When it comes to disruption, there’s likely no business more susceptible to pandemic-fueled change than car leasing. And with the electric vehicle revolution already well underway, the confluence seems to set the stage for the two founders now seeking funders to invest in Borrow stock.
The two guys, Jon Alain Guzik and Rodrigo de Guzman, founded the EV alternative leasing startup based on the question: “Why Own, When You Can Borrow?” It is a subscription service offering pre-owned and fully electric vehicles.
The equity crowdfunding campaign is up and running on the Republic platform. Borrow has blown past the minimum and is on its way to a $1.07 million goal. And conveniently, you just need $50 to invest in Borrow stock. The deadline for the campaign is less than two months away.
Borrow stock in this raise is so-called Crowd SAFE — a modified Simple Agreement for Future Equity — where an investor makes a cash investment in a company, but gets Borrow stock at a later date, in connection with a specific event. Regulators see Crowd SAFE as better suited for crowdfunding. The deal is sourced in partnership with Wharton Impact Venture Associates.
Should You Invest in Borrow Stock or Tesla?
If you thought Tesla (NASDAQ:TSLA) or Nio (NYSE:NIO) stock was expensive, how about the cost of acquiring one of their EV models?
Borrow’s investment thesis is built on a belief that EVs are expensive and confusing to customers. At the same time, the needs and wants of drivers are changing. In particular, millennial drivers don’t want long-term commitments and are comfortable with flexible subscriptions. As evidence, look at the demographic group’s love affair with Spotify (NYSE:SPOT) and Netflix (NASDAQ:NFLX).
Borrow’s model of making EV leasing easy offers a one-stop turnkey EV subscription solution. Operating initially in Los Angeles, Borrow enables customers to get a pre-owned, fully electric car for terms ranging from three to nine months. When that subscription period ends, customers can either renew, upgrade or end their subscription. There’s no down payment.
Subscriptions come with a bundle of related services, like insurance, maintenance, roadside service and free charging at public stations. The service offers 100% touchless delivery of fully sanitized vehicles.
But what vehicles can you lease? And how much does it cost? Those are very important questions.
Borrow’s fleet includes the Tesla Model S, BMW i3, Fiat 500e and Smart ForTwo Electric Drive. Borrow offers these vehicles via four subscription tiers. On the low end is the three-month Campus tier at $299 per month for a Smart ForTwo Electric Drive. On the other end is the Platinum tier that puts a customer behind the wheel of a Tesla Model S for $1,499 a month for three months. Payments include Borrow’s flat monthly rate and insurance.
There are also a few more fees. Borrow seems to have taken a cue from Airbnb — it charges customers a $50 cleaning fee once they return the vehicle. Borrow estimates a 39.1% margin on subscriptions by 24 months.
Adding Key Partnerships
Borrow has been pretty aggressive in adding key partnerships to help build its business and keep its costs under control. One of those is with Goodyear Tire (NASDAQ:GT). The household tire name is collaborating with its predictive tire servicing solution for connected fleets to forecast and automatically schedule needed tire maintenance and replacement. The goal of this particular partnership is to maximize the uptime of Borrow’s fleet.
Another partnership is with ChargePoint, the charging station operator backed by oil companies, utilities and venture firms. Plus, ChargePoint recently raised $127 million to expand its global network of 114,000 locations to charge EVs. A similar collaboration has been set with EVGo, which last month teamed with General Motors (NYSE:GM) to deploy nearly 3,000 fast chargers around the country over the next five years.
Earlier this year, Borrow was named by Built in LA as one of the 50 startups to watch in 2020.
Revealing Discussions
As with any investment decision, the more due diligence done, the smarter you’ll be. With Borrow’s private investing campaign, I found the company’s discussion on the Republic platform to be most revealing … and refreshing in the founders’ willingness to share insights, answer questions and dive into the weeds on their market and operational assumptions.
In this type of back-and-forth, a potential investor can get a real sense of the team that is behind Borrow. As any successful venture capitalist will tell you, seeing the founding team in action and under the harsh light of the crowd provides a view that can make or break an investment decision.
Similarly, take the time to read the investor reviews. Real names. Real money. And most importantly, real insights into why the more than 500 investors to date have put money into this disruptor.
Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups. He was previously emerging markets editor for Bloomberg News in Tel Aviv. He is a contributor to the Powered by Battery blog. As of this writing, Robert does not own any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks
