China has been constantly witnessing money-burning battle among the firms of different industries. The latest battleground is set in the bike-sharing space.
One such firm, Ofo, has raked in $450 million in series D financing led by DST. It has reached the milestone of valuation of one billion. The round also involved the participation of China’s leading taxi hailing service Didi Chuxing and Matrix China and CITIC, who have infused capital into Didi before. Also, Didi had invested in Ofo through a financing deal last year.
Startups are leveling up to be the “Uber for bikes” in China, the service is easy to avail, people looking for a ride, open their smartphones, unlock a bike parked nearby, ride it to their destinations and pay once they reach. Ofo claims to have rented over a million cycles since June to over 20 million registered users. Its business is spread across about 40 cities in China. Also, it is planning to expand into the U.S., UK, and Singapore, the process for the same has already begun.
Ofo’s rival in the industry, Mobike, had closed a $215 million funding round month, led by Tencent Holdings and Warburg Pincus LLC, then last week it announced receiving investment from Temasek.
The competition, the money burning battle, it all seems familiar. There was a rivalry between Didi and Uber, which later toned down when Didi stepped up to take over Uber. The ride-hailing industry was clouded with uncertainty over long-term profitability, but ride-sharing space brings with it a completely different set of challenges.
Both Mobike and Ofo, rely on technology for the services as the bikes are equipped with GPS chips. This allows them to be rented via their respective app, with no need of getting stocked at a central location. But renting a bike at just 1 CNY ($0.15) per hour comes with fewer business margins. Not only this, there’s a high probability of them getting vandalized or stolen whereas the “park anywhere” facility sometimes comes off as a bane, when parked in remote locations with no nearby foot-traffic.
It would be interesting to see how things turn out in future for the firms. The government might tend to stay friendly with them as their services align with the former’s goal of reducing pollution. But, like Didi, which now is making its way through the burdened road of different imposed rules, things might take a different turn.