Market value of Cervelo & BMC

[Randall]

Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

[Victor Kan]

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

IIRC, BMC bikes and the team were co-founded by Andy Rihs who also co-
founded Phonak (which interestingly changed their corporate name in
2007), which has a 6.4B (US$) market cap:

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=882368

So I would guess that Rihs is comparable in wealth to Bob Stapleton
who owns Highroad and funded (or still funds?) the team out of his own
pocket.

[Plano Dude]

Post by Victor Kan

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

IIRC, BMC bikes and the team were co-founded by Andy Rihs who also co-
founded Phonak (which interestingly changed their corporate name in
http://investing.businessweek.com/research/stocks/snapshot/snapshot.a...
So I would guess that Rihs is comparable in wealth to Bob Stapleton
who owns Highroad and funded (or still funds?) the team out of his own
pocket.

Highroad was formerly Telekom/T-Mobile, which IIRC, didn't want to be
on the jersey anymore after the 2007 season, when a rash of former and
current riders got caught or 'fessed to a wide rage of doping
excursions. As I recall the story, which differs from what is on Wiki,
is that T-Mobile was still under contract for somewhere in the $10M
range, maybe more, and that is what funded the team until Columbia
came on board at the '08 Tour. I'm not sure that Stapleton is out of
pocket for the team.

[Randall]

Post by Victor Kan

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor howeve

I am really surprised that BMC does not have any other major sponsors
or other sponsors on the team clothing.

Post by Victor Kan
IIRC, BMC bikes and the team were co-founded by Andy Rihs who also co-
founded Phonak (which interestingly changed their corporate name in
http://investing.businessweek.com/research/stocks/snapshot/snapshot.a...
So I would guess that Rihs is comparable in wealth to Bob Stapleton
who owns Highroad and funded (or still funds?) the team out of his own
pocket.

[Ryan Cousineau]

Post by Victor Kan

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor howeve

I am really surprised that BMC does not  have any other major sponsors
or other sponsors on the team clothing.

Post by Victor Kan
IIRC, BMC bikes and the team were co-founded by Andy Rihs who also co-
founded Phonak (which interestingly changed their corporate name in
http://investing.businessweek.com/research/stocks/snapshot/snapshot.a...
So I would guess that Rihs is comparable in wealth to Bob Stapleton
who owns Highroad and funded (or still funds?) the team out of his own
pocket.

Probably. BMC appears to be a semi-hobby for Rihs, whose bread and
butter is either real estate or his founder's stake in Phonak, a
pretty big player in the hearing aid industry. The only other sponsor
marks on the BMC jersey are for Hincapie's clothing (the jersey
makers) and a French resort that has a Michelin starred restaurant.

More of a Vib Gourmand type, myself,

[Ryan Cousineau]

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

As you said, Cervelo is no longer a title sponsor. I think we can
safely assume Garmin has deeper pockets.

http://lavamagazine.com/features/kona/bike-count#axzz1T9KLLD23

The 2010 Ironman bike count* found somewhere close to a million
dollars in Cervelos at the event. 468 bikes, more than 1/4 of the
total. USA Triathlon says they have 135k members, which is way higher
than I expected. So that argues that you're not crazy if you think
Cervelo has sold 30,000 bicycles just to American tri-geeks serious
enough to do at least a sprint Tri.

A little hand-waving suggests to me that their annual sales are
probably in the 10-50 thousand bikes, which is a big range, but only
one order of magnitude. Let's call that annual revenues in the $10-50
million range. I'm probably optimistic, though.

http://www.manta.com/c/mm46ggr/trek-usa

This profile of Trek says they're a company with revenues in the
$20-50 million range. I'm almost certain Cervelo isn't as big as Trek.
I'd assume then that 10,000 bicycles and $10 million annual revenue is
closer to the truth than $50 million.

Either figure is probably not enough to be the sponsor of a ProTour
team. They run in the range of $10 million annual budgets, I think.
($6M for a cheap team?) Title sponsor is probably most of that cost. I
don't think Cervelo could spend so much of its annual revenues on a
ProTour sponsorship, and they said as much when they "merged" with
Garmin. But also, the Cervelo Test Team was a Pro Continental team,
not full ProTour.

Conclusions: CEO/DS Vaughters is running a business on the same
revenue-scale as Cervelo co-founders Vroomen and White, though a very
different sort of company (Garmin-Cervelo has, in a way, 30 customers
(its sponsors), and maybe 5 of those are really crucial to its
existence).

Pro cycling teams are really big fundraising entities, more or less
acting as conduits of sponsor money towards rider salaries and racing
expenses. It's probably one of those businesses where you think that
one thing (bike racing) matters, and in fact your day-to-day business
turns out to be sponsor seduction.

Rihs' milkshake brings all the sponsors to the yard,

*I only follow this survey in search of tri-mocking fodder.

[Simply Fred]

Post by Ryan Cousineau
Either figure is probably not enough to be the sponsor of a ProTour
team. They run in the range of $10 million annual budgets, I think.
($6M for a cheap team?)

A cheap team being one without a program presumably.

[Amit Ghosh]

Post by Ryan Cousineau

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

As you said, Cervelo is no longer a title sponsor. I think we can
safely assume Garmin has deeper pockets.
http://lavamagazine.com/features/kona/bike-count#axzz1T9KLLD23
The 2010 Ironman bike count* found somewhere close to a million
dollars in Cervelos at the event. 468 bikes, more than 1/4 of the
total. USA Triathlon says they have 135k members, which is way higher
than I expected. So that argues that you're not crazy if you think
Cervelo has sold 30,000 bicycles just to American tri-geeks serious
enough to do at least a sprint Tri.
A little hand-waving suggests to me that their annual sales are
probably in the 10-50 thousand bikes, which is a big range, but only
one order of magnitude. Let's call that annual revenues in the $10-50
million range. I'm probably optimistic, though.
http://www.manta.com/c/mm46ggr/trek-usa
This profile of Trek says they're a company with revenues in the
$20-50 million range. I'm almost certain Cervelo isn't as big as Trek.
I'd assume then that 10,000 bicycles and $10 million annual revenue is
closer to the truth than $50 million.
Either figure is probably not enough to be the sponsor of a ProTour
team. They run in the range of $10 million annual budgets, I think.
($6M for a cheap team?) Title sponsor is probably most of that cost. I
don't think Cervelo could spend so much of its annual revenues on a
ProTour sponsorship, and they said as much when they "merged" with
Garmin. But also, the Cervelo Test Team was a Pro Continental team,
not full ProTour.
Conclusions: CEO/DSVaughtersis running a business on the same
revenue-scale as Cervelo co-founders Vroomen and White, though a very
different sort of company (Garmin-Cervelo has, in a way, 30 customers
(its sponsors), and maybe 5 of those are really crucial to its
existence).

dumbass,

you need to check your numbers.

http://www.profitguide.com/article/4640--the-amazing-race-cerv-eacute-lo-cycles--page1

http://www.jsonline.com/news/29538074.html

"The sponsorship helped power Cervélo's revenue from $806,000 in 1999
to $11.1 million by 2004, a five-year growth rate of 1,276%."

estimating a 20% (quite possibly on the low side) or so annual growth
rate give me something more like $35mm, in comparison treks revenues
are about $700mm

btw. vaughters thinks that protour teams should get a cut of the media
revenue. that implies to me that in order to receive revenue they
should be required to make an initial investment (ie. buy a
franchise). how much would a reasonable payout be so that team have
some stability? $5mm ?

right now the yield on 10-yr italian bonds is 5.5%, so to make $5mm
you need to invest $90mm. it's probably fair to say that the risk of
the italian govt. defaulting with 10 years is probably only a little
worse than protour cycling failing to pay it's obligations.

so the model that vaughters envisons would require an upfront
investment of at least $100mm (otherwise they are giving away money
for free) - had he considered that ?

[Ryan Cousineau]

Post by Amit Ghosh

Post by Ryan Cousineau

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

As you said, Cervelo is no longer a title sponsor. I think we can
safely assume Garmin has deeper pockets.
http://lavamagazine.com/features/kona/bike-count#axzz1T9KLLD23
The 2010 Ironman bike count* found somewhere close to a million
dollars in Cervelos at the event. 468 bikes, more than 1/4 of the
total. USA Triathlon says they have 135k members, which is way higher
than I expected. So that argues that you're not crazy if you think
Cervelo has sold 30,000 bicycles just to American tri-geeks serious
enough to do at least a sprint Tri.
A little hand-waving suggests to me that their annual sales are
probably in the 10-50 thousand bikes, which is a big range, but only
one order of magnitude. Let's call that annual revenues in the $10-50
million range. I'm probably optimistic, though.
http://www.manta.com/c/mm46ggr/trek-usa
This profile of Trek says they're a company with revenues in the
$20-50 million range. I'm almost certain Cervelo isn't as big as Trek.
I'd assume then that 10,000 bicycles and $10 million annual revenue is
closer to the truth than $50 million.
Either figure is probably not enough to be the sponsor of a ProTour
team. They run in the range of $10 million annual budgets, I think.
($6M for a cheap team?) Title sponsor is probably most of that cost. I
don't think Cervelo could spend so much of its annual revenues on a
ProTour sponsorship, and they said as much when they "merged" with
Garmin. But also, the Cervelo Test Team was a Pro Continental team,
not full ProTour.
Conclusions: CEO/DSVaughtersis running a business on the same
revenue-scale as Cervelo co-founders Vroomen and White, though a very
different sort of company (Garmin-Cervelo has, in a way, 30 customers
(its sponsors), and maybe 5 of those are really crucial to its
existence).

dumbass,
you need to check your numbers.
http://www.profitguide.com/article/4640--the-amazing-race-cerv-eacute...
http://www.jsonline.com/news/29538074.html
"The sponsorship helped power Cervélo's revenue from $806,000 in 1999
to $11.1 million by 2004, a five-year growth rate of 1,276%."
estimating a 20% (quite possibly on the low side) or so annual growth
rate give me something more like $35mm, in comparison treks revenues
are about $700mm

Dumbass, thanks for the corrections. I should have realized Trek's
numbers didn't pass the smell test.

But I'm pretty pleased that my extrapolations from the Kona bike count
pretty much nailed the size of Cervelo. Now to get my research
abilities up to the level of my guessing abilities.

Post by Amit Ghosh
btw. vaughters thinks that protour teams should get a cut of the media
revenue. that implies to me that in order to receive revenue they
should be required to make an initial investment (ie. buy a
franchise). how much would a reasonable payout be so that team have
some stability? $5mm ?
right now the yield on 10-yr italian bonds is 5.5%, so to make $5mm
you need to invest $90mm. it's probably fair to say that the risk of
the italian govt. defaulting with 10 years is probably only a little
worse than protour cycling failing to pay it's obligations.
so the model that vaughters envisons would require an upfront
investment of at least $100mm (otherwise they are giving away money
for free) - had he considered that ?

Well...this is business, not fairness. I'd guess what Vaughters is
implying is that the pro riders are more important to the TdF than
whatever it is ASO does. I'm skeptical. The TdF is logistically
complex sporting event; you don't just book the arena and make sure
the players show up.

To put it another way, if Vaughters ever really pressed the point, I
think the ASO could just buy the Giro and the two other ProTour events
they don't own*, and start their own series. Which seems more
plausible:

1) ASO offers a buyout directly to all current ProTour riders. They
get reorganized into teams of the ASO's choosing (national teams
again? Why not?) and sent to do all the ASO races, plus whichever non-
ASO races want to pay a start fee to get the ASOTour riders (so MSR,
Het-Nieusblad, and the Tour de Suisse still have some reason to
exist). ASO sells the sponsorships using an internal-team model.

2) the teams band together and vow to organize their own races on team-
friendly terms, funded by...love? Bob Stapleton? Current sponsors who
barely keep the lights on for the $200mm worth of teams out there?

3) The UCI...HA HA HA HA HA HA!

Answering my own question, ProTour and Continental teams are like
mayflies. In the last decade we've seen teams fold up with great
regularity, sometimes in the middle of the season, sometimes nearly so
(Coast/Bianchi being the most high-profile case of a team getting
bailed out by a secondary sponsor, in that case so Jan could race the
Tour). They are, as I suggested before, built around a fussy agency
model. The Tour has both the money (TV$) and the power (those races),
but while I think the ASO could raise the capital to take over the
role of the teams, I don't think the teams could raise the capital to
take over the role of the ASO.

I guess this is another way of making your argument: the Tour isn't
going to give up something for nothing. The teams have no leverage and
relatively little money. Bike racing isn't really a pro sport, is it?

*Seriously: http://www.letour.com/2011/TDF/COURSE/us/qui_sommes_nous.html

[RicodJour]

Post by Ryan Cousineau
But I'm pretty pleased that my extrapolations from the Kona bike count
pretty much nailed the size of Cervelo. Now to get my research
abilities up to the level of my guessing abilities.

If your guessing abilities were better you would have guessed that
there's more money in your guessing abilities. Research wouldn't give
you that answer, and that's why research is a guess' bitch.

Post by Ryan Cousineau
Answering my own question, ProTour and Continental teams are like
mayflies. In the last decade we've seen teams fold up with great
regularity, sometimes in the middle of the season, sometimes nearly so
(Coast/Bianchi being the most high-profile case of a team getting
bailed out by a secondary sponsor, in that case so Jan could race the
Tour).

I liked the way LANCE-era Astana ghosted out the logo until they'd
brought their sponsorship money payments up to date.

R

[Mike Jacoubowsky]

=============
This profile of Trek says they're a company with revenues in the
$20-50 million range. I'm almost certain Cervelo isn't as big as Trek.
I'd assume then that 10,000 bicycles and $10 million annual revenue is
closer to the truth than $50 million.
=============

Trek's revenues are closer to $800m than $50m. While it's not a public
company, that information is relatively common-knowledge and found in
press releases from the company.

--Mike-- Chain Reaction Bicycles
www.ChainReactionBicycles.com

Post by Randall
Does anyone have any idea of what Cervelo or BMC is worth...? It's
hard to tell because these are private companies. But I still find it
hard to believe they can afford to sponsor a pro team. Cervelo is no
longer a main sponsor however.

As you said, Cervelo is no longer a title sponsor. I think we can
safely assume Garmin has deeper pockets.

http://lavamagazine.com/features/kona/bike-count#axzz1T9KLLD23

The 2010 Ironman bike count* found somewhere close to a million
dollars in Cervelos at the event. 468 bikes, more than 1/4 of the
total. USA Triathlon says they have 135k members, which is way higher
than I expected. So that argues that you're not crazy if you think
Cervelo has sold 30,000 bicycles just to American tri-geeks serious
enough to do at least a sprint Tri.

A little hand-waving suggests to me that their annual sales are
probably in the 10-50 thousand bikes, which is a big range, but only
one order of magnitude. Let's call that annual revenues in the $10-50
million range. I'm probably optimistic, though.

http://www.manta.com/c/mm46ggr/trek-usa

This profile of Trek says they're a company with revenues in the
$20-50 million range. I'm almost certain Cervelo isn't as big as Trek.
I'd assume then that 10,000 bicycles and $10 million annual revenue is
closer to the truth than $50 million.

Either figure is probably not enough to be the sponsor of a ProTour
team. They run in the range of $10 million annual budgets, I think.
($6M for a cheap team?) Title sponsor is probably most of that cost. I
don't think Cervelo could spend so much of its annual revenues on a
ProTour sponsorship, and they said as much when they "merged" with
Garmin. But also, the Cervelo Test Team was a Pro Continental team,
not full ProTour.

Conclusions: CEO/DS Vaughters is running a business on the same
revenue-scale as Cervelo co-founders Vroomen and White, though a very
different sort of company (Garmin-Cervelo has, in a way, 30 customers
(its sponsors), and maybe 5 of those are really crucial to its
existence).

Pro cycling teams are really big fundraising entities, more or less
acting as conduits of sponsor money towards rider salaries and racing
expenses. It's probably one of those businesses where you think that
one thing (bike racing) matters, and in fact your day-to-day business
turns out to be sponsor seduction.

Rihs' milkshake brings all the sponsors to the yard,

*I only follow this survey in search of tri-mocking fodder.