How a Group of Friends Made a Dent the $6 Billion Bike Industry

This story appears in the March 2013 issue of Startups. Subscribe »

Cyclists are an exceedingly loyal crowd: Hard-core riders make blood oaths to brands like Trek, Cannondale, Giant and Specialized, while casual pedalers rarely break up with childhood sweethearts like Schwinn and Raleigh. Still interested in making a dent in the $6 billion bike industry? You're just as likely to find yourself on the podium at the Tour de France.

But Pure Fix Cycles, which brought in nearly $4 million in 2012, has positioned itself to become a big wheel in the bike biz in just two short years. The company, founded by four childhood friends, sells roughly 2,000 of its no-frills bikes each month both online and through a nationwide network of 300 bike shops. Incredibly, the team got their start while designing bike frames between college classes.

In 2010 Austin Stoffers and Michael Fishman were seniors at the University of Wisconsin, Madison, when they decided to go bike shopping. Madison has one of the largest cycling communities in the country, but they still couldn't find what they were looking for--a simple, functional, good-looking set of wheels for under $1,000. "We found a void," Stoffers says. "So we did our research on why bikes are so expensive, and we found it was because of the gears. Adding eight or 30 gears to a bike is costly."

The solution: fixed-gear, single-speed bikes, or "fixies," which have been trendy among city riders for almost a decade. Instead of having a complex multisprocket gear shifter mounted on the back wheel, fixies are rigged like most children's bikes, with one gear. Sure, single-gear bikes require a little more mustard to propel up hills, but they're cheaper, more reliable and, if kids and urban hipsters are any indication, more fun than their multigear counterparts.

That's why the Pure Fix boys set out to design the ultimate, budget-friendly fixie. Adding college friend Zach Schau and his computer-whiz brother Jordan to the posse, they mocked up designs for their dream rig, and Stoffers, whose family has import-export experience, worked on finding an overseas manufacturer to make it a reality. For their first batch, they built 165 bikes priced at $325 each, expecting to slowly sell them over the course of the next year. Instead, they sold out over winter break. "It blew our minds," Zach Schau says.

They entered their company in a university business-plan competition and walked away with $7,000, which they used to put in a larger, second order. The bikes sold out in two weeks. "We kept doubling our order, and we'd sell out even before we received the bikes," Schau says. "We had no grasp of the demand, and never had enough bikes."

After graduation the guys moved Pure Fix to Burbank, Calif. They hired Andy Abowitz, a former senior executive at Priceline.com, as president and began selling their bikes nationwide, using their own distribution system, which kept costs remarkably low. "Usually with bicycles there's a distribution chain, with large companies purchasing from manufacturers and selling to distributors," Schau explains. "By acting as our own distributor and supplier, we're able to have an affordable product right off the bat."

The system also enables Pure Fix to provide superior customer service to its bike-shop dealers. "Early on, if someone had a situation, we'd throw a replacement bike in the car and drive 40 minutes to bring it to them," says Schau, who notes that unlike larger bike companies, Pure Fix has no minimum order, which allows smaller shops to take a chance on them. "We'll do anything to keep business, and that's gone a long way for us."

But the reason behind the company's hot streak isn't necessarily cost or customer service, it's the stylish product.

To wit: The same simple fixie comes in more than 15 color combinations, like a gray frame with orange wheels, or a green frame with white wheels. Some even have glow-in-the-dark rims.

"Once a store gets their eyes on the bike, it's never a difficult sell," Fishman says. "It's a great-looking product that hits all the margins they want to hit. It's turned out to be the fastest-selling line for a lot of them."

The guys cite their small stature and super-lean operation as prime advantages. "Because we're smaller, we're able to innovate faster. We can switch our manufacturing process and come out with something new almost immediately," Schau says, pointing to recent innovations like frames for kids and a fixed-gear "trick" bike.

But perhaps their ultimate secret weapon is their youth. The twentysomethings want what their young customers want--that's why they got into the business in the first place. "At Trek, they need to get past 100 gatekeepers, all with different agendas, to have someone say yes to a new idea," Schau says. "With us, it's just five, and we're already on the same page."