EUGENE OR (PRWEB) SEPTEMBER 11, 2017 – She lives in a tiny house. She bikes or walks almost exclusively. She recently took over as President of Bike Friday in Eugene, Oregon, where she manages one of the last bicycle factories in the US. But this story started 25 years ago when Alan Scholz and his brother Hanz decided they had a better way to build a folding bicycle.
Way, way back in 1992, folks were more worried about Y2K than they were about climate change, but the Green movement was alive and well. The country had been working to clean up the air and water for a few decades, and a sizable percentage of the population was talking about sustainability. The Scholz brothers were part of that group. They had also been intrigued for over 20 years about the idea of putting a high performance folded bike into a suitcase for airline travel.
Many cyclists love to travel, but they find almost every transportation provider to be disinterested or even hostile to bicycles as luggage. Their idea was to offer a quick folding bicycle that would fit easily on public transport and would also be “as fantastic to ride as your favorite bike.”
In the beginning – Bike Friday is born
The Scholz brothers were running a small manufacturing facility designing and building tandem bicycles as a partner for Burley Design, a cooperative started by Alan and his wife in 1977. Alan’s first big product success was the original Burley child trailer, it set the standard for all future child bike trailers in North America.
Alan and Hanz proposed three hot new designs to the cooperative in 1992. Alan Scholz explains: “We had a slick lightweight folding bike that would fit in a suit case, a new trailer design, and a tandem that could be easily disassembled for travel. We were shocked when the cooperative board turned down all three. The board members complained that no one was making anything like this and that bike shops would not sell these types of items. At that moment, my brother and I decided to set off and sell these items direct to consumers.” The corporation was established as Green Gear Cycling Inc. with the dba of Bike Friday (https://BikeFriday.com.)
Bike Friday grew and prospered. The folding bike concept was over a century old, but the new design offered a groundbreaking level of performance that developed a substantial and loyal following. Alan continues: “We were directly in touch with the consumer. Burley Design had wanted us to stop talking to the consumer. We knew this would end our innovation. Now we were dealing direct with the folks who knew what needs they had, and we were able to supply those needs. Listening carefully to consumers became the underpinning of everything we do today.”
While the company grew so did Alan’s family. His three daughters all were involved in the family business. “We started them lacing bicycle wheels when they were preteens. They were paid for their work and happy to have the extra spending money,” explains Alan. “Later we would step them up to doing mailings or even working in the paint room. Hanna built a bike from scratch when she was about 16. It served her well for over a decade.”
Storm clouds over Eugene
Over the last 25 years, the company experienced ups and downs like most businesses. Changing tastes, recessions, and 9/11, all had impacts on the company. But in 2013, with Bike Friday still recovering from reduced sales after the Great Recession, the company found itself in a perfect storm.
The company had borrowed heavily from the City of Eugene in to finance the tooling and startup costs for the most revolutionary folding bike ever, the tikit. The tikit was very well received and sales were ramping up dramatically. But then the first of three disasters hit.
A supplier error resulted in a recall of the the tikit. Not only was the recall expensive, but it was a blow to the reputation of Bike Friday and its leading model. Sales tanked. Then, just as the company began to recover from this disaster, the whole bicycle industry began a prolonged slump also felt at Bike Friday.
Alan sighs: “We had made the mistake in 2011 of laying off qualified and seasoned staff too quickly. This time we made the bigger mistake of waiting too long to let people go.
When Alan’s daughter Hanna took over the in late 2015, Bike Friday was struggling. Sales were down and headed even lower. Losses were mounting. However, Hanna wasn’t in the dark about the challenges:
“My friends, family, advisors, and even some employees thought I was a little crazy to take over when I did. They were not shy about telling me so.”
Hanna struggles with her career path
But let’s back up a few years. Why was Hanna taking over now? Company transitions from one or both parents to their children is a big deal for any company, and this type of transition is often fraught with emotional struggles on both sides. Hanna tells her side of the story…
“For a long time, I wasn’t really sure that I had any interest in taking over. I had tried working for other organizations in the sustainability movement, and I even considered starting my own business in some other industry. My dad started asking if I wanted to run Bike Friday when I was just 25 years old (so they could design and build and not have to do administration) but I couldn’t picture myself giving orders to my dad and uncle, or believe they would actually follow them — could not fathom it at all. Even as I moved into my 30’s and was taking on various responsibilities in inventory and then marketing and other parts of the plant, even as dad kept suggesting I start running things, I couldn’t picture it. I only had this one picture of my dad and uncle as my examples of managing a factory, and I didn’t see myself fitting into their place in that environment.”
Hanna’s educational journey had been unique. She calls herself a pretty good multitool, but not an expert at anything, with plenty of stubborn determination. She honed those skills into a strong combination during a stint at the National Outdoor Leadership School or NOLS. If you head over to the curriculum page for NOLS, you’ll start to understand something about the grit that currently defines Hanna. To take just one excerpt:
NOLS teaches risk management by applying leadership and wilderness skills and facilitating experiences to develop judgment. Students will be able to:
- Identify and assess hazards and understand risks in the wilderness
- Use technical skills, leadership, judgment, and situational awareness to manage risks
- Use risk management terminology and models to assess and communicate decisions and actions
- Create and implement contingency plans
Hanna felt that “NOLS was my greatest single source of training after middle school. The foundational principles of how to live simply, to lead, to work as a team, and to overcome adversity by wit and grit have served me well ever since. It has informed my decisions to live simply and to be clear on what are the essentials to live, and see everything beyond those essentials as luxuries. So I live the tiny house approach and I don’t rely on a car for my daily life.”
The second half of 2014 found the company with a full slate of problems to solve and actions to take. Alan Scholz once again asked Hanna to take the title: “We don’t usually put a lot of stock in titles at Bike Friday. Never have. However, it just seemed that in this case we needed to make a statement.”
Hanna still wasn’t ready. But the truth was that she was effectively running the day-to-day operations, and Alan was doing what he loved…inventing and designing.
Simultaneously, the company had just used one of Alan’s favorite approaches to solving sales or cash flow issues. He invented a new product and it was ready to be announced. The new product also provided a new category for the company. The Haul-a-Day is a sport utility bike designed for anyone who needs to carry larger loads on the bike, but still wants the bike to perform and handle like the lightweight bikes we all know and love. And its one frame can adjust to fit a whole family of people.
Hanna decided to use Kickstarter for the bike launch in November 2014. “We’d been watching this idea for a little while. A lot of bike ideas were raising substantial money on Kickstarter, and we felt the Haul-a-Day was so unique that the Kickstarter platform would really be a perfect way to introduce it to the world. We had no idea just how much work it is to do crowdfunding the right way. We ended up devoting massive time, energy, and emotional resources into the campaign.”
The company really needed a win. The tension was palpable when the Kickstarter campaign launched. Employees who had computers handy were checking the progress throughout the day. Less than half of all Kickstarter campaigns reach their funding goal. And if you don’t reach your goal, you get nothing.
By the end of the first day, there were a lot of smiles at the plant. It seemed that the Kickstarter community was loving the bike. By the end of the campaign, the Haul-a-Day had raised over $130,000, putting this campaign in the top 3% of all the successful Kickstarter campaigns, and close to the 1% level of all campaigns.
The huge cash infusion would be a great help as the company exited 2014, but all was not well. Hanna says she “has thought a lot about the lowest point over these last three years. Dealing with unhappy vendors, explaining difficult days to employees, having an unexpected slow sales month – these are all difficult. But right in the middle of the heady days of the Kickstarter campaign, my personal life took a huge hit.”
“When my partner left, I was devastated. It took a toll on my ability to be fully present on the job. Ironically, he was also our web developer and running the Kickstarter with me, so we ended up having a deficit to fill at Bike Friday as well. My survival training had prepared me for much of what I was about to go through in the business, but somehow, we are never prepared for a broken heart.”
“Fortunately, there was little time to think. I just had to focus on the business and that’s…eventually…what I did. I was also lucky to have good friends and family to offer emotional support and wonderful employees who stepped in to give their all to keep Bike Friday going as I struggled through these dark days.”
Burn the boats
The turning point in Hanna’s career path came in 2015 when she became involved with an organization dedicated to helping startup businesses in the Eugene area. “RAIN (Regional Accelerator & Innovation Network) was a second time where my education came in a very non-traditional way. I was not the actual target client for RAIN. They were looking for young startups. But they took my case anyway.”
“I was immediately placed under the instruction of seasoned business owners who dug deep down into the details of how to start, manage, finance, and grow small businesses. My eyes were opened in many ways, but chief among them was the realization that I didn’t need to be like my dad and uncle in order to effectively take the reins of Bike Friday.”
“My concern had been that Alan and Hanz were both very creative at designing, tinkering with, and eventually crafting the various inventions that had been the core of Bike Friday. I saw that as fundamental to the job of president of Bike Friday. In some ways, I thought I’d need to give up who I was as a person and as a woman in order to be president. Through my instruction at RAIN I began to see that I could be authentically myself and also fully female while running a predominantly male steel fabrication business. From that moment, it was only a matter of time until I would relieve my dad of a responsibility that he really hadn’t prized for a long time.”
Hanna finally agreed, “I knew dad was right about the title change to President, and I thought it wouldn’t be a big deal. I was surprised at the change it made in the employees’ relationships with me. But the bigger challenge was how to change the relationship with my dad. Even though he was much happier having me run things, unsurprisingly, he didn’t always want to totally let go.”
We have now come full circle. In late 2015, Hanna is now the president of the struggling manufacturing company her dad and uncle founded 23 years earlier. She ignored the advice of most around her and committed to finding a path to sustainable success. “I believe in recycling, so I didn’t want to throw away an entire company that was doing so much good. I love our employees and customers, and want to continue serving them.”
Unfortunately, even with the cash infusion from the Haul-a-Day Kickstarter campaign and the new sales created by the new product, by early 2016 the company edged towards crisis, again. Sales were still moving lower. Losses were eating into cash flow. Something needed to give, and fast.
Hanna decided on a philosophy that would lead her through this crisis and start turning the ship around. She collected advisors and mentors around her that she could lean on for advice. Her relationships at RAIN represent one part of this cadre of consultants. Alan is still her first resource, and often her last. She feels that outside help, consultants that have no vested interest, will provide a new way to look at old and festering problems.
January 2016 – The Marketing Manager is laid off and Hanna takes over as Marketing Director for the second time. A whole new online marketing strategy is created.
March 2016 – Staff and manufacturing employees are cut back. Alan and Hanna’s last available personal funds are loaned to the company. A solution is needed, and soon.
April 2016 – The old Bike Friday website is replaced by a mobile-friendly site, the Bike Friday Facebook page has a new active manager and an Instagram account is created for the first time. A marketing consultant is called into action. Alan suggests someone he has known about in the bicycle industry for decades. The sales team is retrained, new approaches are tried.
May 2016 – Alan has another new, world’s first bike in the works and Hanna starts planning the second Kickstarter campaign in less than a year. The first one raised almost $140,000. This time the company will introduce the lightest folding bike in the business.
A massive advertising and social media campaign is launched to support the new pakiT folding bike’s Kickstarter campaign, and the results are impressive. Orders flow in for over $150,000 worth of the new bike. This puts Bike Friday in the upper 3% of all Kickstarter campaigns for the second time. It would be like winning the Tour de France back to back. The cash infusion gets the company through the fall season and into 2017.
January 2017 – pakiTs are shipping and the public loves the new bike. But the bicycle industry slump continues and the company is still losing money month after month. The losses are not sustainable.
February 2017 – Hanna turns to the consultants again. With determination Hanna’s team digs and cuts deeper and finally finds the best mix of skills and knowledge at a company size that matches sales to ensure a profit going forward. Decisions are made and the losses are stopped. From February on, the company either breaks even or makes a profit. But the losses already booked force Hanna to consider how she can raise more funds for investment to grow.
March 2017 – Consultants suggest several possible solutions.
- Go to the venture capitalists and see if the company can find a VC partner to buy into the company.
- The City of Eugene had loaned the company money in the past. Maybe they would do so again.
- Use the new online equity crowdfunding method that would allow Bike Friday to raise equity online.
April 2017 – Hanna decides to try the city. The City of Eugene loaned the company $300,000 several years before and that loan was almost paid off. Maybe they would rewrite the loan for another $300,000. The city said they were interested and Hanna scrambled to put together a financial package for them to consider.
June 2017 – The city comes back after reviewing the package and offers Bike Friday $175,000 while requiring substantial new collateral. Hanna decides to try another route and makes the decision to use StartEngine.com to raise working capital through a crowdfunded equity offering. Equity crowdfunding is in its infancy, so Hanna’s team does research to ensure that they have selected the right online platform for the job.
July 2017 – Hanna and her team continue to keep sales steady, and keep the company at break even or slightly profitable. Unfortunately, cash flow is dropping due to repayments of loans. Hanna, Alan, and others on staff work long hours to create the crowdfunding offer. A major supplier is getting angry and sends a troubling letter. Hanna meets with him and calms him for now. Something close to a miracle is needed very soon.
August 10, 2017 – The StartEngine.com site is completed and goes live. Emails go to the Bike Friday fans – over 20,000 and growing. Facebook ads go to selected audiences likely to respond, including their 12,000 followers. Tweets are Tweeted. A few hours go by and there’s no activity. But then someone makes the minimum purchase of $300. More investments come in for $500, $1000, and then one for $5000. By the end of the first day, a total of $27,000 is posted on the dashboard at StartEngine.com. The number is substantially above what most online crowdfunding equity campaigns achieve in the first day. There’s excitement in the air at Bike Friday.
August 11, 2017 – More success overnight and the flow of new orders is looking good again. By the end of day two, over $50,000 is in place and the initial goal seems very doable. Hanna had elected not to spend the $2,000 it would take to have her financial statements reviewed before the first offering. On Friday, she puts in a call to a CPA and sets up the financial review that will allow Bike Friday to raise the offering goal substantially.
August 12, 2017 – Another fantastic day, the total now moves close to $75,000 largely because of a couple of large investments. The investments are averaging over $1500 per investor, unheard of for 95% of StartEngine campaigns.
August 13, 2017 – Less activity on Sunday, but another $5000 comes in. Hanna agrees to pay a bit more to the CPA in order to expedite the review.
August 14, 2017 – A continued lull and by the end of the day, the number is just under $90,000.
August 15, 2017 – Large investments come in and the total is now $109,000. Hanna puts a plan in action to start the 2nd round on August 23 if everything is ready. Everyone on the team is ecstatic!!
August 18, 2017 – Raising a larger amount is a much heavier lift than raising the first portion, but the speed of the initial raise indicates a serious potential to achieve substantial additional funding. Hanna meets by phone with her outside marketing consultant to strategize the 2nd round launch. They agree to a very aggressive campaign designed to prove that with additional funding, the company has the vision that could pay off for the new investors. They also agree that there are some specific targeted investor types and groups that will be interested in a US manufacturer run by a young woman that has an obvious environmentally positive business.
August 24, 2017 – The campaign goes live again. During the lull, orders for stock have continued to accumulate and the total is now $141,000.
The fundraising effort has already helped to stabilize Bike Friday to focus into the future. Hanna Scholz has recognized the value of outside counsel, and combined with her innate talents, personal enthusiasm, passion, and just plain grit, (plus talented dedicated team) has turned the company around in under two years. She has set a vision for the future and has communicated that vision to her team, the fan base, and investors. The company’s foundation was already strong and the products enjoy a great following. With the focus, persistence, authenticity and vision of the founders daughter, Hanna Scholz, Bike Friday is launching into a new, more sustainable era.