Description
When is a business model considered circular? A fund with circularity in its name must answer this question.
Andrew Shannon, Partner at Circularity Partners, gives us her answer. A benchmark market method is used to examine the behaviour of the portfolio company’s customers.
In addition, Andrew describes how the financing challenges of PaaS businesses can be overcome.
This episode is the sixth in the series PaaS Decoded, 16 conversations about the fine details of product-as-a-service.
Video Impression
People
Andrew Shannon, Partner at Circularity Capital
Patrick Hypscher, Co-Founder of Green PO, Expert in Sustainable Business Models
Chapters
00:00 Intro
03:35 Circular Nature of PaaS
05:53 Benchmarking the circular against the linear model
07:30 Collecting Impact Data
12:38 Account for Rebound Effects
13:22 Screening companies for Circular Character First
15:48 (Not) Using Equity Money to Finance the Assets
20:12 Asset Based Funding
22:42 Subscription Based Funding
23:43 Explosion of Non-Bank Lenders
25:02 Financing early Growth
29:13 Longt Product Lifetime & Short Use Case
32:28 Lasting Products as Foundation
35:15 Rising demand
38:40 Get in Contact
About Circularity Capital, from website:
Circularity Capital was founded as an independent investment manager in 2015, with a mission to deliver value for investors by supporting growth and innovation in the circular economy. We are a supportive hands-on investor and use our team’s specialist expertise and knowledge in the circular economy to support the businesses we back. Circularity’s investors comprise of pension funds, fund of funds, insurance companies and leading single family offices.
Further Links
https://circularitycapital.com
Transcript
[00:00:00] Intro
Andrew Shannon: As a younger stage business, you’re more likely to get funding for those type of assets where there’s already a really well understood funding universe, relative to where there’s very little evidence.
Patrick Hypscher: Welcome to the sixth episode of PaaS Decoded, 16 conversations about the fine details of product as a service. In the last episode, Lennart van Mens gave the bank’s perspective on funding product as a service. In today’s episode, we take the perspective of an investor and look at assessing the circularity of a portfolio company and funding the assets.
Patrick Hypscher: He studied technology and business studies and has a master’s degree in economics from the university of Cambridge. He has worked in investment banking and private equity for nearly 20 years.
In 2015, he co founded Circularity Capital. Circularity Capital is invested in multiple product as a service companies, Bike Club, Grover, WeBike, Lendis, and Advanced Clothing Solutions. He’s a member of Circularity Capital’s investment committee and leads the firm’s pan European origination practice.
Welcome, Andrew.
Andrew Shannon: Thank you, Patrick. That’s a really nice introduction. And I’m looking forward to the conversation.
Patrick Hypscher: Great. On a personal note, what’s the subscription you personally like the most?
Andrew Shannon: Well, I, I have two, two young children. So I’m a, a Bike Club subscriber. They, they grow very quickly. The children like weeds. And so the, the transition through the different bike sizes is, is made really easy through the Bike Club.
Patrick Hypscher: Yeah, I can relate to that with, as a dad of two small kids as well. Let’s switch to the Circular Capital perspective. Your investment approach includes circular use models. Are they in any way different than product as a service?
Andrew Shannon: So a really good question. So here at Circularity Capital, we invest in businesses operating in or enabling the circular economy across Europe. We’re typically investing between 20 and 40 million euros in gross stage companies right across the circular economy. From circular use models to circular products and materials and enabling solutions.
But let’s deep dive on the circular use. So when we think about circular use, we think about businesses that are using rental subscription models whereby they keep assets on their own balance sheets. So that’s products, the service in our mind.
And then secondly, within the circular use. We think about businesses that are refurbishing, repairing, remanufacturing products, uh, for extended product life. And they don’t need to be doing that for their own balance sheet. They could be doing that for, for others.
Patrick Hypscher: Okay, okay, clear. So a bit also, let’s say, supporting functions, supporting activities. Um, Yeah.
[00:03:35] Circular Nature of PaaS
Patrick Hypscher: If we stick to the product as a service model, when is a product as a service model for you, a circular product as a service model?
Andrew Shannon: So firstly, I should say that Circularity Capital invests in businesses that are impactful versus business as usual.
So, we would only look at a product as a service model as being impactful and circular, if the traditional business as usual in that market is quite linear. So to give you an example and use the Bike Club as a as a starting point. Today, most people buy children’s bikes and use them. Possibly sell them on, uh, or gift them to other friends and family. And often they, they are downgraded in, in their next use case where perhaps they’re stuck in the garage or a shed for four years before anyone does anything with them.
Patrick Hypscher: I don’t do that. Yeah, I think we have three, three unused yeah, yeah, I will. We have three right now, or maybe four, to be honest. Yeah, but
Andrew Shannon: uh, so in our mind, business as usual is linear ownership. So the Bike Club provides a circular solution, which is impactful versus business as usual. And where it becomes circular in our minds is if they are designing their business model. To have the cycle through multiple users and in between times in between users, the company is extending the, the upgrading the asset or extending the asset life.
So in the, in the bike example, it could be changing the handlebars. It could be repainting the frame, upgrading the brakes essentially, making it look as good as new or close to new. Between every use and therefore maintaining that asset. So it can extend its life and number of users that it can service. So if the business is designing its business model to keep assets in circulation for longer and it’s often designing the assets in that way also, then it becomes a very circular model in our mind.
[00:05:53] Benchmarking the circular against the linear model
Patrick Hypscher: Okay, so it’s a bit a combination of qualitative criteria and quantitative. Qualitative for foremost, like, is it their intention? Is it part of the strategy and business model design? And quantitative in a way that you try to benchmark with existing customer behavior. Okay.
Andrew Shannon: Exactly, exactly. So that the benchmarking with customer behavior demonstrates the impact versus business as usual. And the intentionality within the business model and the business demonstrates the commitment to the circular economy.
So, for example, if we look at Grover, which is a B2C consumer electronics subscription model, very circular in our mind in what is a very linear traditional market, Grover buys assets that it wants to cycle through many users over many years.
And whilst Grover themselves don’t do the refurbishment or the cleaning and upgrading between cycles, they are doing that through a third party, which It’s contracted by Grover intentionally to keep the product in as good as new for, for as long as it can.
So the company doesn’t need to do the activity itself in terms of the refurbishment, repair, cleaning, upgrading. But as long as it’s implicit in the business model and it actually does it and it’s economically rewarded for doing so, then we think it’s a locked in circular economy model.
[00:07:30] Collecting Impact Data
Patrick Hypscher: Okay. Okay. The world outside is normally pretty messy. How do you determine whether this, uh, behavior the company triggers is actually superior to behavior customers would do otherwise? How do you collect that data and do companies or like say startups, when they start talking to you, you do your due diligence, do most of the startups or scale ups already provide that data to you, or how does the process look like so that you ultimately can make a decision about the degree of circularity.
Andrew Shannon: Yeah, really good observation. And you’re right.
The world is messy and not every customer does the same thing. That at the point at which we, we are investing is, is typically in this kind of scale up or growth stage. So, the companies that we’re talking to already have quite a lot of granular data about how their customers use products and services. But we also have a, a a theory of change in our, in our minds before we make an investment. And we’re testing that theory Through diligence market research and, and customer engagement over the course of the, of the diligence period to really test whether our, our theories are, are translated into actual reality within the chosen customer base.
Patrick Hypscher: Okay, so, so you actually collect data about that customer behavior.
I, just trying to reflect on my five years of experience at BlueMovement, what’s normally interesting is that you want to track change of behavior over time. Yeah. So you also see, okay, right now I am reaching one specific segment, but I want to grow more towards another segment due to various reasons, be it like profitability or be it also impact, customer lifetime.
Ideally, you want probably want to make a diligence process with data you need to collect over a couple of months, but you don’t want to have so long diligence process. Can you provide a bit of a, let’s say an example if you look at the customer behavior of a specific company you’re reviewing,
Andrew Shannon: Sure. Well, let me, let me use some examples from, from the portfolio company, uh, portfolio companies.
So you’re right, you want to test your theories and the customer behavior over a long period of time, uh, which is why we’re also investing uh, when the company has, you know, significant customer attraction and engagement. So it may be the case that the companies that we’re investing in have, you know, five years worth plus of, of customer data since their finding. So we, we can get quite a rich data set from, from their existing customer data to help us really evaluate our, our theory of change. And then we would do regular annual, uh, data analysis to support the theory of change on a, on an annual basis off post investment.
So we could see whether that theory was, uh, was still standing the test of time over multiple years, and then we would adjust our calculations on, uh, on the impact based on the, on the actual customer behavior post investment.
Patrick Hypscher: So, and in let’s say in the case of a bicycle Company, you probably also send out surveys and ask people about their actual behavior and what they would have done if they didn’t sign up to this specific
solution?
Andrew Shannon: Yes, exactly. So using the Bike Club as a good example when we invested, they had four, maybe five years worth of customer data. And many of those customers were continuing subscribers. So we could be in touch with the continuing continuing subscriber base, conduct surveys as to why they were using the service, how many bikes they’d been through, uh, what condition they received them in what condition they returned them in what, What activity was done by Bike Club between a customer uses on that specific bike.
So we can track it at customer level and also on an asset level.
And given that circular economy is about increasing asset utilization. It’s really important to look at it on an asset level basis. In the, In the, in the, the software systems of the company, , one would expect to be able to see a asset go out to a a customer to be returned after a set period of time, it’d be processed by the business to upgrade it, extend the life maintain it, et cetera, before being sent out again to the next customer. And you should see that process happen two or three times, possibly more in a five year period. And if you’re not seeing that level of asset level activity to extend asset life, then that would be a major flag.
[00:12:38] Account for Rebound Effects
Patrick Hypscher: There is sometimes a discussion about rebound effects when it comes to a product as a service models because they make certain products more accessible, from a financial point of view. Is there also a way that you can account for possible rebound effects in your assessment?
Andrew Shannon: So in terms of how we measure the impact of our investments, we are absolutely taking into account potential rebound effects. As I say, because we’re investing, you know, four or five years after the business has been founded and there is customer data, we can quite a good view what that rebound effect is from the existing customer base and, and by extension, the the forecast customer base.
[00:13:22] Screening companies for Circular Character First
Patrick Hypscher: Now, let’s, let’s say zooming out, you collect all the data, made the analysis and you get an idea of the circularity of that specific business. What importance does this data have in comparison to commercial KPIs?
Andrew Shannon: So if you think about our investment process, we are screening for circular economy alignments, then screening for impact then screening for the commercial KPIs.
And the reason that we focus on screening for circular economy first is because we truly believe that a well organized, well run circular economy business will be able to out compete its linear peers. Um, so, that already gives you a sense of confidence that the business will deliver some good commercial KPIs and maybe an attractive investment opportunity.
And then you have to take it uh, the next steps into the impact. And then uh, of course, into the more traditional commercial assessment. But fundamentally, we start from the view that circular strategies will outcompete linear strategies. So when you start from that perspective, everything else can be additional.
Patrick Hypscher: . Okay.
Andrew Shannon: We don’t believe, circular strategies can win out in every asset class at all times. Uh, for instance, people tend not to subscribe for pencils. They would typically buy a pencil. We have a view as to what types of asset work in a circular use model and a products and service model and which don’ts. And, and so we’re, we’re applying that filter too.
Patrick Hypscher: Plus probably at the point in time you’re sitting, there has been quite some selection already before. I mean, first you need to grow the businesses for, four, five years to be qualified to, let’s say, a knock on your door, so to say, yeah, that, that’s another filter at least on the commercial side.
Andrew Shannon: Exactly.
Patrick Hypscher: And if at some point a pencil subscription will get to the point, I’m pretty sure you’re curious to look at
Andrew Shannon: Yeah, we’re certainly be curious. I mean, we’re happy to be, yeah, to, to learn more all the time.
[00:15:48] (Not) Using Equity Money to Finance the Assets
Patrick Hypscher: Great. Um, let’s look a bit at one specific, let’s say challenge of product as a service um, and models, and this is funding the assets. I talked to so many startups in the early phase, and this is the number one topic where they fail.
Circularity Capital is a private equity company. The capital you provide can that be used to finance the assets or is it only for the growth of the company? So what’s your view on that?
Andrew Shannon: So it’s a really, it’s a really good topic to cover.
Products as a service businesses do require quite heavy balance sheets of assets to allow for the use and, and a subscriber numbers. And the funding of that is, is really crucial in our minds.
Our capital is there to help the business grow. It can be used for funding the assets, but we don’t think that equity funding assets is the optimal way of growing a business. Because as you rightly said at the start, typically the assets derive a longer term return.
So you need to demonstrate an efficient capital structure for, for a product as a service model. And that typically involves quite a lot of debt funding to purchase and maintain the asset base.
And that’s another reason why there are specific assets that are more suitable for products or service models than, than others- back to my pencil analogy. Banks typically
won’t fund a collection of pencils. But they, they will fund of consumer electronics items.
And we can go into kind of some of the reasons for that. And the, the sort of primary ones are that there is a already quite transparent secondary market for use consumer electronics. So lenders typically are looking to see what the asset value of the, of the devices or assets are at any given time. And if they needed to, what, what could they sell them for to recover their, their loan? And so when you’re doing that sort of analysis, you want to know that there’s large market in which you can sell these devices, that the pricing within that market is relatively stable and transparent, and that you could get comfort that if you were to sell the the asset pool that you’ve funded in the secondary market, you would be able to translate that into, into cash, which is what the lenders are seeking to do
. So for a startup scale up products as a service business that is seeking to raise capital, they should be thinking quite hard about the efficient use of capital and how they might blend equity and debt into their capital structure. If they’re considering the use of debt, then what are the metrics that the lenders would use, to assess the business and the, and the risk of the underlying loan.
One of the risks or the metrics they would use is their ability to realize value in a in a, in a wind up scenario. So this, you know, being able to resell the assets. And of course the, another one of many KPIs would use would be the strength of the underlying customer. Often B2B subscription businesses are easier to deal with because the customers have stronger credit ratings but you can get it in a, in a consumer setting also, if you can demonstrate that that underlying consumer has, um, a good credit score indeed that you can recover the assets, and resell it for a reliable value.
So, having a really good understanding of the depreciation curves of the assets is, is really important.
[00:20:12] Asset Based Funding
Patrick Hypscher: Yeah, that totally makes sense and thanks for elaborating on that field as a start.
Do you see any superior, let’s say debt solution that most, if not all the, the growth and scale up companies use?
Andrew Shannon: Currently, The asset based funding or subscription funding are the two most commonly structures that we’ve seen. I Think in the end and once you’ve got to scale, then there could be more of a securitized facility. And it’s worth just touching on, on that a little bit.
So the the banks, or the lenders typically want to lend, you know, quite large sums of money. So let’s say, like a minimum of 25 million. pounds, dollars, and, you know, could be up to 500 a billion. So lots of assets of relatively low value, so back to my pencil analogy, there would be lots and lots of pencils required to get to a 25 million Euro facility which again is quite cumbersome for the, for the lender.
How do I get hold of all these pencils? Who’s got them to keep track of the, uh, the, the subscriber. The logistics of, of gathering these pencils together really, really outweighs the cost of, of the logistics, uh, sorry, the cost of the pencil or the value of the pencil. Therefore, it just doesn’t make sense.
But when you start to think about it like. Well, you know, what if it’s a vehicle, a car, you know, let’s say 15, 000 euros value you, you have many fewer 15, 000 euro packages to make up a 25 million facility. The logistics costs of, of getting them back are, are lower relative to the value. So it starts to make more economic sense. And of course this can scale there’s, there’s a sweet spot between a pencil and a, and and a car that also works. So children’s bikes, you know, let’s say they’re on average 400 euros asset value. IPhone or a tablet, you know, somewhere in the range of 400 to a thousand euros. That, that also makes sense for the types of financing and the, the ticket sizes of, of lenders that sort of asset value makes sense.
[00:22:42] Subscription Based Funding
Patrick Hypscher: Okay. At the beginning of your, your answer, you said you, you differentiated between asset based financing and another one.
Andrew Shannon: Consumer subscription or subscription financing.
So some lenders will look at the quality of the customer and the long, the typical longevity of the customer and, and think about financing on the, on the basis of the the long term stream of cash flows from the customer rather than necessarily the, the value of the asset and the depreciation curve of the asset. So if you’ve got really strong credit quality customers, whether B2B or B2C and you can demonstrate that the average customer life is, let’s say, 10 years then a lender would take a lot of comfort from the stream of, of cash that comes from your customer rather than perhaps the underlying value of the, of the asset. So two different approaches.
[00:23:43] Explosion of Non-Bank Lenders
Patrick Hypscher: What I’ve seen at Grover from the outside, there it looks like that they are not even banks. They’re also normal, let’s say, financial institutions that want to invest in that asset class.
Andrew Shannon: Yes, so what we’ve witnessed in the market over, not we, not just we, but what has happened in the market is that there’s been an explosion in non bank lenders,
Patrick Hypscher: Okay.
Andrew Shannon: over the last, yeah, 10 to 15 years. So whilst, you know, 10, 15 years ago, if you wanted to get a loan, you had to go to a bank. Now you can go to special credit funds or, or other sort of non bank institutions who have a specialism in lending. The, the variety and the possibility of of lenders has, has expanded significantly over, over the years.
Which is, I think is a, is a strength and is also a reflection on the way that banking market has moved with additional regulation all across the globe. And these alternative lenders, uh, credit funds, et cetera, have sprung up to, to, provide this support that would otherwise have been provided in the past by traditional banks.
[00:25:02] Financing early Growth
Patrick Hypscher: Okay. And do you see them also as a partner to bridge early phases of growth? Because what I’ve witnessed a lot is that startups start with a great product as a service idea, and then they manage to get, let’s say, 100 to 500 subscriptions based on the funding they got from friends and family sometimes even small strategic investors.
But then at some point it gets, yeah, more expensive. You need more cash. But it’s not yet so substantial that the bank would already invest in, so do you see specific providers that help in that situation, especially in that phase.
Andrew Shannon: It, that is a very difficult phase for for products as a service businesses.
Back to my earlier comment in that lenders typically like to extend quite large sums of money in, in one go. So they might have a minimum drawdown of 2, 3, 5 million for a, for a 25 million, uh, Euro facility.
So the company needs to provide the working capital to get to that group of assets that’s or subscription cohort that allows for that drawdown from the lender. And then, then the lender needs to have the comfort that they continue, that the business can continue to generate that sort of flow of new customers to onboard that number of assets or that subscriber base to fill the full facility in, in, you know, in the short term, let’s say over two to three year period. So there is extended equity bridging period required for producas a or service businesses in my mind before they can become sort of relatively working capital efficient and move on to a capital structure that’s more efficient through the use of leverage.
Patrick Hypscher: Okay. What also happens is that then you collaborate with a strategic investor or some brands that reduce a bit the stress on your own balance sheet by different payment terms. That’s, that’s also something that happens.
Andrew Shannon: Yeah. So another way of getting around that, um, uh, situation is to provide your products as a service in a market where there’s already a really common funding for that type of asset.
So, you know, give you an example, a, you know, a JCB digger, uh, there’s, you know, very well established markets for funding Of that quality. The lenders have a really good sense of what the asset value is, what the depreciation curve is and what the residual value is. And there’s a, you know, strong secondary market. That would be an example where you as a younger stage business, you’re more likely to get funding for, those type of assets where there’s already a really well understood funding universe relative to, you know, my example of a pencil earlier where there’s, there is very little evidence. so clearly it depends on the, on the, uh, the, the business’s chosen asset base. But if that asset base is already very well understood by the lender environment, then it’s possible that you can get access to debt capacity earlier than you would in a, in a more nascent asset category.
Patrick Hypscher: that makes sense. It’s less, less insecurity on the lander’s side. Given the, yeah, this existing market, existing data.
Andrew Shannon: And having long term contracts in a, in a B2B environment, if you have long term contracts subscription or rental contracts, with your B2B customer, that would be another way of, um, of shortening your, the period to get financing. Particularly if the, you know, if the B2B, the business customer is a really high credit quality.
[00:29:13] Longt Product Lifetime & Short Use Case
Patrick Hypscher: Yeah, true. Let’s touch upon the last aspect, which is exactly about the time horizon.
I sometimes feel that a product as a service with long lasting products and let’s say in my case, washing machines, uh, that they come with a rather late break even of individual contracts.
So if you want to compete with the buying proposition, the linear proposition, ideally, and if you want to address the mass market, you, you might want to put your break even of the individual contract at let’s say five, six, seven years in the future. Which can be a challenge from the provider side because then of course in turn the whole business model won’t break even before that most likely later because you’re growing the business, which also requires capital.
So if you look at product as a service models, does the product lifetime matter for you? Is this a specific criteria you look at?
Andrew Shannon: Yeah. So product lifetime is, is really important. Because in the end, what you, as a, as a business, if you’re trying to increase the asset utilization and, and you know, displace multiple yeah, multiple devices with, with one, one device, then, then the asset life is, is really important. Whether that’s, you know, kind of designed in or your ability to refurbish re manufacturer upgrade in a modular way, for example is really important.
But but I think there’s two things here. So yes, absolutely. A long, long lived assets is, is important. But you have to pair that with short lived customer use cases. So if you’ve got a long lived item and a long life customer use case, then the likelihood is that it’s harder for the customer to make the case of buy versus rent or subscribe. And therefore you have to kind of reduce the cost and extend the break even for the customer longer and longer.
Whereas if you have long life assets and a relatively short customer use case, Then you can build that return much earlier in the in the asset life. So if we take the children’s bike subscription, as an example, children’s bikes are relatively simple pieces of technology. They don’t evolve very much from, from year to year. But the child grows. Um, so they typically only need a bike for 18 months before they grow out of it. So you got, so that’s an example of where you’ve got a really long use case for the asset. But a short use case for the customer. Uh, and it’s that relationship that that works the best in, in these environments.
Patrick Hypscher: Awesome explanation. The last year has never met someone who, who let’s say nailed that relationship so sharply.
Andrew Shannon: Thank you. Hmm.
Patrick Hypscher: So that makes me even more curious to finish off with three more generic questions.
[00:32:28] Lasting Products as Foundation
Patrick Hypscher: The first one is what do you think, what’s the main thing you as a startup, a brand or manufacturer should make sure before you start a circular product as a service?
Andrew Shannon: Now you’re putting me on the spot for all the, all these OEMs.
Patrick Hypscher: Ha ha ha ha.
Andrew Shannon: so I, I would, I would think really hard, hard about quality of your product, how, how
long realistically the asset life is. And how you can maintain it for longer life.
I would then look at the service proposition of your customers. How long are they going to actually use it for?
And then I would look at the finance ability of it. And I think then maybe it’s going slightly off topic, but I think that OEMs and brands that have traditionally been very high quality long asset life there is much more, uh, opportunity, uh, in the circular economy than there is for cheaper brands without this sort of high quality product that will, that will typically last longer. And there isn’t a sort of cache of ownership or use.
I kind of know your, your background, but if if I translate it into white goods in the home, you know, I think Miele and others at that sort of level of price points, sort of brand awareness, cachet quality, longevity of asset life, have more of an opportunity than the cheaper alternatives where they’re likely life is, is shorter and the customer is, you know, kind of less excited about owning one using one, I should say. And, you know, you can equally translate that into, you know, clothing. You know, is it, is it more likely that someone will subscribe to Chanel than that it is for them to subscribe to or um, pine stretcher.
Patrick Hypscher: That absolutely makes sense. And I think you’re right that companies that have that strength in terms of longevity, customer service and durability overall, uh, that they have a better starting position. Which doesn’t necessarily mean that you can only always make a product as a service work for every, let’s say, niche or proposition, you know, or target audience. Especially considering what, what we discussed before about the use cases and how long a customer will need that specific product. But taking everything else as equal the companies have a better positioning. Yeah, definitely.
[00:35:15] Rising demand
Patrick Hypscher: The second question looks more into the future. What significant trends do you see in circular renting in the next three to five years?
Andrew Shannon: Well, I think it’s going to grow in, in terms of consumer model there’ll be more and more willingness for consumers to shift to rental and subscription rather than ownership. And I think there’s a number of. Some megatrends that are allowing for that. so I’m, I’m excited to see the consumer market grow within the existing assets that are already offering circular solutions.
And I’m also really excited to see a wider adoption across different asset classes. I think fashion is coming. We’ve seen in the U S, you know, a lot of excitement over the last Five, 10 years on , Rent the Runway for instance.
Patrick Hypscher: That’s it.
Andrew Shannon: lots of the secondhand trading platforms for used clothes and garments.
I think that’s, that’s going to increase as the next generation come through, you know, increase their earning power and have more influence on the market.
Patrick Hypscher: That’s a motivating outlook.
Andrew Shannon: Yeah.
And generally, you know, generally we’re seeing, uh, prices of of goods increase and the, the utility of those goods increase. You know, if we think about, you know, when we first started using mobile phones, uh, we, we used them only to make phone calls. Now they’re, uh, you know, diaries, emails tide timetables weather forecasting devices, you know, all sorts. The utility of, of these items is increasing and, and and that requires more technology, more software and increasing the cost of of the device and indeed the importance of it to individuals. And you know, that, that is also a helpful in in a product to service model.
The same with you know, e bikes, for example. I mean, the adoption of e bikes of over the last five years has really changed the e bike market or the bike market in, in generally. You know, to, to buy a new e bike, it’s, you know, 3000 plus euros. But 10 years ago, you could buy an adult’s bike for 500. But what we’re seeing is that actually bikes are extending the use case of bikes for longer distances. So people are more willing to use bikes for longer journeys, and they’re enabling the use of bikes for extended age, age ranges which is fantastic. Well, a number of health benefits um, also,
Patrick Hypscher: inclined to check Bike Club right now if they already have an e bike for kids.
Andrew Shannon: Well, so what I was, what I was saying is that the e bikes are extending at the upper end. So we’re seeing more,
uh, elderly people cycling, which is, which is great. We want the kids to be peddling hard, get rid of energy that they have.
Patrick Hypscher: true. To make sure that they only need the e bike towards the end of their life and not already.
Andrew Shannon: Exactly.
Patrick Hypscher: Yeah, cool, Andrew. Thanks.
[00:38:40] Get in Contact
Patrick Hypscher: That brings me to my last question. Circularity.fm is about sharing knowledge and connecting people. And maybe you have certain topics you want to look into, milestones to reach, questions you discuss right now.
So if someone is listening to this episode right now, who should get in touch with you?
Andrew Shannon: Look, I’d be happy to talk with anyone who’s trying to accelerate the circular economy. That’s kind of our mission here at circularity. We’re doing that with a combination of knowledge and capital, which we apply to our portfolio companies and the management teams that we work with. But I’d be delighted to hear from anyone seeking to, um, start or develop their circular economy journey and they can get in touch with me on LinkedIn or drop me an email at andrew.
shannonatcircularitycapital. com.
Patrick Hypscher: Wonderful. That sounds like a big invitation.
Thanks a lot, Andrew, for sharing your insights. And thanks again, especially for this perspective that is in particular helpful to early stage product as a service founders.
Andrew Shannon: Not at all, Patrick, I really enjoyed it and hope it’s useful to some of the listeners.
Patrick Hypscher: I’m pretty sure. Thanks.
Andrew Shannon: Great.
Outro: This was another episode of PaaS Decoded, 16 conversations about the fine details of Product as a Service. If you liked it, share this episode with colleagues or on social media. If you missed a question or topic, please send me an email so I can improve the conversations for you. If you learned something from this episode, please provide a review via Spotify or Apple Podcasts. That helps others to discover the podcast.
And, don’t forget, the most abundant renewable resource is your imagination.