Grover: The billion-dollar circular economy startup

Dusseldorf Germany now has a unicorn of the circular economy – i.e. a start-up with a valuation in the billions. The Berlin start-up Grover has raised 330 million euros in equity and debt capital from investors and has since been worth more than one billion US dollars.

So-called rental commerce offers electronics such as smartphones and laptops for rent on a monthly basis. The business model is similar to the many subscription options for streaming services, for example: You rent a cell phone or television and can return it monthly.

The motto of founder and CEO Michael Cassau: “We want to create availability instead of promoting excessive consumption.” Away from a “throwaway society” towards repeated, long-term use of products.

Grover’s new financing round was led by the tech fund Energy Impact Partners, along with several other investors. Nazo Moosa, Managing Partner at Energy Impact Partners, thinks the market is promising: “The business model fits in with the increasingly specific regulations for the circular economy and the trend towards sustainable consumption.”

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At the same time, Annette Zimmermann, smartphone expert from the market analysis institute Gartner, expects a slight decline in sales of new devices due to the current economic situation with war and a lack of resources. “Also, a lot of people will want to look at prices because of inflation.”

Repaired Cell Phones and Co.

Grover is just one player in the growing space for recycled electronics. The marketplaces that offer repaired cell phones and notebooks are also getting bigger. Provider Back Market from France, which is also expanding in Germany, broke the five billion mark at the beginning of the year after financing 450 million euros.

>> Read also: Second-hand platform Vestiaire Collective takes over US rival Tradesy

The Austrian start-up Refurbed raised 45 million euros in August last year. Both providers cooperate with repair companies and sell refurbished electronics via their platform.

The Finnish company Swappie, which itself refurbishes and sells smartphones, received 108 million euros in growth capital in February. In addition, there is a 200 million euro financing in December 2021 for the Berlin start-up Everphone, which has also created a rental model, but for company cell phones.

Politicians want to create a “right to repair”.

The trend can be illustrated well in numbers with smartphones: The International Data Corporation (IDC) from the USA forecasts worldwide sales of used smartphones for the year 2024 at almost 352 million units and anticipates total sales of 65 billion dollars. In 2019 there were still 206 million used cell phones.

EU politicians are also flirting with a long cycle for electronics; according to the EU Commission, the “Action Plan for a More Circular Economy” is at the heart of the European Green Deal, a roadmap to climate neutrality. A resolution on the “right to repair” is to be added this year.

With this, the EU wants to create guidelines for durable electronics. There has already been a guideline since 2021: household appliances and televisions must be designed in such a way that they can be repaired, and their blueprints must be freely available. The resolution for a “right to repair” should also reduce electronic waste in Europe.

Figures from the Federal Statistical Office (Destatis) show: 10.5 kilograms of electrical equipment per capita end up in the garbage every year in Germany. For comparison, that’s about 75 iPhones of the latest model. However, less than 40 percent of this is recycled in this country, i.e. put back into the material cycle.

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Companies like Grover, Refurbed and Back Market promise to do their part to combat e-waste. “By sub-letting, our devices have a much longer life cycle than devices that are bought,” says Cassau. “Before we rent them out again, they are repaired, cleaned and updated.” Grover rents out an iPhone around five times, says the founder.

More on the subject:

In a study, the Öko-Institut calculated the average carbon emissions for the production of mobile phones with a service life of around two years and came to around 100 kilograms (kg) of CO2 – although the figure varies depending on the device. According to the institute, a smartphone that is used for five years only emits 20 kg of CO2.

Most recently, Grover was able to increase its sales run rate from 61 million euros in 2020 to 140 million euros in 2021. With the fresh money, Cassau now wants to build up massive subscription numbers and expand further into the USA. The company currently has around 250,000 customers. “Demand is far from exhausted,” adds Cassau.

Thomas Antonioli and Michael Cassau

The two founders of the electronics rental start-up Grover have raised 330 million euros.

(Photo: Grover)

The remanufactured electronics marketplaces also want to keep growing. Refurbed, for example, was able to double its sales last year compared to the previous year. According to their own information, Refurbed generates several hundred million euros in external sales. To be more precise, you can buy refurbished mobile phones and other electronics in the Refurbed shop, which, according to CEO Kilian Kaminski, cost up to 40 percent less than a new device.

If a software update is no longer possible, the cell phone is worthless

An iPhone 12 with 64 gigabytes of storage is about 31 percent cheaper in the shop, cost point: 547 euros. “Our focus is primarily on quality, so that customers then choose us because of price and sustainability,” says Kaminski. “We therefore select the repair partners carefully.”

Back Market came onto the market eight years ago and was one of the first in this branch in Europe. Around 1,500 partners now repair electronic devices for Back Market, which customers can buy on the website. “In Germany, we also introduced buy-back and swap options last year,” says co-founder and manager at Back Market, Vianney Vaute.

Customers can therefore trade in or sell their old devices to the company so that they can then be refurbished again. The marketplace has six million customers worldwide. For Germany, the start-up is planning 60 million euros for operations. In addition, the size of the German team is to be tripled.

The rental and refurbished providers not only have positive climate effects, but also a common problem: numerous devices, especially smartphones, can often no longer receive new software after a few years of service. At some point, the big manufacturers no longer guarantee updates. “The manufacturers are thus forcing customers to exchange devices because the software cannot be extended,” says Kaminski. “Legislators have to change something, or manufacturers have to act on their own initiative.”

The EU’s draft for the right to repair contains at least a few approaches: MEPs write that “software updates must be made available for a minimum period of time”. The politicians propose that if manufacturers do not comply, they should be able to be blacklisted for “unfair business practices”.

And then there’s the problem of what happens to the device when it can no longer be renewed: who recycles it? Christina Dornack is Director at the Institute for Waste Management and circular economy at the Technical University of Dresden and sees the current business models as more of an extension of the use of electronics, but not yet a closed circular economy.

Even after the end of the life of a refurbished smartphone, it is often no longer possible to recycle all the components elsewhere. If the raw materials in a smartphone are only worth about one euro, then “no subsequent processing is economical,” says the professor. “Primary raw materials are still far too cheap.”

According to Cassau, for example, Grover is currently passing on irreparable devices to other re-commerce companies who can reuse their parts. The company is not yet able to actively recycle. “But we’re working on it,” says Cassau.

The growing start-ups are increasingly facing competition from large manufacturers. The Bloomberg news agency reported at the end of March, citing insider circles, that Apple would launch a hardware rental model at the end of this year. In any case, Dornack sees the competition positively: “If these offers are available in many places, people are more likely to think about taking part.”

More: iPhones for money: used goods start-up Refurbed stirs up the German market

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