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Chinese bicycle rental startup ofo raises funding of $866M led by Alibaba

Beijing-based bicycle rental start-up ofo, has raised a funding of $866 million led by Alibaba Group, with participation from Haofeng Group, Tianhe Capital, Ant Financial and Junli Capital. The company will use the funds to accelerate its growth and development globally.

Founded in 2014, ofo offers dockless bicycles on rent, which means the bikes are distributed around the city or campus to be rented per trip instead of dispensing them from one station. The bikes are tracked via GPS, and can be located by users, paid for and unlocked using their smartphones.

ofo currently operates in 250 cities across 21 countries including India and claims to have 200 million users globally. The company entered in India early this year starting with Pune, Coimbatore, Indore and said it will soon expand to more cities like Ahmedabad, Bangalore, Delhi, and Chennai.

Bike rental space in India

Note that there is a sudden focus on bicycle rental or sharing in India. In December 2017, cab aggregator Ola introduced ‘Ola Pedal’, its own bicycle sharing platform, starting with college campuses like IIT Kanpur. In November 2017, we found out that InMobi’s co-founder Amit Gupta has started an IoT-enabled bicycle rental company Yulu in Bangalore, which is yet to roll out its vehicles on the road. In October, Self-drive car rental company Zoomcar launched PEDL, a cycle rental service in the country, starting with Bangalore, Chennai and Kolkata. There are some more players which are already offering bike rental or sharing services via tech platforms in the country, like Letscycle, Rentomo, RentOnGo, Wicked Ride– to name a few.

MediaNama’s take

As we earlier pointed out, that despite the fact that bicycle sharing is a million-dollar business in China. the companies offering bicycle rentals are failing, and the growing number of such companies in India too should be watchful for some of the following issues:

Lack of civic sense: People were parking the bikes anywhere. (Because most of the new-age bicycle sharing companies work via an app, and users simply locate the bike via app, unlock it with QR code or something, pay via wallet etc, and go ahead with the ride, and supposed to park at the destination). Apparently, that does not happen. People were parking cycles anywhere, blocking the way for pedestrians and traffic, and authorities in China found bicycles dumped in rivers, abandoned anywhere on land, hanging in trees, etc. Also, many startups lost their bikes because they didn’t have a GPS tracking device. Via Business Insider.

– Does not make financial sense: According to a story in Fortune, the business of bicycle sharing does not improve with scale as it does in case of cab aggregation or other businesses. Because scale ‘doesn’t create a much lower cost structure per unit,’. For instance, if Ofo gets more customers then it has to buy more bicycles. Also, since rentals are low, these businesses are either unprofitable or have thin margins. And, paying employees, finding abandoned bikes, tackling thefts (Wukong lost 90% of its vehicles to theft), etc comes at a cost.

– Competition, but no difference: The same Fortune story mentions that competitors keep on increasing, but it is very hard to differentiate the service. What different will you offer in bicycle sharing service?

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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