degree coaching. How to eat, how to train, and you can track this from your smart control.
“Users can share the data and compete with one another, make friends and meet up with a group.
“Even if you don’t have the bike, you can still use our app,” he continues. “You can use basic functions, for example GPS with your phone to track your riding and also we have a ranking function so you can compete against others.”
Playing with the big boys
Though SpeedX has made winning investors and backers alike look effortless, winning acceptance within the bicycle industry has proven to be challenging for the upstart CEO and, potentially, also to his liver.
“My experience is in producing really small things, like the button,” says Li. “Bikes are really huge, and I learned to respect the industry. I know that we cannot change the whole industry or the experience of riding, but we want to have a better product so we should talk with the suppliers and the stakeholders in the whole industry.
“I spent the whole of last year drinking beer with them, to just have dinner and stay in their factory to talk with them; that is where I spent most of my time on the manufacturing side.
“I learnt that if you don’t have a good relationship with all the suppliers you won’t have good products, especially in such a complicated industry.”
The Kickstarter campaign also exposed some planning shortcomings which experience in the bicycle business would have helped avoid.
For starters, VAT and import duties weren’t taken into account. This meant all Kickstarter backers outside China and the U.S. – Li says the top five backers by country were from the U.S., UK, Canada, China and Germany – would have to pay tax and import duties on top of the purchase price. SpeedX responded by offering up to a US$250 (AU$350) refund per bike depending on shipping destination and acknowledged it was “losing a bit of money” in the process.
SpeedX also didn’t account for the high anti-dumping duties incurred when shipping bicycles from China to the EU, so they had to scramble to find an assembly factory in Taiwan to dodge that bullet as well.
“We didn’t realise it was so complicated,” Li acknowledges. “Each country has different VAT, duties and shipping methods. We also didn’t realise we would have so many purchases from so many countries. So that’s our fault, lots of factors come together and I want to say sorry. After the campaign, we will sell the product with VAT included in the price.”
Like most good entrepreneurs, Li understood that it was more expeditious for a fledgling brand to plug in decades of expertise and connections than to acquire these things over time. Alongside Li, Gao, Head of Design Li Jianliang and Head of Marketing Raggy Lau, are two bicycle industry veterans to help move things along.
“We now have the General Manager of UCC taking care of the global distribution channel,” says Li, referring to Wu (Tony) Yamou of the well-known Chinese original brand manufacturer (OBM), which counts Avanti amongst its customers. “And we also have the head of the factory Li Shiqin who is taking charge of manufacturing.”
Yet even after all of the beer-swilling and clever hires, isn’t Li concerned that a bigger brand like Giant, Merida or even UCC might turn its hand to ‘smart’ bikes in future and blow the new company off the roads?
“That doesn’t concern me a lot,” replies Li. “The only thing I’m concerned about is the manufacturing and supply chain side. If Giant and Merida tell the suppliers that they cannot sell the products to SpeedX, that’s the only thing I’m concerned about, but they are very good companies so they won’t do this.
“Also, within the three names you mentioned (Giant, Merida, UCC), one of them is our client so we will supply Smart Control to them.”
Building an ecosystem
Away from SpeedX’s Beijing HQ, which steers the brand narrative and oversees software development, the electronics are taken care of by the company’s office in Shenzhen. Further up the east coast in Xiamen is the factory where the frames are produced.
“Xiamen is the centre of carbon fibre frames,” states Li. “More than 60% of carbon fibre frames come from there. We buy the frames from Fibertek, whose clients include Specialized and Swift. We just find the best suppliers in the industry and we develop products with them.”
Though Wu is conceptually responsible for establishing SpeedX’s global distribution network, the brand is intent on keeping its supply chain short to ensure it can keep costs down.
“Our focus is online,” says Li, “but we will have some after-sales service if the bike happens to break or not work. Right now, we are verifying around 200 shops. I think some of those shops will sell our products, but our focus is online because we want to save costs for our customers.”
But before SpeedX can even start to think about global distribution, it needs to start shipping products.
Deliveries of SpeedForce stems were due to commence this month, but have since been delayed due to ‘mixed results’ in pilot production and field testing. The first Leopard and Leopard Pro bikes are scheduled to start shipping in July, which seems extraordinary to anyone who is familiar with bicycle industry lead times.
Still, SpeedX is continuing to release new products at lightening speed to flesh out the ecosystem which it hopes will help the brand break even and start making a return on its investment by 2018 (Li won’t say how many paid users are needed before break even is achieved).
At the China Cycle exhibition earlier this month, the company launched the Leopard AL road bike for the domestic market – “you cannot just have one bike to satisfy all the users“ says Li – and a ‘SpeedX Care’ plan comprising free servicing, extended warranty coverage and third-party insurance for CNY299 (AU$63) per year.
Li says that it is ‘value added’ products such as SpeedX Care that will ultimately make SpeedX viable, whereas the hardware is simply a conduit to the market.
“We can already track over one million cyclists and we have a lot of plans for the global and local markets,” says Li. “It is a huge market. Once you have a habit, you tend to keep investing in it.”
Li explains his company doesn’t plan to offer any additional hardware this year “because we want to focus on the bikes,” but more ‘smart’ accessories are expected to follow next year.
China is huge, but not huge enough
Throughout our nearly hour-long chat, Li has been stuck in his car battling Beijing’s notorious traffic and rarely a minute passes without the sound of blaring horns punctuating the conversation. It is a timely reminder that the car is still king in China. Motor vehicles may remain the preferred mode of personal transportation for the foreseeable, but Li is adamant that many people are now looking past owning a shiny car as the ultimate symbol of success.
“We have a very good future because people are making more money and they want a lifestyle,” he says. “Sport and health are the most important things. It is similar to the Japanese market 30-40 years ago. There are many people, and there will be many more people, in China that love sport, so that’s the China we want to grab in our hands. I think with SpeedX we have that chance.”
Though China’s government has launched an ambitious plan to get more Chinese involved in sport and also attract more investment in the sporting goods industry, Li says the only advantage he sees from the Government’s latest policies is “there are a lot more investors around”.
Li has already made it clear he doesn’t just want SpeedX to be a story about China. It’s why the company is looking to invest in a pro cycling team to help spread the word.
“We want to bring our product to customers around the world so international professional races are our target,” Li says. “If you don’t put your products on the highest level of professional races then how can you say to the customer your bike is the best?
“We want to build up a second Nike or second Under Armour, so professional cycling is really important for our brand. It will be an international team. Even though we will spend a lot of money, I think it’s worth it.”
About the author
Cam Whiting is the founder and publisher of Cycling iQ, a website focused on Asia’s role in the globalisation of road cycling. Whether it’s a new UCI race in Indonesia, chatting with a pro cyclist from Japan, a visit to the Chinese factory that makes frames used in the WorldTour or uncovering data on road bike sales in India – if it’s related to road cycling in Asia, it will be at Cycling iQ.