Grover's Woes
Today's article is brought to you by the letters D, E, B and T.
There’s no doubt that from a consumer perspective, tech rental or device-as-a-service (DaaS) has a lot going for it. No big cash outlay, stable monthly payments, return the device in exchange for the latest and greatest model, and let the rental firm take care of refurbishing or recycling the old device. Easy right? So why don’t more of us do it? It’s no different from what we were, or maybe still are, used to with our carrier contracts. The business-to-business side of DaaS has been humming along nicely for years with giants like CHG-Meridian, DLL and Econocom getting utility assets off the books and out of mind.
Yet the direct-to-consumer market has been slower to gain widespread adoption, facing what appear to be major challenges despite the apparent benefits. The UK market offers some contrasting examples: Raylo reported impressive 43% subscriber growth between 2022 and 20231, while MusicMagpie struggled with the capital requirements of funding what was otherwise the most promising segment of their business (though the recent AO.com acquisition may signal a turnaround)2.
This brings us to Grover, the German tech rental specialist. They have been on my radar for a while, partly due to their pioneering approach alongside Raylo and also their once novel GroverCare bundled in with the subscription offering to cover 90% of most issues. I had intended to wait for their latest financial filings before providing a Research Update, but recent developments have made a more timely assessment appropriate.
Recap
Founded in 2015, Grover offers approximately 4,000 products across categories including computers, smartphones, wearables, gaming, and e-mobility devices with flexible rental periods from 1 to 24 months. They operate in Germany, Austria, the Netherlands and Spain and, up until 2023, in the U.S. with an abrupt stop to the clear disappointment of existing customers3.
The business operates through a three-tier corporate structure:
Operating Companies (OpCos) - Primarily Grover Group GmbH, which centralises tech development, sales, procurement, logistics, administration, and finance functions
Financing Companies (FinCos) - Entities including Grover Finance I GmbH and Grover Finance II GmbH and Sustainable Tech Rental Europe II GmbH, which own the electronic devices and lease them to RentalCos
Rental Companies (RentalCos) - Local entities in different markets that lease devices from FinCos and sublease them to end customers
By the middle of last year, Grover had raised $323m in equity funding with the latest Series C round closing with a $54.6m raise in July 2024. Leading investors include Coparion (10.3%), Circularity Capital (7.1%) and Augmentum (6.4%). There are a couple of notable corporates invested, including Assurant (2.9%) and Samsung NEXT (2.5%).
Business Model
Grover's value proposition centres on flexibility, sustainability, and access over ownership. The company extends device lifespans through refurbishment and recirculation, reducing electronic waste and supporting a circular economy model.
The company generates revenue primarily through:
Monthly rental fees from consumer and business customers
Service fees charged to sister companies for operational support
Eventual sale of previously rented devices
Key partnerships include online and offline electronics retailers, electronics manufacturers, and affiliate partners. The company reaches customers through multiple channels including its website, mobile app, and integration with partner platforms.
Finances
The most recent available financials are for FY2022, not great, but all there is to work with. Grover Group GmbH had demonstrated strong top-line growth but continued to operate at a loss:
Revenue: €48.4m in 2022 (slight increase from €48.0m in 2021)
Net Loss: €70.0m in 2022 (increased from €45.8m in 2021)
Cash Position: €35.8m as of 31 December 2022 (up from €19.7m at end of 2021)
Total Assets: €104.8m as of 31 December 2022 (123% increase from previous year)
Major expenses include:
Marketing costs: €41.8m (2022), down 9% from €46.0m (2021)
Personnel costs: €27.6m (2022), up from €15.8m (2021)
Logistics/transport costs: €10.7m (2022), up from €6.9m (2021)
Grover's business model is highly capital intensive, requiring significant financing to purchase inventory. The company has relied heavily on debt financing, with several major facilities secured since 2017:
Early financing: Initial $4.7 million facility with Varengold Bank in January 2017, later extended to $11.7 million
Expanded facilities (2020): Increased Varengold Bank facility to €250 million in January 2020
Major financing (2021): $1 billion in asset-backed financing from Fasanara Capital alongside $29 million equity (Series B extension)
M&G facility (2022): €270 million debt financing from M&G in September 2022
Venture loan: Kreos Capital facility (€13.2 million outstanding at end of 2022)
By September 2022, Grover had reportedly raised approximately €800 million in debt funding in Europe and $250 million in the USA, bringing total funding (debt and equity combined) to approximately $2.3 billion.
Most of this financing appears to be asset-backed, using the electronics inventory as collateral, rather than traditional revolving credit. This reflects the company's asset-heavy business model and has created substantial financial obligations which, combined with continuous operating losses, seems to have ultimately contributed to the need for radical restructuring.
Restructuring Process
In January 2025, Grover initiated restructuring proceedings at the Charlottenburg District Court (Berlin). Key developments include:
Court appointment of restructuring officer on 20 January 2025
Submission of a restructuring plan on 20 March 2025
Plan discussion and voting hearing held on 16 April 2025
Court confirmation of the restructuring plan on 25 April 2025
The restructuring plan was approved by three of four creditor groups. The fourth group (existing shareholders) did not approve the plan, but their vote was deemed given under the legal provisions.
Key elements of the plan appear to include:
A capital reduction to zero, wiping out existing shareholders
New capital injection of €30-35 million from investors led by Fasanara Capital and M&G (two of Grover's major debt providers)
Current shareholders retaining only 5-10% of equity, with debt providers becoming majority shareholders
Possibility for existing shareholders to participate in new funding rounds
Subordination of a portion of existing debt
Restructuring of debt, particularly affecting subordinated convertible loans
Implementation of operational improvements
Analysis
Without having recent financial data, it's difficult to determine what's happened, but if I were to speculate, Grover appears to have fallen into a debt spiral that culminated in the 2025 restructuring. The company's substantial €70 million loss in 2022 (reflecting a monthly cash burn of approximately €5.8 million against €4 million in monthly revenue) likely worsened through 2023-2024, rapidly consuming both the €35.8 million cash reserve at the end of 2022 and the €122 million raised in its Series C funding round. Simultaneously, global interest rate increases significantly drove up the cost of servicing the €800+ million debt load, while its electronics inventory faced depreciation pressures that possibly outpaced rental income if there was any residual value variation. As financial performance deteriorated, the company likely breached covenants in its debt facilities. Attempts to secure additional equity funding almost certainly failed as investors grew increasingly cautious about capital-intensive, loss-making businesses, particularly given the unsustainable unit economics. By late 2024, these factors culminated in an acute liquidity crisis, leaving Grover unable to service its debt obligations while maintaining operations.
Management likely recognised their debt-driven growth model had become unsustainable and proactively pursued restructuring. Post-pandemic normalisation of consumer electronics demand may have significantly undercut growth projections, while the company potentially identified substantial operational efficiencies that required a capital structure reset to implement effectively. International expansion costs, particularly in the US market, may have proven excessive, necessitating a strategic retreat or market refocus. Key creditors such as Fasanara and M&G, seeing long-term value in Grover's core business model, appear to have supported this voluntary restructuring approach rather than forcing the company into a more disruptive insolvency process.
Outlook
The approval of the restructuring plan marks a critical juncture for Grover, but the broader tech rental market remains poised for growth despite these challenges. Consumer electronics ownership models are evolving, with factors like extended product lifecycles (now approaching 4 years for smartphones), growing sustainability concerns, and economic volatility creating a complex landscape for rental solutions.
For Grover to capitalise on these opportunities, they'll need to make decisive strategic shifts. First, unit economics must be prioritised over aggressive expansion. The court-approved plan suggests a renewed focus on operational efficiencies, which likely means optimising inventory management, reducing device depreciation costs, and significantly lowering customer acquisition costs. Grover's high marketing spend (€41.8m in 2022) indicates substantial room for improvement in conversion efficiency. In contrast, Raylo's CEO Karl Gilbert highlights how deep vertical integration has allowed them to "control the experience, drive strong margins, and scale responsibly."4 Their approach of managing the entire platform end-to-end—from credit assessment to lifecycle management—could offer a template for Grover's operational reset.
Second, flexible pricing models that deliver both customer value and business sustainability are essential. As Karl Gilbert noted in the Houlihan Lokey interview5, Raylo's subscription model offers "low monthly prices and flexible upgrades" while still maintaining healthy margins. This approach focuses on "value and freedom" for consumers, appealing particularly to "younger, values-led customers" with sustainability concerns. For Grover, developing pricing structures that align with both customer expectations and financial realities will be crucial for sustainable growth.
Third, technology-driven operational excellence appears increasingly vital in this sector. Gilbert emphasizes how Raylo's AI-driven platforms enable "market-leading credit and fraud risk assessment and dynamic pricing" while supporting "device risk management and maximizes lifecycle value." The ability to deploy technology effectively across the entire customer journey—from acquisition to device return—may represent the difference between profitable and unprofitable players in this space.
Fourth, strategic partnerships deserve renewed emphasis. Integrating rental options at point-of-sale with major electronics retailers or manufacturers could significantly reduce customer acquisition costs while expanding market reach. Samsung's investment in Grover suggests potential for deeper manufacturer collaboration, while Gilbert notes Raylo is "expanding partnerships with global OEMs to power their subscription offerings through white-label solutions."
The tech rental market still offers compelling opportunities, with growing consumer interest in circular economy models and financial flexibility. However, Grover's restructuring serves as a reminder that even promising business models require sound financial fundamentals. Success will ultimately depend on balancing growth ambitions with sustainable economics—a challenge that extends beyond Grover to the entire consumer device-as-a-service sector.
For consumers and the environment alike, I hope they succeed. The market needs viable alternatives to the buy-use-discard cycle that dominates consumer electronics, but rental providers must prove they can deliver this alternative profitably. Grover's next chapter will be instructive for the entire industry.
Peace,
sb.
Ibid.