Colorado Springs, Colorado
Industry: Consumer & Lifestyle
Products: Fat bikes, parts, and accessories
Co-founder and CEO Steve Kaczmarek seeks to build on momentum as a first mover in fat bikes, with an eye on innovation.
Five years after it launched, Borealis Fat Bikes has ramped up, tripling output to meet demand. Kaczmarek credits the company's success in part to being the first to offer a lightweight carbon-frame fat tire bike, designed for mountain terrain or snow.
The company's business model is based on a lean seasonal staff, advanced computerized equipment, and regular ROI review. Frames and other parts are fabricated in China, and assembly is handled in Colorado Springs by a small team of full-time, year-round and part-time seasonal employees -- some of whom job share with a summer bike tour company.
Borealis got a boost two years ago when it incorporated advanced Holland Mechanics' computerized wheel building and calibrating equipment. Since then, Kaczmarek has been able to reduce employee head count and increase production by more than 300 percent. A streamlined assembly process is accompanied by a focus on culture. "It's a high priority," Kaczmarek explains. "Our people have a passion for what they do. We have to talk 'bike' -- it's a different language."
A reputation for quality production and top-of-market awareness brought Borealis into the national spotlight in fall 2017 when the company competed on CNBC's Adventure Capitalists. The bike manufacturer attracted investor interest and potential European contacts from Olympic skiers Jeremy Bloom and Bode Miller. Kaczmarek calls it "a crazy, educational experience," and admits reality TV is rapid fire. "You have to be prepared," he says.
The company's Crestone carbon frame and Flume aluminum frame models range in price from about $1,600 to $6,000. Business is seasonal with bike assembly picking up in late summer or fall. By mid-season, it's not unusual for models to sell out and parts sales are on the rise.
Freight is Borealis' third biggest expense after payroll and components -- or about 10 percent of sales. Many key components will be impacted by new tariffs. Because international suppliers typically require cash up front, Kaczmarek plans more frequent partial orders rather than pricier full shipments.
The tariffs, however, are driving change. Borealis is in negotiations with all major shipping carriers for "best lane" imports. "The 25 percent tariff increases will definitely impact us, but haven't affected our supply chain yet," Kaczmarek says. "We're actually facing over-ordering and warehousing a larger inventory to offset their potential impact on working capital."
Thanks to a solid national dealer network, title sponsorships including the 2018 Fat Bike World Championships in Crested Butte, and smart "geofencing" strategies designed to protect retailers, Kaczmarek expects to see continued growth. "While fat bikes have traditionally been known as snow bikes, new markets are opening up in northern states," he says. "And work has begun on a new veterans' program to build bikes for wounded warriors."
Challenges: "Sales have gone up so much that we sometimes run out of inventory," says Kaczmarek. "We're scrambling, following a move to a new headquarters to be ready for the fall.
Opportunities: "Really, it's to remain in the No. 1 position in the fat bike world," says Kaczmarek. "We were the first. Today there are hundreds of competitors. Dealers and clients tell us Borealis is their top brand."
Needs: Kaczmarek is looking for innovation in the supply chain in the form of lightweight components. "We rely on our suppliers to come up with innovative parts and products we can put on our frame to offer consumers," he says. "Weight is always an important consideration.