by Timothy Motte
Lacking both money and experience, Markus Villig had to get creative to take a stab at Uber’s empire.
Zuckerberg, but for Estonia
“The Social Network”, a biopic about Facebook’s inception story, is a rite of passage for a number of aspiring, young first-time founders.
The movie depicts an ambitious, visionary, and sometimes cruel Zuckerberg, flouting social norms to build out his revolutionary idea. The movie’s appeal might reside in the proof it gives high-school nerds that they, too, can be seditious, rebellious, and glorious.
Bolt: How a 19-year-old Estonian founder took on Uber
As that fictional startup founder matures, they realize that Facebook’s story is a rarity. After failing their first startup, they read Ali Tamasebʼs Super Founders and discovered that most respected entrepreneurs had a regular job before starting their companies. Very few unicorns are actually created out of dorm rooms.
Yet, every once in a while, a “Zuckerberg story” comes to light. And on December 17th, 1993, on a small Estonian island, the writer of one of those stories was born.
Nature vs nurture
Markus Villig is today’s protagonist. Not much predisposed him to entrepreneurship, even less so to Silicon Valley-style tech startups. Two years before his birth, private enterprise wasnʼt the plat du jour in Estonia, a part of the Soviet Union. The country’s independence in 1991 arrived at an opportune time, at least for Markus.
He was thus born in a brand new country, 1.3 million people strong, spanning a territory a little larger than Belgium. Independence sparked a long-repressed entrepreneurial spirit throughout the nation. Everything was to be built but on Estoniansʼ own terms this time. The USSRʼs legacy of strong STEM education was a boon in that quest.
One of the sectors Estonia specialized in was technology. In 2003, the country witnessed the creation of Skype, one of the decadeʼs most consequential companies. Skypeʼs international reach and $8.5B exit to Microsoft kickstarted Estoniaʼs startup scene. But more importantly, it showed geeks from snowy Tallinn that they could launch products that impacted the world.
In 2007, an unprecedented Russian cyber-attack reinforced Estoniaʼs focus on its digital sector’s strength. The scale and brutality of the attack, and the need to protect itself from the next one, bolstered the nation’s cyber-security capabilities.
Estoniaʼs love story with digitalization ended up reaching international fame in 2017 when the Baltic nation was declared the world’s “most digitally advanced society” by Wired magazine.
“Some 99% of all government services in Estonian are done online, from voting to tax filings. Estonian officials even provide e-governance advice to other countries such as New Zealand.” – Realistic Optimist
The origin story
Markus started his company in 2013, between Skypeʼs founding and Estoniaʼs hailing as a digital champion. At that time, the country was tech-oriented, but the startup ecosystem was nowhere near where it is today.
Markus’ older brother, Martin, worked at Skype. Markus became enamoured with tech, teaching himself how to code while still in school. Most fascinating to him was the impact lines of code could have on the world, just as his brotherʼs code had. The seed was planted.
Markus had four inceptive realizations that ultimately converged into the founding of Bolt, initially known as Taxify.
(i) Markusʼ desire to create a consumer-facing product led him to one of the world’s largest and arguably perennial industries: transportation.
(ii) Markus had long identified the increased use and adoption of smartphones, a topic he wrote about for a high-school research paper.
(iii) Markusʼ brother had told Markus about a ride-hailing service he had used while on a business trip in Ukraine. Markus couldnʼt think of a similar service in Estonia.
(iv) Markus theorized the Estonian population’s frustration with the local taxi service, plagued by poor service and overall inefficiency.
In 2013, Taxifyʼs first, elementary app was launched. Markus’ brother eventually came on as a co-founder alongside Oliver Leisalu, the CTO, recruited through an obscure coding forum. The appʼs initial scope was simple: an Estonia-focused ride-hailing app. While Markus technically started by trying to optimize the “traditional taxi sector”, he later switched to the more common ride-hailing model we know today.
The Uber antithesis
Despite Estonia being Taxifyʼs home turf, the trio had broader objectives. Markus’ vision was grand: replace the need for individual car ownership by providing all related services on one app. Those loy ambitions clashed with a thorny issue: Markus didnʼt come up with a revolutionary idea. Other, vastly better-funded competitors were already building out that vision for themselves.
Chief among them was Uber, obviously. The American fund-guzzler, who recently turned its first operational profit, appeared as the uncontested Goliath to Boltʼs David. Markus, lacking both the experience and network needed to engage in a funding battle with Uber, had to decipher an alternative route.
The Estonian wunderkind and his team applied two principles in a bid to compete and differentiate themselves from Silicon Valleyʼs baby.
Markus started by instilling a strong culture of frugality, more by necessity than by pure principle. If Markus was to conjure Boltʼs grand vision, he had to figure out how to not run out of money.
“He ran the company on a shoestring budget, running close to break-even as annual revenue grew from $730,000 to $142 million between 2015 and 2019. Uber, by contrast, burned through $19.8 billion, almost $6.3 million a day, before going public in 2019.” – Forbes
Markus and the Bolt team’s true stroke of genius came in the form of its strategy. While financial discipline preserved the company’s existence, the hyper-competitive markets where ride-hailing was thriving would require significant investments, both in terms of marketing and growth-inducing subsidies. Bolt found a solution to the quandary: they just wouldnʼt compete there.
Instead, the company went where almost no competitors were. Azerbaijan. Malta. Georgia. The Czech Republic. Ride-hailing in those markets was still embryonic, and Boltʼs experience with launching Estonia from scratch could serve them well. The cooler competitive climate enabled Bolt to grow despite its financial constraints.
“In 2014, Bolt took significant market shares in Estonia and started its expansion abroad that same year. The strategy was to capture the ride-hailing sector in emerging markets where the more established rival company Uber had not gained a strong foothold yet.” – 3 Seas Europe
The African play
In 2016, Bolt would take that logic even further, launching its services in Africa. It arrived on the continent around the same time that Uber did. However, sticking to its original ethos, Bolt did things a bit differently.
Bolt had still not raised significant amounts of money. It survived through a mix of spending prudence and small fundraises from various Estonian investors. Its Africa expansion would thus have to factor in frugality. It launched in South Africa, recruiting a local country opener through Skype, of course. No one from Bolt HQ actually physically went there at first.
On top of its financial creativity, Bolt would be quick to implement a crucial element of its subsequent African success: product localization. It added cash payments in markets where credit card penetration was low. It launched boda boda (motorcycle) services in countries such as Kenya. It partnered with financing companies to help drivers buy their vehicles. It was generally cheaper than Uber.
And, maybe less known, it implemented “softer” driver onboarding requirements than Uber. All of these differentiating factors explain Boltʼs impressive African performance.
“Having launched in South Africa in 2016, the company now operates ride-hailing and delivery services in six further countries – Kenya, Ghana, Nigeria, Uganda, Tanzania, and Tunisia – with over 47 million customers and 900,000 drivers on the platform.” – TechNext 24
Becoming “one of them”
After a couple of tight-pocketed initial years, investors finally started seeing Boltʼs potential. The company’s previously limited treasury started filling up. In 2018, Bolt was crowned with the coveted “unicorn” status, raising $175M from notable investors such as Daimler, Mercedes’ parent company, and Didi Chuxing, China’s ride-hailing giant.
Bolt, which rebranded as such in 2019, bagged another consequent $182M round in 2020 during the pandemic. Armed with actual funds, the Estonian company could now expand
rapidly, competing with Uber in the markets it previously restrained itself from. The new financing also enabled Bolt to diversify its offerings, including now-ubiquitous services such as electric scooters and food delivery.
While still severely underfunded compared to Uber (by a factor of more than 10), Bolt had the tools to execute its North Star objective, boldly stated on the company’s website:
“Bolt is the first European mobility super-app. We fight for cities for people by offering better alternatives to the private car, including chauffeur-driven transport cars, car sharing, scooters, and the delivery of food and groceries.”
In 2022, Boltʼs $709M Sequoia-led round (at an $8.4B valuation), decidedly demonstrated the new galaxy it had entered. It wasn’t the scrappy, cute Estonian fairy tale anymore. It had joined the tech-enabled mobility sector’s cutthroat fight. It had become “one of them”.
Bolt vs Uber today
While seemingly similar, Bolt and Uber donʼt actually play in the same arena. Their final objectives diverge. While Uber seems set on inventing the future of transportation as a whole, boasting a freight unit and autonomous vehicles projects, Bolt appears to be dead set on replacing the need for individual cars.
In other words: while Uber is defining how tech can improve transportation, Bolt is organizing the infrastructure rendering individual car ownership obsolete.
Watch on Youtube: Markus Villig, CEO of Bolt: “How super apps can create better cities?”
Food for thought
Boltʼs marketing heavily revolves around it being part of the climate change solution, through a frontal attack on individual car ownership. While a noble goal, the situation has to be nuanced. Isnʼt Bolt actually competing with public transport and walking, two of the most carbon-effective transportation methods?
“Kay Axhausen, an ETHZürich academic, found that while shared e-scooters replaced cars in 12% of cases in Zürich, they also substituted walking at a rate of 51%. Another study, focused on
Paris recorded that 72% of respondents shifted to e-scooter use from public transport and walking rather than from cars.” – Sifted
Going further in that reasoning, is Boltʼs business endangered by European cities heavily subsidizing public transportation?
“Today, a scooter rental ride hardly seems like a bargain. At typical rates, which include an upfront and per-minute fee, a 20-minute ride would cost about $6. That is more than a quick bus or subway ride in places that offer those options.” – Crunchbase
While initially viewed as the Uber anti-thesis, Boltʼs VC-fueled growth has led it to face similar conundrums to other startups in the sector. In Nigeria, the company’s low prices are said to have been balanced with looser driver requirements, endangering some passengers. In South Africa, the company has faced criticisms about its model.
“Drivers earning a livelihood on Uber, Bolt, and Didi have repeatedly complained about the inadequacies troubling South Africas e-hailing sector, namely high commission rates, safety concerns, and the absence of complementary insurance schemes, among others. – Weetracker
Conclusion
Operationally, no one can deny that Boltʼs story is an exceptional one. In 2022, the companyʼs revenue increased 126%, to $1.26B. Its losses, $547M in 2021, had dropped to $72M the following year. Not too shabby for a company founded just 10 years ago by an Estonian teenager.
While 80% of its 2022 revenue came from ride-hailing, 10% of it came from its flexible car rental service, which could gain prominence as new generations prefer “shared” solutions over burdening ownership. These new millennial/Gen-Z consumption habits, influenced by more than a decade of sharing economy bonanza, could fit in nicely with the world’s urbanization and growing ecological conscience.
Overall, Bolt seems to be following and building for the trends of the future: sharing economy, urbanization, and climate change solutions. Their business model is still fragile, however. Food and grocery delivery startups have been closing. Paris recently held a referendum surrounding the legality of e-scooters. As European cities actively turn anti-car, Boltʼs ride-hailing business, its cash cow, could take a hit.
Those new existential challenges to the model could represent a sink-or-swim situation for the Estonian unicorn. Just as the 2007 Russian cyber-attack did.
