Mips: The Gore-Tex of Brain Protection

Why didn't helmets do more to prevent severe brain injuries? That question, asked in a Swedish surgery room, set off a chain of research that would redefine helmet safety. What started as an academic pursuit became a groundbreaking technology – one that would eventually evolve into a must-have feature in helmets across multiple industries. This is the story of Mips and its impressive ingredient brand business model.

• Hans von Holst: The story of Mips began with neurosurgeon, professor, and Dr. Hans von Holst, whose expertise in brain trauma led to a revolutionary innovation.

• The idea: Mips was founded on the realization that helmets did not provide sufficient protection against the most common type of accident – angled impacts.

• The solution: With its background in science and engineering, Mips developed its Brain Protection System (BPS), a technology designed to be seamlessly integrated into any helmet model.

• Ingredient brand: Mips operates as an ingredient brand which is one of its key competitive strengths.

• Challenging market dynamics: In the post-pandemic years, the bicycle industry has faced significant challenges, with excess inventory levels impacting market conditions.

What do a Swedish helmet company, Intel's computer processors, Teflon's non-stick cookware, and Gore-Tex's trusted outdoor gear have in common?

We always aim to highlight compelling business stories in our articles - this one is no exception. But beyond that, it might introduce you to a technology you weren't familiar with – and perhaps even inspire you to invest in your own safety.

Join us as we dive deep into Mips, a Swedish company with a $1.2 billion market cap, growing revenue and EBIT at a CAGR of 21% and 35% respectively since its IPO in 2017 to 2024E. What Mips does is provide a meticulously developed input ingredient for helmet manufacturers through a strategic licensing model. With exceptional operating leverage, a dominant market position built upon its over 400 patents, and three decades of accident simulation expertise, Mips sets itself apart from the competition.

You may have spotted their yellow dot logo on your bicycle commute, or while waiting in line for the ski lift. If not, after reading this, you'll likely start noticing this subtle stamp of helmet safety everywhere.

Let's rewind about three decades…

Mips' scalability reflected in revenue and EBIT from 2014 to 2024E.

Mips' scalability reflected in revenue and EBIT from 2014 to 2024E.

The story of Mips begins with Professor and Dr. Hans von Holst. Back in the early 1990s, von Holst was working as a neurosurgeon, a professor emeritus at Karolinska Institute in Stockholm, chairman of the World Health Organization (WHO) Collaborating Centre for Neurotrauma Prevention, and had over 150 research publications to his name.

Throughout his career studying head injuries, particularly brain trauma, he noticed something that did not sit right with him: many patients with severe brain injuries had been wearing helmets at the time of their accidents.

And even when there was no visible damage to the skull, the brain could still be badly injured. Why was that?

The fact that stayed with von Holst was that helmets didn't seem to provide adequate protection.

Determined to investigate further, he brought his research question to the Royal Institute of Technology (KTH) in Stockholm in 1995. This decision proved pivotal as it led him to cross paths with PhD student Peter Halldin.

Intrigued by von Holst's hypothesis, Halldin initiated his doctoral research on head and neck injury biomechanics – research that eventually would not only prove to be successful but also commit Halldin to von Holst's mission for the long term. Nearly three decades later, Halldin remains Mips' Chief Science Officer.

Together, the two researchers began conducting accident simulations. Over time, they formed a crucial conclusion: many severe brain injuries could be attributed to the rotational forces caused by angled impacts to the head.

This finding highlighted that traditional helmets lacked protection against rotational motions transferred to the brain. Even if these tests were simple – at least compared to what would follow – the results were revealing. An idea was starting to develop but required more advanced testing.

At this time, the duo and their research partners began filing their first patents for a product. Looking back at these patents, you can see that the small team early on was onto something. Although they were far from a finished product, a clear thread runs through their work, with some innovative details already taking shape – details that would later become the foundation of Mips' success.

During these years, they established a trading company called Neuroprevention Scandinavia. Seed funding from a few investors allowed them to file the aforementioned patents and continue their countless impact tests.

The decision to form a company and build a patent portfolio is what took this further than a mere scientific breakthrough. But thanks to Hans von Holst's drive and interdisciplinary willingness to involve engineers, the story doesn't end here.

As the patent filings and company formation suggest: as time went on, the experiments got more and more advanced. However, it would take a few more years for two major puzzle pieces to come together – gradually transforming the intriguing research topic into an industry-defining innovation.

The first of these puzzle pieces was an invention by a man named Svein Kleiven. In 1996, the future co-founder of Mips made progress on a method that would have significant importance for the company.

Kleiven created a detailed, state-of-the-art computerized test model, capable of simulating real-life accidents and their effects on the human brain. This model, known as a Finite Element (FE) model, is a numeric 3D representation of the human head, incorporating the skull, brain, and brain tissue.

In short, the FE model consists of ~50,000 interconnected elements, similar to a digital LEGO structure. When an impact force is applied to the skull, specialized software calculates how the brain deforms in response. This deformation, or strain, provides a reliable prediction of brain injury risk, such as concussions.

The model enabled the team to analyze brain trauma in an entirely new way, allowing them to begin helmet testing and visually map out how simulated impacts affected the brain. With each test the team conducted, they could adjust key variables and accurately measure the impact of those changes.

Before this breakthrough, their research relied on far simpler test machines, making Kleiven's advanced FE analysis a game changer. With Kleiven on board, the researchers secured exclusive rights to his model – rights they continue to hold today. While Mips and other companies now utilize additional FE models, Kleiven's pioneering work gave the company the keys to go deeper into its research in unexplored territory.

The second piece of the testing puzzle came from co-founder Peter Halldin. Together with Magnus Aare, Halldin explored how to develop a more realistic method for testing helmet quality.

Previously, tests were more focused on linear impacts, where the helmet experienced a direct vertical collision with the ground – essentially a straight fall. However, von Holst's and Halldin's experience had convinced them that this testing standard did not reflect real-world accident scenarios. Their belief was increasingly supported by scientific research, concluding that the most common accident situation was of an angled impact.

For their 2003 study, Halldin and Aare developed a test rig – a simulation method with features that could create endless impact scenarios:

Specifically, the rig was designed to drop a helmeted dummy head onto a movable plate, simulating different accident scenarios. This setup allowed them to collect data from impacts at speeds of up to 30 mph, with the flexibility to adjust the angle of impact – capturing everything from direct collisions to sliding forces across the impact area.

The findings confirmed their beliefs and the technology they had developed was immediately put into practice. Since then, the company has continued testing and researching, using the methods of Kleiven and Halldin. Over time, these methods have formed the backbone of Mips' product development, shaped its success, and cemented an industry-defining standard for helmet technology.

Built on its early breakthroughs, Mips' test lab has carried out over 75,000 helmet tests.

Built on its early breakthroughs, Mips' test lab has carried out over 75,000 helmet tests.

Now, let's rewind two years, to early 2001. Although Halldin and Aare's breakthrough was still a couple of years away, the research trio was making steady progress. Building on von Holst's belief that a business structure was needed for wider adoption, the company changed its entity type to create a more enduring and scalable foundation. The trading company was converted to a limited liability company – signaling their belief in the technology they were developing.

Around the same time, they rebranded the company as Mips, an abbreviation for Multi-directional Impact Protection System.

As the patents filed a few years earlier suggested, the company had been working intensively to perfect a new technology. The product Mips was developing was named BPS, short for Brain Protection System.

This innovation featured a low-friction layer designed to mimic the brain's natural protective mechanism – the cerebrospinal fluid. This fluid allows the brain to slide slightly within the skull when subjected to angled impacts, helping to reduce the forces transmitted to the brain. However, the cerebrospinal fluid alone provides only limited protection.

The Mips BPS low-friction layer consists of thin, lightweight plastic. It is attached and connected to the helmet's interior but can move independently of the outer shell. Upon impact, a helmet equipped with BPS can shift approximately 0.4-0.6 inches relative to the head. In essence, the head “floats” inside the helmet, much like the brain floats within the cerebrospinal fluid.

This aims to redirect and reduce the harmful rotational energy that forces the brain to twist and move within the skull – a process known as intracerebral shearing (tissue stretching), which can lead to brain damage.

With BPS, the force transferred to the brain from rotational motion caused by angled impacts is reduced by up to 40% compared to traditional helmets. Angled is the keyword here. While its vertical impact protection was similar to traditional impacts, Mips' ability to mitigate rotational forces set it apart. Given that angled impacts are the most common type of head injury, the relevance of this innovation was undeniable. At the time, no other product on the market offered this level of protection.

With patent protection secured and the technology being finalized, the small team began considering its go-to-market options. Ultimately, they decided to develop and produce their own equestrian helmet with the BPS technology integrated. It was a bold move, given their limited experience in the consumer market and the significant financial risk of investing all their resources into production.

The Mips helmet was released in 2007 and was an instant success. Within a short time, all 3,000 helmets produced had sold out.

But the success was short-lived.

As the harsh Swedish winter set in, it exposed critical flaws in the product. The helmets simply couldn't withstand the cold, causing the neck retention system to fail. Mips had no other option but to recall all 3,000 helmets – a devastating blow for a company that had staked everything on this launch.

The story of Mips and its BPS technology could have ended there. In hindsight, the team has acknowledged that they came dangerously close to bankruptcy.

Crucially for Mips, the issue was not with their meticulously researched and refined BPS technology, which had been in development for over a decade. Instead, the failure stemmed entirely from their lack of experience in manufacturing and the consumer market.

Therefore, they managed to secure funding from their first institutional investors – HealthCap, Almi Invest, and KTH-Chalmers Capital – ensuring that Mips survived. Looking back, these tumultuous years proved to be a blessing in disguise, as they forced the company to take a step back and change its strategy.

As said, the manufacturing failure led Mips to change course. After reconsidering their options, they devised an alternative strategy to bring the BPS technology to the market. In 2009, founders Hans von Holst and Peter Halldin, along with new CEO Niklas Steenberg, signed their first customer to install Mips' technology directly into their helmets.

The revamped approach – shifting from developing and manufacturing entire helmets to simply producing a key component – was not just an instant success, but also a catalyst for long-term growth. From the very first customer in 2009, integration of BPS has never stopped. As of 2023, Mips' technology was integrated into over 150 different customers' helmets, in well-known brands like Bell, Giro (both owned by Vista Outdoor), and Scott.

Even though Mips no longer produced helmets, it still needed production operations to manufacture its BPS technology. To support this new strategy, the company set up a base in China where they began outsourcing their growing production.

This move allowed Mips to position itself close to many of the world's leading helmet manufacturers, facilitating smoother supply chain integration. Mips started producing custom-made BPS low-friction layers, which were then delivered to helmet brands for installation in their own products.

In just a few years, Mips transformed from near-bankruptcy into a supplier to some of the world's leading helmet brands – integrating their innovative technology in not only equestrian helmets but also bicycle, ice hockey, motorcycle, and more.

Pursuing the goal of becoming the global standard for helmet safety was undoubtedly a bold move. However, if successful, the market potential was immense – with every helmet brand worldwide representing a possible customer. This business model also allowed them to maintain a lean, focused organization with significantly lower capital requirements for production, marketing, and go-to-market strategies.

While the move may seem obvious in hindsight, it's important to underscore the significant challenges of creating a universal input technology for different branded products.

Despite the many hurdles, Mips shifted from being a manufacturer to a trusted supplier – fully committing to its new identity as an ingredient brand.

A helmet featuring Mips' integrated BPS technology.

A helmet featuring Mips' integrated BPS technology.

Perhaps you haven't heard of the term ingredient brand, but you've undoubtedly encountered some of the most well-known examples. In fact, without realizing it, you're often influenced by these brands when making what seem like the most logical and informed purchasing decisions.

So far in this article, Mips' story exemplifies the early steps of building an ingredient brand. To recap what an ingredient brand is, and how they're usually created: a patented (or at least highly advanced) innovation creates a first-mover advantage, offering a breakthrough solution, feature, or technology. Its quality and timing in the market establish it as the industry benchmark, a position it never loses – largely because consumers view it as the standard.

As you can imagine, achieving this status is extremely difficult. It's not just about developing a technology that deserves to be a required input for manufacturers – it's equally about branding and marketing. Both of these elements are crucial in cementing its long-term status and recognition.

Because, when the patent eventually expires, it's brand awareness and consumer demand that sustain its dominance. By the time competitors emerge, the brand has already established itself as the default choice – to the point where consumers expect or even demand its inclusion in the final product. If it's not there, the product simply isn't worth considering.

To illustrate the power and potential of becoming an ingredient brand, let's explore some of the most successful examples that have mastered this strategy.

Silicon Valley-founded Intel initially built its success in the semiconductor memory market during the 1970s. However, by the 1980s, fierce competition from Japanese semiconductor manufacturers forced the company to pivot and rethink its strategy.

At the time, Intel had a small but promising foothold in the emerging microprocessor market, which it decided to pursue with full force. The timing proved critical, as the PC industry was on the brink of explosive growth, and competition in computer processor (CPU) development was still minimal.

Intel had previously collaborated with AMD as a second-source manufacturer, but in an unexpected strategic move, it decided to end the partnership for its next-generation processor – the 386 chip. This chip was anticipated to be a major technological leap, and Intel's decision to retain full control over its production proved to be a masterstroke. By scaling up its own production, Intel positioned itself as the sole supplier of processors for the entire PC industry for several years.

By the time competition began catching up, Intel launched what would become a legendary marketing campaign. In 1991, CEO Andrew Grove devised a brilliant strategy: Intel would cover half the marketing costs for PC manufacturers – but only if they prominently featured the "Intel Inside" logo.

The aggressive campaign incentivized PC brands to choose Intel's processors, significantly boosting consumer awareness. For years, having "Intel Inside" became a must-have for PC manufacturers looking to stay competitive.

The story of Teflon began in 1938 with a young DuPont chemist, Roy Plunkett. While experimenting with a refrigerant called tetrafluoroethylene (TFE), Plunkett made an accidental discovery. When storing TFE gas, a combination of pressure and temperature triggered an unintended polymerization reaction, causing the TFE molecules to link into long chains, forming a waxy solid – later recognized as PTFE (polytetrafluoroethylene).

Plunkett and his team quickly recognized PTFE's unique properties: its nonstick surface, exceptional chemical resistance, and ability to withstand extreme temperatures. They patented the material in 1939 and received approval a couple of years later.

One of PTFE's earliest applications was in the Manhattan Project, where it was used in the separation plant enabling the production of the bomb. PTFE was chosen for its unmatched resistance to chemical corrosion, making it essential for handling the highly reactive uranium hexafluoride used in the process.

After the war, DuPont trademarked the material as Teflon and began exploring consumer applications. Initially, PTFE coatings were supplied to industrial markets, where they were valued for protecting machinery from corrosion and reducing friction in demanding environments.

Recognizing its broader commercial potential, DuPont later licensed the Teflon brand and technology to manufacturers, allowing them to apply its revolutionary nonstick coating to consumer products like cookware. What began in heavy industry soon expanded into food processing and, eventually, into nearly every kitchen across the U.S.

Although the patent for PTFE expired after some years, DuPont continued profiting by maintaining and licensing the Teflon trademark. Its first-mover advantage and breakthrough innovation ensured that Teflon became synonymous with nonstick cookware, securing its place in consumer consciousness for generations.

It almost sounds too good to be true, but this next ingredient brand actually traces its origins back to DuPont's discovery of PTFE.

During the 1950s, a man named Wilbert Lee “Bill” Gore was working at DuPont, where he became convinced that PTFE held untapped potential. In 1958, Bill left DuPont and, together with his wife Genevieve, founded W.L. Gore & Associates.

His first breakthrough came when he successfully insulated a ribbon cable with PTFE. Inspired by the innovation, Bill and his son, Bob Gore, who was still in college at the time, developed the Multi-Tet Cable – a patented design that quickly became a national success.

Early customers of the Gore family's cable solutions included IBM, which used them in the System/360 mainframe, and NASA, where they contributed to satellites and spacecraft – including Apollo 11's historic moon landing.

In 1969, just as the company's technology was making history in space, Bob Gore made an accidental discovery that would completely redefine the company's trajectory. What he stumbled upon was expanded polytetrafluoroethylene (ePTFE), a material with exceptional properties that made it ideal for a wide range of applications, from dental floss to telecommunications gear.

However, its most promising use case was as a fabric. Its microporous structure allowed water vapor to escape while preventing liquid water from entering, making it both waterproof and breathable.

By securing key patents for the technology, Gore ensured long-term protection, allowing the company to launch its groundbreaking technology without competition. In 1976, Gore turned what we now know as Gore-Tex into a billion-dollar business. Rather than manufacturing clothing themselves, they licensed the fabric to various brands, supplying them with the material that was then integrated into their products.

Since then, Gore-Tex technology has been incorporated into products at nearly every major outdoor apparel brand – from Patagonia jackets to Nike running shoes.

Although Gore-Tex's patents expired long ago, the brand's early success and dominant market presence cemented its place in consumer consciousness. When people want the assurance of being “Guaranteed to Keep You Dry,” they instinctively look for the black-and-gold label on the racks.

Returning to the story of Mips, we have yet to explore how the company advanced to the next level in its pursuit of becoming an ingredient brand – achieving consumer awareness so strong that their demand drives helmet manufacturers to adopt the technology.

Back in 2009, former CEO Niklas Steenberg had a bold vision, which the company's business model was built upon to achieve:

To build the foundation for its vision, Mips continued to build its patent portfolio. While its earliest patents from 1998 have long expired, new ones are continuously added to protect its innovative technology. As of 2024, Mips holds a broad portfolio that includes over 50 patent families and approximately 400 granted patents.

These patents cover a wide spectrum, from brand protection to the various BPS technologies developed by Mips. Their lifespan varies from 10 to 20 years, securing Mips' intellectual property and making it significantly more challenging for competitors to create similar technologies. Mips has also been proactive in enforcing its patent rights, taking legal action a few times to defend its innovations from infringement.

Mips' patents will, however, eventually expire. Some of the most critical actually expire as early as 2030. This is a reality that Mips is preparing for.

To do this, Mips continuously invests heavily in R&D to keep innovating and to secure having the best technology out there. More than a decade after its commercial breakthrough, Mips' technology is still recognized as the most effective solution for reducing the risks of rotational forces transferred to the brain.

The company is confident in its ability to maintain this position, backed by an unmatched volume of test data and research:

Since its inception, Mips has conducted over 75,000 helmet tests, solidifying its position of strength through decades of refining and perfecting its technology. With their extensive expertise, the company has also advanced its testing capabilities. In 2021, Mips launched a virtual test lab, designed to simplify testing and accelerate development. Since then, it has conducted over 100,000 virtual helmet tests.

The second strategy in the post-patent landscape revolves around brand awareness. Over the past decade, Mips has worked to transition from a patent-driven market leader to a consumer-driven brand leader. This shift mirrors what Intel, DuPont, and Gore successfully achieved with their ingredient brands.

Just as these brands became synonymous with industry standards, Mips is steadily embedding itself into consumer consciousness. The transition is ongoing – from being an integrated safety feature chosen by manufacturers to becoming a recognized brand that consumers actively seek out when purchasing a helmet. As awareness grows, helmet manufacturers are increasingly compelled to incorporate BPS technology to remain competitive.

While Mips has made significant progress in brand recognition over the last decade, it still has a long way to go before reaching the status of the industry-defining brands mentioned earlier. To strengthen its brand and expand consumer awareness, Mips annually invests 7% of net sales in marketing initiatives. This includes PR work, in-store marketing, customer and salesmen education, sponsorship of athletes, and targeted media campaigns.

Browsing on helmet brands such as Bell, Giro, and Trek websites, highlights Mips' growing influence in the industry. Each of these brands has dedicated pages explaining Mips technology to their customers. Whether this stems from paid PR efforts, licensing agreements, or independent initiatives by the manufacturers remains unclear. Either way, it serves as an effective strategy for boosting brand recognition and reinforcing the credibility of Mips' technology.

While no competitor can currently match Mips' patent portfolio or its extensive simulation data, a few companies have developed similar solutions aimed at reducing rotational forces. However, none have successfully commercialized their technology at the same scale or come close to Mips' market position.

Another risk is that helmet manufacturers may begin developing in-house alternatives, reducing their reliance on Mips. A notable example is Lazer, which has introduced its own rotational protection system, Kineticore.

That said, while this presents a possible threat, there is currently no concrete evidence suggesting that Mips is at risk of wider disruption. Concerns like these often underestimate how difficult it is to develop a competitive, independently validated, and cost-effective product.

Moreover, for a manufacturer focused on producing a cost-efficient, sleekly designed helmet, competing against three decades of specialized testing experience from a well-established ingredient brand seems like a difficult task.

Beyond brand recognition, regulatory changes may also work in Mips' favor. In recent years, motorcycle helmet safety standards have been updated to include mandatory oblique impact testing. The company is optimistic that similar testing requirements will be adopted for other helmet categories, further strengthening the relevance of its BPS technology.

Mips, being an ingredient brand, doesn't just sell its safety system – it has created a licensing structure that ensures widespread adoption while reinforcing its market influence.

This offering starts with the BPS system, which itself varies depending on the helmet type it is integrated into (more on this later). The BPS system – different from one helmet to the next – is designed and developed by Mips, produced by a subcontractor, and delivered to the helmet manufacturer which implements it into their helmet. For this, Mips charges a fixed fee for the development and implementation services, as well as a fee for the BPS itself.

Finally, Mips charges a licensing fee for the right to use its brand, which includes its IP, technology, and marketing material. A key part of this branding is the iconic yellow dot logo, which is actually mandatory on every helmet equipped with BPS technology.

This ties directly into Mips' ambition to increase consumer awareness. The yellow dot – comparable to Intel's "Intel Inside" stickers – serves as a seal of safety and quality. The fact that the technology comes from a third party further enhances its credibility, adding a premium perception to helmets featuring Mips technology. In effect, Mips markets itself through its customers' products – while getting paid for it.

Maybe you've noticed the yellow dot logo on your commute to work. Otherwise, now that you are familiar with it, you will start noticing it. And eventually, after finding yourself counting yellow dots as a sport, you'll find yourself actively seeking a helmet with the Mips logo the next time you buy one. Because, just like choosing a jacket with Gore-Tex, you want the safest helmet on the market. Brilliant marketing, right?

Mips' distinctive yellow dot logo featured on a Sweet Protection helmet.

Mips' distinctive yellow dot logo featured on a Sweet Protection helmet.

As of 2025, Mips offers seven different BPS products, each designed to provide the same type of protection but integrated into different helmet types. In essence, these products offer varying versions of low-friction layers (which resemble protective shells) and, in some cases, additional features for enhanced comfort and durability. Mips' solutions are engineered to be compatible with basically any helmet type on the market.

The products are integrated into a wide range of helmet types. Mips categorizes these into three main categories: Sports, Motorcycle, and Safety. The Sports category is by far the largest, accounting for roughly 90% of the company's revenue.

This segment is further divided into the subcategories: Bike, Snow, Equestrian, and Team Sports. In this group, bike helmets amount to approximately 80%, meaning that it represents over 70% of Mips' total revenue.

This revenue distribution has remained consistent since Mips' early years, but might not be equally distinct in the future. The Safety category, introduced in 2021, presents the company's largest focus market, with an estimated 110 million helmets sold annually, compared to 45 million for the Sports segment and 40 million for Motorcycle helmets. As this category expands, its growth trajectory will be interesting to follow in the coming years.

Until 2021, Mips reported the total number of helmets sold with its technology integrated. That year, 12.6 million helmets were sold, generating $67.2 million in revenue.

With Q4 2024 soon concluding, Mips' 2024 revenue is projected to come in slightly below $45 million. Given that revenue has declined, Mips helmets sold on the market can be assumed to not have increased since the reported 12.6 million in 2021. Based on this, Mips' market penetration remains below 7% of its total focus market.

While Mips has expanded its product range, enabling BPS integration into nearly any type of helmet, the company still limits its focus market from the total addressable market.

This is partly due to an internal assessment of accident scenarios, identifying where the rotational force from angled impacts poses the greatest risk – which, for instance, led Mips to exclude baseball helmets from its focus. And partly, because their technology is costly which means that the lowest-priced helmets on the market might not be as likely to implement BPS.

As previously noted, Mips has over 150 customers. However, the largest two account for nearly 30% of total revenue – a ratio that has remained stable over the past five years. The same stability can be said about its geographic revenue split, with North America consistently accounting for around 60%.

While Mips' test lab is situated in Stockholm, the production of its BPS systems is outsourced to various manufacturers, primarily in China. Cost is certainly a factor for this, but the main reason is proximity to Mips' customers, many of whom manufacture their helmets there.

Being close to these production sites significantly streamlines the supply chain, as Mips' BPS – like other helmet components – is integrated directly on the assembly line. In many cases, the facilities producing Mips components are either within the same plants as the helmet brands or located nearby, essentially making logistics a non-issue.

Mips' low-friction layers are produced on demand, keeping inventory costs minimal while maintaining only a limited stock of other safety system components. Once delivered to the manufacturer, Mips' technology is integrated directly into the helmet by the manufacturer itself. As promised by Mips, the BPS integration process is designed to take no more than two minutes on the assembly line.

These strategic choices in Mips' business model lead to a highly scalable operation. This structure also allows the company to rapidly increase deliveries without requiring significant investments in production facilities or a major expansion of its workforce. An impressive feature we will get back to later on.

The value chain of Mips' ingredient brand business illustrated.

The value chain of Mips' ingredient brand business illustrated.

In 2017, Mips went public with an IPO at a valuation of 1.16 billion SEK, equivalent to approximately $130 million. Even before its IPO, the company was experiencing strong momentum, which it carried into the late 2010s and further accelerated during the pandemic. The lockdowns and consequential shift in consumer spending that followed proved a perfect cocktail for Mips' business, as outdoor recreation became a global trend.

Mips was selling safety systems like never before – and demonstrating the scalability of its business. From its IPO to 2021, Mips grew its revenue and EBIT at a CAGR of 48% and 99%(!), respectively, achieving an operating margin of 54% in 2021.

However, like many other pandemic-driven trends, Mips' momentum proved unsustainable.

The spike in helmet demand led manufacturers to scale up production aggressively to saturate the market. Overforecasting, order batching by retailers, and global supply chain disruptions resulted in a severe inventory surplus across the entire bicycle industry.

As the pandemic came to an end, consumer spending began shifting back, with people eager to attend concerts, dine out, and refresh their wardrobes. At the same time, inflation came creeping which would prove to have some big effects on consumer spending.

These two factors worsened an already imbalanced market. From a period of explosive demand and a deliberate supply expansion to a suddenly cooling demand but with the supply side firmly stacked. A textbook example of the bullwhip effect.

Mips, like many other companies in the bicycle industry, faced a prolonged period of challenging market conditions. While its financial performance in recent years has been modest at best, its business model has proven resilient. As Mips operates at the start of the value chain and only produces upon order placement, it avoided being stuck with obsolete inventory.

Additionally, as previously noted, Mips maintains a lean organization, with only around 100 employees, half of whom are engineers. So, despite declining financials, the company has fared better than many of its industry peers so far. Another thing to add is that even though the market has been challenging, Mips has not lowered its prices – signaling confidence in its long-term positioning beyond the current turbulence.

As of Q3 2024, the inventory situation is improving but levels have yet to return to pre-pandemic norms:

An update on this will definitely come in Mips' coming Q4 report, released on the 6th of February. The fourth quarter is widely regarded as the most important quarter for the bicycle market, as it provides an indication of sentiment for the upcoming cycling season.

As Mips' operating margin has demonstrated over the years – most notably peaking at 54% in 2021 – its business model benefits from strong operating leverage. The company's long-term goal of maintaining a 50% operating margin underscores this inherent strength.

Once a new brand or helmet model is onboarded, the BPS system is integrated, and safety testing is completed, the marginal cost of producing Mips' technology remains relatively low, resulting in high incremental profitability.

After Mips' technology is adapted and incorporated into a new helmet, nearly every additional dollar in revenue flows directly to the bottom line. The company's outsourced production model, combined with a lean organization and a fixed percentage of expenses allocated to R&D and marketing, further enhances its scalability – allowing production to increase significantly without a proportional rise in expenses.

In 2022, Mips presented its financial projections for 2027, setting a target revenue of $182 million, an operating margin of 50%, and distributing 50% of profits as dividends. Whether Mips' strong operating leverage will be enough to achieve these ambitious objectives remains to be seen.

While Mips cannot control inventory levels or market demand for outdoor recreation, it has flawlessly executed the factors within its control since its strategic pivot 15 years ago. This has led to an impressive ~10x increase in its stock since its IPO in 2017. Becoming a global ingredient brand is no easy feat, but Mips has undeniably succeeded. Its distinctive yellow logo is evolving into a global symbol of safety – recognized, demanded, and impossible to ignore.