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It's embarrassing that he even posted that.
"Always observe how ephemeral and worthless human things are, and what was yesterday a speck of semen tomorrow will be a mummy or ashes. Pass then through this little space of time conformably to nature, and end your journey in contentment, just as an olive falls off when it is ripe, blessing nature who produced I and thanking the tree in which it grew."
“Do not act as if you were going to live ten thousand years. Death hangs over you."
"Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: For where your treasure is, there will your heart be also."
I would kill to have you come to a dinner party with me.
the whole family or just me
Like the $8000 Gucci Surfboards or nearly $4000 skimboards 🤣
A lot of the people I work with are people who just sold their company for $50M or more. Those numbers on YT (which are gross) and the level of conspicuous consumption are at the very least puzzling, especially if he didn't have another business he thought was also going to hit big. Very curious to see what other details emerge.
cringe for sure, but i'm kinda impressed that he managed to somehow eke a couple $2M hypercars, pimp house & large assortment of $$$ toys out of the mountainbike industry. always assumed there wasn't sufficient margins / volume to generate that kind of bank, but somehow...
The fact that they're in self-administration indicates to me that there isn't that kind of money in the bike industry, if you're looking at a 5+ year time frame.
Flossman tried the vogue/vanity fair method. Razor thin margins because everything is spent on marketing and perpetuating the myth of great financial success when in reality you are just barely making a profit even when sales are good.
Whether any of that portrayal was paid for with debt I have no idea. But clearly a large portion of yts “profits” were used for advertising and flossman’s personal gain. Then they required loans to get in inventory. And the house of cards came crashing down once they couldn’t flash sale their way out of trouble. Cause most bike buyers aren’t fashion advertisers and readers. They couldn’t give one damn about expensive ad campaigns or how much of a tech bro the owner wants to portray himself as.
Perfect example is the mob. No sponsors cause apparently funding is less important than having yt be the only name on the jersey. They let vali run a small rockshox logo on the shoulder.
Hard to imagine this doesn’t mean yt has to both provide almost all the funding for racing (including buying parts) but also has to offer and singlehandedly cover larger salaries since their riders can’t put other sponsors on their jersey or have an apparel sponsor. They have the top female racer and two dh race winning males. And a enduro champion who is very much capable of winning another. These salaries and support have to be astronomically expensive. And one kind of assumes they aren’t organizing those massive expenses particularly frugal either. Much more likely that the company card just gets used and questions are asked later.
So are we all in agreement that his excessive spending and flexing basically sealed the fate of YT?
No. What he does with his money is completely unrelated to the situation in the company he founded.
This is of course assuming it was his and only his money and was earned without weakening the company in any way. If either of those happened it changes the situation.
What we can agree is that egregious spending of the ceo in private does not look good when many actions of the company seem similar and the company is now in administration because of financial problems.
So we can't confirm it didn't affect anything neither that it did, but I will agree that is sure does not look good.
Ease up on Markus gang… and let’s stop and imagine what the sizzle reels must look like for the people that sold him those hypercars… the owners of Pon!
All that money he spaffed on luxury helicopter rides, sports cars and yachts could have been invested into the company. Would you do the same thing if your company was making losses? The reason this happened is because he knew he would be bailed out by the government or private equity, when in a just world, there would be prison time for jeopardising the lives and jobs of his employees by living a life of luxury at the expense of the struggling company.
All true. Unless the frivolous spending occurred AFTER the PE buyout and was funded by cash from said buyout. That makes it all good if you ask me. That would make it church and state.
Does it look good? Not really. Does the fact the Porsche article showcasing a mansion and two of the most sought after hypercars came out a month and a half before the company entered administration make it look any better? On the contrary.
What I'm trying to say is that there is a reasonable chain of events that makes it possible this was not company founded or that it jeopardised the company in any way. Do we even know the current ownership structure of the company? Is the PE still involved or has Markus bought it back? Maybe he will be doing it now that it tanked for pennies on the dollar. It's not like this hasn't happened before. Recently. Multiple times. With a few competing brands.
I know it looks like I'm defending him and that's not my intention. He does not seem like someone I'd like to hang out with 😂
If he pulled the kind of money it takes to support his spending (house, cars, etc) out of YT, it’s a pretty good guess that it was on terms (growth / revenue targets) that were completely unrealistic (Covid bubble strikes again) and set the company on a direct course to its current situation.
Let’s just hope he doesn’t have to dump the house at a loss like the Peloton guy…
https://behindthehedges.com/peloton-co-founder-john-foley-hamptons-home/
I just still think, even if he 'earned every penny', the margins YT operates on and the CEO pay that would be required to fund such a lifestyle seem totally incompatible. Again, assuming these are all full purchases and not all rental/collab/project/fake bullshit to give off the appearance of extreme wealth. (Saying all this having no idea what his personal pay out would have been from PE.)
Dude is living the 'fortune 500' lifestyle. Live Uncaged turned out to be about debt and spending, not riding. I guess I would need a better understanding of comparative peoples; what kinda lifestyle the CEO of similar businesses is. But can't compare to Canyon (mostly road) and Commencal (a LOT going on there with skiing and other ventures).
I dunno can anyone point out other MTB brand CEOs flossin yachts and supercars/hypercars?
Rob Roskopp did very, very well for himself.
There is absolutely zero chance the German government bail out a tiny bike company. The Germans cant even bail out themselves they are so stingy with debt.
I actually think most of this isn't Markus Flossman' fault. This is the timeline:
November 2020 Flossman departs as CEO and is replaced by Sam Nicols
August 2021 Ardian buys a majority stake in YT
February 2024 Flossman returns as CEO as Nicols departs
July 2024 YT enters administration.
YT start making large losses and begin the fire sale AFTER Flossman departs.
I say kudos to the guy for buying some Porches, Nicols sold a majority stake of his company for absolute bank to PE, ran it into the ground, and now he is returning to pick up the pieces. Its pretty on the nose to show his spending habits, but ultimately, he isn't the majority owner anymore, and Ardian seemingly cant manage a bike company properly despite having 130bn in assets under management.
The press release makes it pretty clear the deal was done with the founders.
Ardian Expansion will invest in YT together with the company founders Markus Flossmann and Jacob Fatih - alongside the management team. The management team, led by former Amazon manager Sam Nicols who joined the company in 2020, and the founder and CVO Markus Flossmann, supported by Jacob Fatih’s business incubator Crealize, will focus on building out the company’s product portfolio, whilst simultaneously bringing YT’s brand and customer experience to the next level.
https://www.ardian.com/press-releases/leading-mountain-bike-brand-yt-industries-partners-ardian-support-growth-strategy
I have zero knowledge about any of this, but my guess is the founders were looking to cash in on the covid boom, talked to some advisers who told them to polish up the management team (i.e. hire a professional CEO with a growth background) and then start shopping the company.
They picked up a guy from Amazon (growth!) at the end of 2020 (https://www.pinkbike.com/news/former-amazon-country-manager-Sam-Nicols-…), started shopping it immediately and closed the deal in Q3 2021.
The other way it could have played out was they shopped the company, found a suitor who said sure, but you need to bring in a CEO to get this deal done and then they made the hire.
In either case, the CEO was window dressing for the sale, not the one driving it.
Looking forward to Jeff's take on this one!
Not sure I’ll ever finish the long blog post, so dropping a few thoughts here instead:
YT did sell a majority stake to a PE firm.
-Details are scarce. We don’t know the exact stake sold (just that it was over 51%), how many equity owners there really were (beyond the two founders), the deal structure, valuation, any earn-outs, if Markus retained a stake etc etc.
-Without that info, blaming Markus might not be fair. Sure, flaunting wealth on Instagram is a bad look, especially during a downturn, but that’s social media for you. I’ve posted cringe stuff too (just not the wealth kind...but I do have a blog...eek).
-We don’t know what Markus was taking out as owner’s draw, or how much he was reinvesting. I did come across a hint that some company borrowing may have been personally guaranteed by him, but I’ll confirm that before stating it as fact.
-No clue if Markus comes from money. Maybe he does. If I had $30M in my 30s, who knows how I’d act? I like to think I'd be more mature and gentlemanly, but the reality is I probably wouldn't be. I'd be buying motorcycles and race cars, going on lavish trips and trying hard to post something on instagram to get me laid...(I type this as un-proud as possible)|
What no one seems to talk about is YT’s real industry impact...pricing. Alongside Canyon, YT forced the industry to rethink pricing and margins, pushing brands toward hybrid D2C models. Mauboussin’s Measuring the Moat applies: margins erode as smarter competition enters. “Your margin is my opportunity” fits here.
Markus pushed the low-margin model, which demands flawless execution. YT operated for years, so they clearly weren’t clueless.
My guess? They collapsed because a non-bike CEO and a PE board (who likely knew nothing about bikes) took over. Combine that with a black swan macro shock to the bike industry and a fragile low-margin business built on a complex supply chain, and the end was inevitable.f
Oh I totally agree that Markus wanted the sale.
But ultimately it was Nicols and majority owner Ardian in charge during the downfall. Flossman was CVO until February, the buck stops with Ardian about how they're in this mess now.
I'm just wondering how it's gone so wrong when they haven't really changed anything, and the things they have arguably changed (US mills) seem to have been so positive for the company that the US sector is maybe cruising while EU is under insolvency.
Plus it's not like Markus just disappeared for 4 years. Unless his CVO title was just a formality while he ran around doing uber cool social media shtuff. I'd assume he wasn't completely hands off.
Also if Nicols was so bad for some reason, I guess it's a ballsy move by Propain to take him on to their board of directors lol i dunno
As a SoCal resident, it's kinda hard to believe as I nearly see more YTs than Speshys these days. Definitely feel like I see more YTs than Treks now.
YT was a VERY good price for years..In the Early 2019's what they suffered from was LOTS of broken Chainstays and LONG warranty lead times to get customers replacements ( I know 3 customers at my shop that HAD to buy a new bike or frame to ride that season..And I'm a hole in the wall shop in LI, NY). Once they overcame that a bit, Their pricing has gone up. While other Main brands over ordered thinking COVID boom and they ran sale after sale. Then even BIGGER sales. That's why Spec, Trek..Etc. can got F-Themselves from my store now and other shops. But YT was not such a great deal anymore. As far as Marcos..He is doing WAY better then the average bike shop owner. So good for him, But he helped KILL IBD's to get there.
Again just speculating, but based on the various quotes, the strategic direction (grow, grow, grow) seems like it was baked well before the CEO and PE guys came in. The CEO hire and the PE investment were both done to drive that strategy.
Flossmann has decided to bring in Nicols to help, "further accelerate YT’s growth trajectory, already turbocharged by this year’s demand, while navigating the increased business complexity and customer expectations."
"Markus and the team have already started making the necessary changes needed to enable YT to scale and continue to redefine how customers around the world buy and experience gravity mountain bikes."
“The combination of one of the most popular performance MTB brands and the underlying structural growth of the international MTB markets provide significant growth potential for YT. The company’s innovative and ambitious founders and management team combine strong passion for the product, a highly successful marketing approach as well as an outstanding online direct-to-consumer distribution model. We are thrilled to be able to support Sam, Markus, and the wider management team to help them achieve their envisaged growth path.”
Would a CEO and board with sector experience have helped once market conditions started to deteriorate? Perhaps. But the founders made key decisions which put them on this path and everyone involved failed to anticipate and plan for the possibility of a severe post-covid market correction (like so many others).
Remember Most brands were forced to Order Big numbers in advance if they wanted Bikes - This wouldve been at expectation they could sell them for top dollar, However whether timing was bad, or order was delayed etc could play a major part.
This caught out both specilized and Trek, Especially trek - they had a big order in from SRAM/shimano and Frames(giant?) in early 2020, Apparently they upped their order number and they got massively caught out during this time, hence the overlap of the Two fuel Generations.
I've been told Trek has recovered well and now just working on getting those SKU's lower.
I don't get a lot of Specialized news etc but their Ebike market Is strong, Quite a few Stumpy Evo's Still around that Wont sell - alot of EVO owners bought an EVO frameset when the 15 came out as it was a bit lackluster.(15)
Those wondering what the operational and financial catalyst to the demise of YT here is my best guess. Again, as I keep saying, I have very limited knowledge of the company's financial statements (like...none).
I think its safe to assume that YT was running a low-margin business, especially compared to their competitors. It's also been reported they had a decent amount of debt (based on older news releases I've seen). So how do you service that debt and turn a profit while selling at thin margins? Volume. You have to move inventory fast and turn it multiple times per year to generate enough cash to cover your obligations and hopefully produce some actual profit.
Ironically, Amazon built its early success on this exact model. Thin margins, high inventory turnover, and vendor credit that acted like free growth capital. If you're a nerd for this stuff, happy to go deeper.
Back to YT. When COVID disrupted supply chains, they were in a terrible position. They couldn't get inventory, and by the time they did, demand had dried up. How do you service your debt when this happens? If your turns go to shit, you are in a tough spot and you are on the (debt) clock. The right move back then would’ve been to make tough decisions to boost margins (cost based accounting helps a lot) or keep inventory turns high (knowing your product mix). Plus, just flat cutting costs wouldn't have hurt, either. If you do none of this, this outcome was inevitable, regardless of who was running the show, how involved private equity was, or whether Markus was flexing on Instagram.
One last note...I'm speculating. I don’t have inside info or financials, so take this with a giant grain of salt.
Oh, I don't disagree that Markus has always wanted to grow the company. I feel this is pretty clear in their model, marketing and image alone (dating back at least a decade). What I'm arguing is the nuance required to maybe make the right decisions through this COVID meltdown comes down to your ability to understand the financial levers to pull on against a lot of in-industry "touch". These aren't iPhone cases from china that are all more or less the same, these are products made for a discerning group of nerds who bang away at keyboards in internet forums at 7:15 on a Sunday morning like its almost religion. You have to nail the little things if you have any hope, and I can't see an Amazon CEO who doesn't know bikes + PE board who also presumably doesn't know bikes being able to have that level of industry knowledge to steer this ship to safety.
I definitely don't think the CEO / board helped, there's lots of evidence of big spending in the last couple years alone (new Mills opening, new race truck, bigger race team, etc). But from all the industry chatter since the meltdown, it seems like end of 2021 (when they took on PE) was VERY late to be doubling down on a covid-era growth strategy. I guess I'm having a hard time seeing how their fate wasn't sealed already at that point. Unless of course the PE guys took over and immediately reversed course (we all know that wasn't happening).
Kona also sold to PE in December 2021, and where'd they end up? But to your point, a company like Santa Cruz is still around because it sold in 2015 to Pon, rather than to some random PE in 2021... however didn't they still oust their bike industry CEO after their covid missteps?
I agree that YT had an uphill road regardless of who was at the helm and perhaps no management team could have saved the ship. However, hindsight has a way of making things clearer than they actually were in the moment. To remind everyone, interest rates remained relatively low throughout 2021, COVID outcomes were still not totally clear (cities hadn't reopened fully), the MTB supply chain wasn't fully back online, and demand was hard to gauge (there wasn’t enough supply to base it on). Yes, some shops started to note that 2021 wasn't as gangbusters as 2020, but it was a weird year. It wasn't until 2022 that things started to become clearer, and even then, you'd have to be pretty savvy to see the writing on the wall. Demand wasn't sticky, future demand had merely been pulled forward, and there is a ton of inventory in the system that will gum things up for years.
One theme you'll see in this thread over and over again is how unwilling management seems to be to live in reality and make the changes required to give themselves a shot. Again, this can be really hard. Many of these companies do not have sophisticated financial planning and analysis tools, they aren't watching macro indicators to understand where consumer demand is headed, and they aren't looking at appropriate comps to learn from (what is the CFO of Fox Factory saying on conference calls? Might you heed these thoughts for your own business?). It's hard enough to run a company, but trying to do so while navigating all this complexity can be overwhelming. Still, you have to do it.
My guess is that if they were savvy and paying attention, they would have started to stress test their model and realized they had a problem with respect to volume and turns against their debt obligations while running a low margin business. That might have been the catalyst to go to their creditors and renegotiate (which they are doing now), optimize their product mix for the changing market dynamics, cut costs, or do something. To their credit, maybe they did, but if so, it wasn't obvious to an uber-nerd like me.
YT in many ways sings a similar tune to KTM. It wasn’t e-bikes that sunk them (though it kind of was for KTM), but it does look like CFOing was absent. Nobody was ringing the alarm bells as things went off the rails.
The big irony here is that the company actually appears to have a good chance of making it. They just have to go through German Chapter 11. Oh well, Markus already got his bag. The one owner likely to get screwed is the PE firm. The whole investment might go to zero.
I do think it's worth acknowledging how good Markus’s timing was. He got out at the 11th hour, right at the peak of crazy multiples and after the best year ever. Amazing. That never happens.
Few charts...
interest rates from summer 2020 to now.
This is a great reminder as to when the market realized we were going into a "new normal". (...and that PTON/other COVID darlings were not going to be a part of that)
Google search trends "mountain bike" - summer 2020 to now.
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