In 2015, I invested in the world’s first modern bike-sharing startup. Donkey Republic from Copenhagen. We made an investment through the Accelerace fund. Later, I made an angel investment before they went public in 2021.
About 2 years after the launch of Donkey, micro-mobility exploded. Lime, Bird, VOI, and many more attracted immense amounts of funding to flood our streets with scooters.
At the time, the founders of Donkey faced pressure to add scooters to compete. Scooters seemed to become the vehicle of choice. They were fun to ride and needed no pedaling of your own.
But despite the pressure, the founders never did. Why? Because Donkey Republic is not a micro-mobility company. The founders’ motivation for Donkey was not to give people a more convenient way to get around. Instead, the founders wanted to reduce carbon emissions and promote general health. And they believed that bicycling was a key instrument because riders get exercise and burn calories, instead of burning fossil fuels.
Unlike scooters, bikes are good for medium distances, because the rider can sit down and transport luggage. Scooters are mainly used for short distances. In other words, scooters replace walking.
Because bikes replace cars and scooters replace walking, bikes reduce the burning of fossil fuels and promote health. In contrast, scooters increase the burning of fossil fuels and damage health. At least the founders of Donkey claim.
Unfortunately for the investors in Donkey Republic, the company hasn’t become the unicorn many of us hoped for (yet). Still, the company is doing well, and unlike the scooter rivals, Donkey churns a profit in established markets, and have avoided brutal valuation corrections and mass layoffs that have hit their spoiled scooter siblings.
Still, Donkey Republic has not provided the kind of financial return that VCs such as me is looking for. And part of the problem is that the market for their product does not exist (yet).
See, Donkey Republic is not a micro-mobility company. Well, it is. But to the founders, bicycles are means to an end. The founding CEO Erdem is a social entrepreneur by heart. He wanted to create social change. He wanted to promote a lifestyle that included bicycling to reduce carbon emissions and promote health. And they do.
Researchers at the University of Dresden calculated the impact of having Donkey bikes in a city, and they concluded that bicycling saves 1.3 EUR per kilometer in public healthcare costs. On top come the benefits of lowered carbon emissions and reduced time-waste from traffic congestion.
In Q3 2022, 1.7M trips were taken on Donkey bikes. If we extrapolate this number to a full year, we get about 5.2M rides per year. The company reports that each ride has an average distance of 3 km. That equates to more than 20M EUR in healthcare savings alone. But how much did riders pay to use the service in 2021? 5M EUR! That is a quarter of the value Donkey Republic produces in healthcare savings.
And here we arrive at my investment outlook for 2023. Currently, we suffer from a non-existent but unlocked market for societal value propositions. Donkey Republic sells public health more than transportation convenience. In fact, we know exactly how much more. Four times as much.
The problem however is that this “societal-positive-effect-product” cannot be sold. Not because none wants to buy it. Public authorities are screaming for solutions to reduce healtcare costs and carbon emissions. But products that create indirect cost savings and carbon emissions cannot be bought and sold because there is no marketplace for them. And why is there no marketplace? Because we lack a standardized way to value and trade these effects.
In 2021, Stepn was launched and pioneered the move-to-earn Web3 category. The app rewards people for moving. It became the fastest-growing app to date. But its demise was baked into its logic. Why? Because the only way to earn from using the app is to get more people to use the app. This is otherwise known as a Ponzi scheme. However, the inevitable crash of Stepn is a bit unfair because moving creates much societal value. The effect is reduced healthcare costs (and increased revenue for shoe manufacturers and shoe shops). But those effects have not been productized and sold because currently, this market is nonexistent.
If someone came to the public authorities and sold 20M EUR of savings for 10M EUR, they would surely buy it. Why wouldn’t they? However, when the effect is provided as a derivative of a behavior change, it becomes hard.
But hard is not the same as impossible. In fact, hard problems have always created the most fertile ground for entrepreneurs. We have made reusable rockets, solved the Turing test, and made graphic designers obsolete. I think this can be solved as well.
What we need are startups who can unlock this trillion-dollar market opportunity. And that is my outlook for 2023. Startups that can accurately attribute and value societal effects. Startups that take these effects and productize them. Startups that can distribute these products to the public bodies (as the main customer segment). And startups that can help the customers use and harvest the value of this new class of products. I am not sure what they are called, but I guess someone smarter than me will come up with that. My sense is that we need something catchier than “societal-positive-effect-products” or “SPEPs”.
Happy new year everyone.
(We have already made numerous investments that are building blocks in this marketplace described above. Those include Donkey Republic (saves healthcare and environmental costs), Impactly (calculates the monetary impact of social programs), Parazute (saves healthcare costs), SkinBliss (saves healthcare costs), The Upcycl (saves environmental costs), Flexecharge (saves environmental costs), Redo (saves healthcare costs), Chew (saves healthcare and environmental costs) and many others that provide meaningful societal . If you have a startup idea that would fit into this portfolio let us know).