FlixBus is one of Europe’s leading mobility platforms, enabling consumers to take cheap inter-city travels via bus and train.
But how a fairly young upstart challenge the many existing and well-established operators in the old continent? And how does FlixBus generate its revenue?
Let’s dive into its platform, history and business model in more detail.
How FlixBus Works
FlixBus is a mobility provider offering long-distance train and bus rides. It does so by teaming up with local bus companies, who execute the rides on FlixBus’ behalf.
FlixBus itself actually only owns one bus for licensing reasons. They therefore handle commercial management duties (i.e. route planning, pricing, selling tickets, or marketing) of the business and leave the daily operational tasks (i.e driving) for the partners to take care of.
Regardless of ownership, their buses are branded in their distinct green company color. This helped them building a strong brand while making it easier for customers to find.
Furthermore, they offer additional services such as on-board Wi-Fi, various entertainment options and the ability to conveniently book through an app or their website (as opposed to long reservation calls).
Other offerings on the platform include train rides, the ability to rent a bus (e.g. for groups), or a trip to different holiday destinations.
As of 2019, the company connects more than 2000 destinations in 30 countries. Furthermore, 350,000 trips are conducted every day on behalf of FlixBus.
A Short History Of FlixBus
The idea of FlixBus originated somewhere in 2011. During this time, Jochen Engert and Andre Schwämmlein worked consulting jobs at strategic advisor Boston Consulting Group. They bounced many ideas of each other and their third co-founder, Daniel Krauss, who worked at Microsoft during that time.
And as fortune would have it, the introduction of a new regulation would allow them to start what became FlixBus. For the previous 70 years, the state-owned railway and train operator Deutsche Bahn had a monopoly for intercity travel.
With deregulation introduced in 2013, private companies were allowed to operate intercity buses and trains and thus compete with state-run subsidized railways.
The trio got to work and launched the platform along with the deregulation in 2013. Unfortunately, they weren’t the only ones launching during that time.
Competitor MeinFernbus, for instance, was granted a special permit and launched a year prior in 2012. Another notable competitor included the PostBus, an initiative started by DHL.
So what allowed FlixBus to become Europe’s absolute market leader, despite financially potent and early starting competition? Its asset light approach.
As mentioned previously, FlixBus only owns one bus for licensing reasons and sources out operational execution to its driving partners (similar to the Uber model).
Their competitors, on the other side, operated the buses themselves. And because of that, FlixBus was able to scale at a much quicker pace as it tapped into the local resources of their driving partners.
Furthermore, they put great emphasis on their digital product. Their differentiating features include aspects such as dynamic price calculation based on demand, more available routes, and an intuitive and easy to use design.
Therefore, the company was able to acquire most of its competitors over the past few years. For instance, they merged together with MeinFernbus in 2015 and acquired the fleet of PostBus in the same year.
Since they conquered the European bus market, it was time for some bigger fish to catch. Therefore, in 2016, the company rebranded to FlixMobility.
Under the new name, they’ve launched a set of other mobility solutions aimed at intercity travel. In 2018, they introduced FlixTrain, which enables inter-city travel via train.
In that same year, the FlixBus service launched in the US to expand the brand past Europe.
The FlixBus Business Model
As previously eluded, FlixBus offers the ability to book inter-city travels via bus or train. It acts as a lead generating mediator, but relies on partners to execute the transport.
To finance the cost of its operation, FlixBus implemented a revenue-sharing business model. That means that the company shares the revenue from every booking with the partner who executed the ride.
In the case of FlixBus, they keep 25 to 30 percent of the booking price. The rest goes to the train or bus operator.
Contracts with their partners normally last 3 to 5 years. Afterwards, depending on performance, they are normally renegotiated.
And because they are very confident in their ability to dynamically calculate the “right” prices and draw in enough customers, they guarantee to pay a minimum level of income to their partners.
FlixBus Mission & Vision Statement
The mission of FlixBus was and is “to reinvent the established bus industry from a fresh and innovative perspective.”
Conversely, their vision is to create “smart and green mobility for everyone to experience the world.” As such, they want to help reducing emission levels through collective travel solutions and electric vehicles.
One major initiative to achieve this goal is the introduction of the E-Bus. It’s an all-electric bus running on renewable resources, which commutes on selected routes.
Furthermore, FlixBus wants to enable anybody to travel at low cost. Thereby, travel becomes accessible to a wider audience.
FlixBus Valuation, Ownership & Revenue
According to Crunchbase, FlixBus is valued at a little over $2 billion. They raised $500 million in their last Series F funding round, which became largest-ever financial injection for a German tech startup. FlixBus is backed by the likes of General Atlantic, Silver Lake Partners, and car manufacturer Daimler.
There is no current information available with regards to FlixMobility’s ownership structure. But since the company is still founder-led, one can assume that the founding team holds a significant amount of equity.
Prior to their Series F funding round, the founders still held a 25 percent stake in the company.
Having had the highest ever funding round for a German startup ever, FlixMobility’s growth has been as equally as impressive. The company claims to be profitable in some of its core markets, namely being Germany and France, with positive unit economics in the markets it recently launched in.