The Rise and Fall of Rad Power Bikes: From Overnight Success to the Brink of Collapse

Once North America’s largest e-bike seller and a Seattle unicorn valued at $1.65 billion, Rad Power Bikes is now on the brink of collapse. After multiple rounds of layoffs and business contractions, the company admits it may shut down as early as next January.

Rad’s rise and fall epitomizes the survival challenges facing the e-bike industry as its "boom dividend" fades.

The Rise: Timing, Product, and Market Fit

Rad’s success stemmed from launching the right product at the right time to tap into a massive untapped market. In 2015, it introduced e-bikes priced under $2,000, adopting a direct-to-consumer (DTC) model. Targeting casual commuters and leisure users rather than professional riders, this positioning carved out a new market niche. "They made e-bikes accessible to people who might never have stepped into a bike shop," noted an industry insider.

Following its initial crowdfunding campaign, Rad quickly found product-market fit. Sales skyrocketed—"we sold thousands of bikes in seconds; we could never keep up with inventory," recalled Collins. Precise positioning drove soaring sales, with the company hitting $100 million in revenue in 2019 and securing investments from former Zulily and Blue Nile executives Darrell Cavens and Mark Vadon.

The pandemic became a catalyst: in May 2020, demand surged by 297% year-on-year as people sought safe ways to commute and recreate outdoors. "Rad essentially created the mass e-bike category," overseas media noted, with "fleets of Rad bikes" becoming a common sight on commutes.

The Fall: Misjudging Growth and Mounting Crises

Faced with explosive demand, Rad made a fateful decision: mistaking short-term prosperity for long-term normality and pursuing growth at all costs. In 2021, it raised over $300 million in funding, doubling its workforce to over 600. To address supply chain crises, it even chartered shipping containers to move goods from Asia to non-traditional ports.

"We only made one mistake—being overly optimistic that Rad’s growth trajectory would never end," later summed up former supply chain chief Leah Hinkins. By the summer of 2022, the demand surge had slowed significantly. "Prices and profit margins dropped, hitting Rad—and everyone else," said Pruess.

The consequences of aggressive expansion erupted as the pandemic dividend faded. The hundreds of millions of dollars in inventory stockpiled for "perpetual growth" became a crippling burden. "Our inventory liabilities were so huge we couldn’t adapt flexibly," Pruess emphasized. Selling bikes below cost to clear stock was unfeasible: "The more you sell, the more you lose."

Competition intensified as new brands (e.g., Lectric, Aventon) entered the market and traditional bike makers launched e-models. Rad was trapped in an awkward middle ground—neither the cheapest nor the highest-quality option. "Differentiating our products became much harder," said a rider who once saw Rad dominate routes now filled with rival brands.

While the DTC model initially cut costs, soaring sales turned after-sales service into a massive burden. Supporting hundreds of thousands of bikes in the market forced Rad to build an expensive, complex service network. "It worked until people started facing issues with proprietary parts," further eroding thin hardware margins. In 2022, Rad shut down its mobile service division and laid off 100 employees; later that year, founder Mike Radenbaugh stepped down as CEO. By 2024, it had withdrawn from Europe and closed some service stores.

Industry Lessons: Beyond Rad’s Plight

Rad’s predicament is not isolated. After 2022, the venture capital landscape shifted, making the "unicorn" model of chasing rapid valuations unsustainable. Before 2022, VC focused on building unicorns, with hardware firms raising funds at high valuations thanks to high prices and margins. "Post-2022, overvalued companies struggled," explained Clayton Wood, former CEO of startup Picnic. Unlike software, hardware has high production and development costs, leaving little room for pivots.

Consumer hardware brands relying on low-margin, scale-driven models face unique risks. "Brands selling products over $250 depend entirely on consumer demand and economies of scale," noted Patel, a startup studio general manager. "Without software, services, or subscriptions to offset shrinking margins, their businesses become extremely vulnerable."

"Hardware success requires patient capital—which has been scarce in recent years," Wood added. For low-margin, scale-dependent hardware brands, a demand downturn leaves almost no room to maneuver. "It’s bizarre that companies like this can’t sustain themselves without massive cash infusions," said David Johnson, owner of an e-folding bike company. "It seems fundamentally unsustainable."

The Takeaway

Rad’s journey offers a stark industry lesson: overbetting on sporadic demand surges is dangerous. Maintaining vigilance over cash flow and inventory during booms is as crucial as pursuing growth. While the industry outlook remains promising—with the U.S. market projected to grow from $54.1 billion in 2025 to $87.1 billion by 2032—Rad’s fate serves as a warning to all players. The company is still exploring survival options, aiming to "protect the brand and the community that built it."