Everything started with the idea of a rental model for prams. The leap to industry seemed big, but this was actually only a small step towards a successful business model: The startup circuly supports the rental of physical goods with its software. In the spirit of the Circular Economy, circuly wants to enable sustainable economic activity. In the interview with 5-HT, co-founder and managing director Victoria Erdbrügger talks about her path via prams and powerbanks to a circular rental model.
How everything began
“My co-founder and Managing Director Nick Huijs is the proud owner of 50 prams to date. Nick is from the Netherlands and, like me, comes from a family of entrepreneurs. During his thesis on circular economy and access over ownership, he decided to start his own small rental project with 50 prams. But the usual e-commerce shops do not offer many functions and possibilities, such as a checkout for recurring payments or a real-time credit check of the customers. So Nick developed his own software for renting out the strollers. And then the first companies expressed interest in this software. That was the birth of the idea to offer a pure software service model and to enable as many shops as possible to also rent out their products instead of selling them.
I myself studied business psychology and international business. By chance, I came across the Founders Foundation in Bielefeld, a gGmbH of the Bertelsmann Foundation that aims to promote entrepreneurs in the region – with a special focus on B2B, software and service companies. At the time, a friend and I had the idea of renting out powerbanks. But we didn’t find a suitable business model, so we scrapped the idea. The Founders Foundation then brought me and Nick together, because Nick had an idea but no co-founder, and I had the drive to do something new. We were very different in terms of skillset, but in terms of mindset we fit together very well. So one thing led to another and a few months later, in April 2020, we founded circuly. We now have a diverse team of seven.”
What circuly is
“Circuly is a software that enables companies to rent out their products instead of just selling them. We make the webshops of this world smart for renting: Circuly delivers an add-on for webshops that makes renting as easy as buying and allows the shop owner to track his products over the different rental cycles.
Our software is entirely in the spirit of the circular economy. Products and their individual parts should remain in the cycle as long as possible. We want companies to take responsibility for the longevity and quality of their products. This means that the manufacturer also recycles or disposes of the product properly at the end of its life.”
Four reasons for a circular rental model – the corporate side
“If you want to sell sustainability to companies, you also have to be able to promise an economic advantage. Sustainability has to be sold economically. That’s why we bring the topics ‘economic action’ and ‘sustainable thinking’ together with circuly.
When you sell a product, you first have manufacturing costs yourself. When you sell it, you simply add a margin. But when you rent out a product, you can rent it out not only to one, but to several customers. This means that while the manufacturing costs remain the same, you can count on a completely different margin for a product: One of our customers, for example, achieves a five times higher margin with your rental products than with the classic sales model.
Another advantage is that you can control the secondary market: Most products can be found on online marketplaces for second-hand goods and are resold there. If we think back to the example of prams: after two years, this pram can still be of such good quality that it is resold at almost its new value. But if you as a company remain the owner of the product, then you also remain the master of the turnover on the secondary market. And that is a great economic gain.
Furthermore, an additional rental model appeals to new customer groups: For example, you reach people who only need the product for a short time and who cannot afford to buy it outright or new.
But this is only one side of the advantages. On the other hand, as a company you can gather a lot of information about your own product and its use when you rent it out: How is the product used? Which breakages occur more often? How can I improve the quality of the product so that I can rent it out a third, fourth or even eighth time? In this way, you can not only increase your own margin, but also do something for the environment.”
Four reasons for a circular rental model – the customer side
“We conducted a survey and asked 1000 end customers about the acceptance of a rental model in order to find out more about the market of our customers. Initially, we had the hypothesis that a rental model makes sense for three categories in particular: Firstly, for the use of products for a short time, such as the classic pram. Secondly, all products that are very service-intensive and are rented with just this service. Thirdly, products that have a very high price. This is particularly widespread in the B2B sector, as large machines are often rented or leased these days.
We went into the survey with these three hypotheses – and got very similar answers. But the fourth finding was surprising, namely that sustainable consumption is very important to many customers. We were very pleased to see that there is already an awareness of sustainable consumption and the possibility of renting products.”
For whom circuly is intended
“We are industry agnostic, and focus on the rental of physical goods. These can be products intended for the end consumer at home or medical equipment rented by hospitals. Therefore, we are also interesting for the chemical and pharmaceutical industries, because they can also benefit from the possibility of renting their products instead of selling them – be it the rental of large machines or plant components in the chemical industry or the rental of medical devices such as emergency call systems. The rental of medical equipment is not only interesting in the B2B sector, but also for medical practices or for private individuals in home care, because they often cannot afford the equipment otherwise. And equipment parts, such as those needed in the chemical industry, can also be too expensive. That’s why they are increasingly leased or rented, which is where we come in.
Circuly is especially aimed at companies that are active in e-commerce and sell their products online. On the one hand, we focus on companies that only rent out their products, because these companies currently work a lot with Excel spreadsheets and have many manual processes in the background. Of course, this requires a lot of manpower and is very time-consuming. On the other hand, we are targeting companies that have so far had a pure sales model and see the market opportunity to also rent out their own products.”
At which level circuly is
“We were founded in April 2020 and were able to win our first customers directly. Our customers use our software and give us feedback, so we can develop circuly very closely to the market. Our customers are already very diverse, from companies in the furniture industry to book rentals to companies that rent out emergency call systems. By the end of 2020, we want to have developed a market-ready version of the software.
At the moment, the B2B sector is in a comfortable situation for us, because it is not yet as digitised as B2C. E-commerce shops are not yet commonplace in the B2B sector, but the rental model itself is established. That’s why B2B is an exciting field for us, because we can bring together the areas of digitalisation and rental particularly well here.”
What circuly is looking for
“We closed our first financing round at the beginning of summer 2020. Further growth is planned this year. Investors from the B2B sector are particularly interesting – that’s why 5-HT’s network is so valuable to us.
Because we place a lot of value on an industry-independent approach, the 5-HT network is particularly interesting for us, because we have not yet tapped into these industries. We want to create an independent solution in the circular rental model and are therefore also looking for new customers in the pharmaceutical and chemical industries.
Partnerships with companies are also valuable for us, with whom we can jointly develop the product in a spirit of partnership.
The majority of our customers are currently based in Germany, but we are also already on the road internationally. We are in talks with companies all over the world and want to establish ourselves internationally.”
What circuly would like to tell us
“Again and again I notice that companies see the topic of ‘circular economy’ as a very theoretical and huge topic. I would like to see the circular economy become a topic that is simply put into practice. This includes trying out something new as a company. There are many quick ways to take a first step towards the circular economy – such as a rental model. In addition, the topic has a huge potential for companies – it has been valued at 4.4 billion dollars by the Ellen MacAthur Foundation.
A rental model with circuly can be implemented within minutes – and so you can simply try out how the model is received on the market. I wish companies would try something new in the direction of the circular economy more often.”