Grover Secures Funding to Expand Tech Rental Service

A startup operating within the circular economy framework – offering temporary access to products via subscription rather than outright purchase – has successfully raised capital to broaden its reach across Europe and internationally. Grover, a Berlin-based company specializing in a subscription service for consumer electronics, including computers, smartphones, gaming consoles, and scooters, has obtained €60 million ($71 million) in funding.

Funding Breakdown and Growth Targets

The financial injection comprises €45 million in equity and €15 million in venture debt.

Having reached 100,000 subscriptions as of September of the previous year, Grover currently boasts approximately 150,000 subscribers. The company intends to triple this number, aiming for 450,000 subscriptions by the close of 2021.

Expansion Plans and Product Diversification

These funds will facilitate expansion into new markets. Grover will focus on strengthening its presence in Germany, Austria, and the Netherlands – where it already operates – and launching services in Spain and the U.S.

Furthermore, the company plans to diversify its product offerings, incorporating health and fitness devices, consumer robots, and smart appliances into its rental catalog.

Increased Investment in Service Innovation

Grover also intends to invest further in enhancing its rental services. Demand for these services has seen a resurgence, particularly during the past year, as economic pressures and financial uncertainty have increased. This has prompted a shift towards more mindful consumption and maximizing the utility of existing resources.

CEO Statement on Funding and Future Outlook

“Consumers increasingly prioritize convenience, flexibility, and sustainability when acquiring and utilizing products,” stated Michael Cassau, CEO and founder of Grover. “This is particularly evident in the realm of technology and its diverse applications – from productivity to entertainment and maintaining connections with loved ones.”

He continued, “This new funding empowers us to extend these possibilities to a wider global audience. It allows us to refine the customer experience for our subscribers and pioneer innovative approaches to technology access for both individuals and businesses. The robust support from our investors validates the value of our service and Grover’s significant growth potential. We are only beginning to tap into a €1 trillion global market.”

Investor Details

JMS Capital-Everglen spearheaded the Series B equity round, with contributions from Viola Fintech, Assurant Growth, and existing investors including coparion, Augmentum Fintech, Circularity Capital, Seedcamp, and Samsung Next. Additionally, the round included participation from unnamed founders and angel investors across Europe and North America. Kreos Capital provided the venture debt.

Strategic Partnership with Samsung

Samsung is a strategic investor in Grover. The two companies launched a collaborative subscription service in December, initially featuring select models from Samsung’s S21 series, along with the Tab S7 and Galaxy A models. Plans are underway to integrate wearables, smart home devices, TVs, and notebooks into the “Samsung powered by Grover” program. This service currently operates in Germany, and the new investment may facilitate its expansion to other markets.

Recent Growth and Financial Performance

Grover reported a 2.5x growth in its business over the past year. As of September, the company had 100,000 active users renting 18,000 smartphones, 6,000 pairs of AirPods, and over 1,300 electric scooters.

In its most recent fiscal year, Grover achieved net revenues of approximately $43 million, with $71 million in annual recurring revenue, and reached profitability on an EBITDA basis.

Previous Funding Rounds

Prior to this round, Grover secured €250 million ($297 million) in debt financing before the pandemic. Earlier funding included a $44 million Series A round in 2018 and a combined $48 million in equity and debt in a pre-Series B round in 2019. The company has not disclosed its current valuation.

The Rise of the Subscription Economy

Grover’s service is part of a growing trend of startups leveraging the subscription economy model. This model extends to asset-intensive categories like automobiles, as well as digital consumables such as music and video streaming.

“Netflix for Gadgets” Analogy

Grover is often likened to “the Netflix for gadgets,” referencing Netflix’s initial business model of mailing physical DVDs to subscribers, who would return them for new selections.

The Benefits of Gadget Subscriptions

Similar to cars and films, a subscription model for gadgets offers compelling advantages. As the cost of technology increases and consumers face numerous spending options, outright ownership becomes less appealing. The rapid depreciation of gadget value further reinforces the benefits of temporary access.

Adapting to Changing Consumer Behavior

Consumers are increasingly embracing subscription services and electronic payment methods. Grover aims to replicate the seamless experience of subscribing to services like Prime or Spotify, applying it to physical goods.

Value for Retailers

For retailers, offering subscription options provides an alternative to traditional sales methods, including credit financing and buy-now-pay-later schemes. Addressing shopping cart abandonment and online competition, subscriptions can drive incremental revenue. A premium monthly fee for gadget access, coupled with outsourced maintenance, could potentially yield higher profits than outright sales.

Growing Acceptance of Used Electronics

Consumer attitudes towards used electronics and goods are evolving. Companies facilitating the resale of used items are experiencing significant growth, driven by cost savings and environmental consciousness. In Europe, Brighton-based MPB recently raised nearly $70 million for its used-camera equipment marketplace. Other notable deals include Wallapop in Spain ($191 million) and Vestiaire Collective ($216 million).

Navigating a Challenging Market

Grover’s progress is noteworthy, given the historical challenges faced by companies attempting to establish gadget subscription models. Lumoid, a U.S.-based competitor, failed to secure sufficient funding and ultimately ceased operations despite initial traction and a partnership with Best Buy. Other players in the space include Tryatec and Wonder, which focuses on technology from startups.

The Key to Success: Operational Excellence

The critical question for Grover is whether it can successfully navigate the complexities of supply chain management, logistics, reconditioning, repair, and customer service. A promising concept requires flawless execution to achieve long-term viability.