I was saddened to read last week about the demise of Bay of Plenty-based electric bike manufacturer UBCO. For several years, UBCO had valiantly tried to commercialize its various models of electric utility vehicle. Over time, I bumped into the UBCO team at various trade shows and followed their market success and fundraising efforts. As always in these situations, there will undoubtedly be people on the sidelines claiming to be experts on exactly why UBCO ended up failing. As the great Teddy Roosevelt said (he must have come across some of the same “experts” that I have):
It is not the critic who counts… The credit belongs to the man who is actually in the arena… if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.
I was part of a startup that failed a little over a year ago and, much like Teddy above, I was bemused by how many people with no connection to the company or inside knowledge seemed to have a perfect explanation for exactly what went wrong. I’m not going to make that same mistake in this case, I don’t claim to know what happened with UBCO, nor am I an expert on the electric bike market. I have observed, however, that the electric vehicle industry is incredibly competitive, with countless companies vying to commercialize their designs. That said, I’m sure UBCO faced those challenges head-on and had smart plans to overcome them.
What I can speak to, not as someone who knew the specifics of UBCO’s operations, but as someone who runs a business that manufactures physical goods, is this: making products is really, really hard. Like stupidly hard.
New Zealand’s startup ecosystem is predominantly made up of software companies. Don’t get me wrong—building and commercializing software is no easy feat, and I have the utmost respect for what companies like Timely, Xero, and Vend have achieved. But when you’re trying to do all of that plus manufacture a physical product, you’re entering a whole new realm of complexity. You’re dealing with supply chains, global manufacturing logistics, and the challenges of shipping tangible goods worldwide. That’s an entirely different level of difficulty.
I wasn’t an investor in UBCO, so I can’t speak to how their pitch was framed. However, I do wonder if part of the issue stemmed from the fact that, at least in the early days, UBCO gained capital from investors who were more accustomed to backing software companies.
This is a challenge I’ve encountered firsthand. In New Zealand, we’re fortunate to have a vibrant early-stage investment ecosystem, with angel investors and venture capitalists fueling innovation. However, the models and formulas used to invest in software businesses are fundamentally different from those needed for product-based companies.
With software businesses, the marginal cost of acquiring an additional customer is typically negligible, so the focus is on rapid scaling. These companies pour substantial resources into marketing to onboard as many customers as quickly as possible, leveraging the recurring revenue streams of a SaaS model. Inventory, Cost of Goods Sold and supply chain vagaries are not something they need to worry about.
Product companies, by contrast, operate on an entirely different dynamic. They often rely on one-time sales and face significant lead times—purchasing raw materials, manufacturing goods, shipping them globally, and waiting for payments to come through. It’s a complex, capital-intensive process. It’s also one which, generally speaking, has a lower gross profit margin than the so-called weightless economy plays.
Now, I do know a few of the investors behind UBCO, and I wouldn’t for a moment suggest they didn’t understand that UBCO’s model was different from a software business. But I do wonder whether part of the problem lies in this subtle disconnect between the expectations of investors familiar with software and the realities of scaling a hardware-focused company.
Either way, it’s all academic now. ANyone who was involved with UBCO over its journey can be proud of what they achieved and there are still hundreds of people around the world using UBCO bikes every day – that is no mean feat and should be applauded. They tried, but ultimately failed. it’s certainly a shame, but in no way should they be ashamed of that failure.
Ave, UBCO, and don’t listen to those critics safe with their cushy jobs and comfortable armchairs.
UBCO were an automotive entity and refused to accept it. They blindly focused on the ‘tech’ label and ignored all else. Getting people with absolutely zero automotive experience or who had never even sat on a motorcycle before to take over from the original hard working development team (that mostly left after the 2X2 was created) was just one of many things they did incorrectly. UBCO’s initial 100 owners/users of the product provided incredible amounts of feedback of which most was entirely ignored and not acted upon. Genuine findings from test fleets on farms were ignored. Essentially the once the original CEO left it turned from a logical forward thinking business to someone’s personal vanity project that tried to coast off the coattails of a product that badly needed improvement. It’s a massive shame. But seeing comments and posts about lack of funding in the start up sphere or government changes being the cause of this couldn’t be any further from the truth. Check out the glassdoor reviews “Martini Glass management; super wide at the top with executives making outrageous salaries while they laid off their grunts.” – says it all.
This was a really interesting read, Ben. I enjoy all your posts but this one has given me more things to think about than usual.