Chinese bike-sharing start-up says it’s now worth more than US$2 billion

[cyclone]

Chinese bike-sharing start-up says it’s now worth more than US$2 billion
The sky’s the limit for Ofo: Over three million of the company’s bright yellow bikes can be found in more than 50 Chinese cities, and their wheels have already rolled abroad to London and Singapore

By Sophia Yan
PUBLISHED : Tuesday, 18 April, 2017, 11:39am
UPDATED : Tuesday, 18 April, 2017, 11:41am

Chinese bike-sharing startup Ofo now says it is worth more than US$2 billion.

CEO Dai Wei, a 26-year-old entrepreneur who named his firm Ofo as the letters look like a bike, revealed that figure in a conversation with CNBC. It’s about double the last reports of the company’s value — which came out less than two months ago.

Such a valuation isn’t too shabby for a company that started about two years ago with its founders pooling private savings of 150,000 yuan (US$21,800) to kick things off.

Dai, for his part, is unfussed about the value of his Beijing-based firm. He even seems unaware of how astonishing it is to reach that figure for a firm that’s so young. What’s important to him, he said, is what Ofo can do for consumers.

More details in http://www.scmp.com/tech/leaders-founder...s2-billion

[Big Toe]

The world's largest bike company, Giant, started in 1972 and today is worth a little more than USD 2B.
Ofo was founded in Dec 2014, a 2yr+ young start up. Cash flow and revenue is little concern now as long as investors keep pouring money in to grow the company.

[Big Toe]

So Mobike is worth a ridiculous $4.5B now.
At this price, something's gotta give. Especially so when a portion of the purchase is funded by debt.
Dot com days are back in the form of unicorn start ups. And these guys have no clue how to stop burning piles of cash.

https://www.straitstimes.com/business/a-...-of-mobike

[CY09]

Yup unlisted companies can command sky high valuations, despite having no cash flow.

IMO this is because the world is washed with liquidity due to the QE done by China, EU and Japan. If this central banks start contracting their liquidity, cost of debt will rise and less people are likely to back cash burning companies. Till then, such economic mismatch will happen until these central banks "start cleaning up their act"

[weijian]

Just a few months ago, it was OBike and now it is going to be Ofo that's going to get alot of people frustrated in Spore this time around. That said, it is interesting that Alibaba (Ant Financial) has turned to supporting HelloBike from Ofo (Ant Financial was still giving money to Ofo last year). This is probably the main reason why Ofo looks insolvent now.

Bike-sharing firm Ofo's dramatic fall from grace a warning to China's tech investors

On the sidewalks of Shanghai and Beijing, once bright-yellow Ofo bicycles lie in varying states of disrepair – chains unhooked, wheels buckled and paint starting to fade – reflecting the quick rise and sharp fall of the Chinese bike-sharing start-up.

Millions of Ofo users are clamouring for their deposits to be returned and the firm’s founder has admitted considering bankruptcy.

https://www.scmp.com/tech/start-ups/arti...hinas-tech

HelloBike bagging new funds this week: https://techcrunch.com/2018/12/28/hellob...s-of-yuan/

[CY09]

Ofo is actually experiencing problems currently. Its office has downsized in Singapore and its suppliers are owed money.

Source: https://mothership.sg/2018/12/ofo-owe-money-singapore/

[Big Toe]

Experiencing problems is putting it mildly.
Now comparing the 2 CEO/founders,
Dai Wei of ofo and
Hu Weiwei of Mobike

Dai Wei got himself into a huge mess.
If steve jobs created the most valuable company of all time,
Dai Wei has the title of burning cash at the fastest rate in history.
And to top it all off, he pissed off everyone. The government, consumers, suppliers, staff, ... ...
And now he is backlisted by the PRC government.

On the other hand, Hu Wei Wei managed to offload her stake at the highest possible inflated valuation.
And at that time retaining the CEO title. It is only recently that she left the company.
Another masterstroke. Check out Meituan Dianping's result, (parent of Mobike) and you would understand why.
Brilliant Timing. She has ample financial resources now for her next 50 generations.

[karlmarx]

The situation in China is the same in Singapore; ofo bikes are abused, not maintained, and not used. The mess created is an eyesore. A lot more of these bikes are going to be recycled soon. For the majority of Chinese urban dwellers, their preferred mobility tool appears to be electric bicycles and electric scooters. The last time I was in Guang Zhou, I don't remember seeing anyone pedalling on a bicycle.

[specuvestor]

Experiencing problems is putting it mildly.
Now comparing the 2 CEO/founders,
Dai Wei of ofo and
Hu Weiwei of Mobike

Dai Wei got himself into a huge mess.
If steve jobs created the most valuable company of all time,
Dai Wei has the title of burning cash at the fastest rate in history.
And to top it all off, he pissed off everyone. The government, consumers, suppliers, staff, ... ...
And now he is backlisted by the PRC government.

On the other hand, Hu Wei Wei managed to offload her stake at the highest possible inflated valuation.
And at that time retaining the CEO title. It is only recently that she left the company.
Another masterstroke. Check out Meituan Dianping's result, (parent of Mobike) and you would understand why.
Brilliant Timing. She has ample financial resources now for her next 50 generations.

That's a very succinct comparison of the 2, and probably give us a better idea of what I mean by "timing" (hint: not what will happen next day or next week or even next month). In both cases I have said the business model is not sustainable https://www.valuebuddies.com/thread-7890...#pid146831 but looks like one came out nice knowing it's just a ride.

My last up for the year

[Big Toe]

Thank you specuvestor. Upped your rep as well.

Here's one more ridiculous fact about ofo.
They do retrieve bikes and put them at places where they are in demand.
The logistics company charges them estimated $50 per trip to retrieve about 12-15 bikes(using small to mid sized lorries)
The bike share companies charge next to nothing to the users. Each ride they lose about $4 just on daily logistics, the more the riders ride the bikes, the more they lose. This is in addition to their administrative cost, bike licence, bike depreciation/maintenance, software development/maintenance, bike write offs etc

My best guess is their losses are about $15 every time someone rides a bike. Their cost structure is many folds that of the traditional bike rental business and yet charges next to nothing. With a business model like that it is a miracle that they survived as long as they did thanks to the smartest and wealthiest companies investing in very dumb ideas. But all is not lost, at least it made 1 extremely savvy former bike share CEO very very very wealthy. And if you think it happens only in bike share, think again. Cash rich and successful companies very often invest huge amounts of money in companies that completely dont make sense no matter how you look it.

Some may argue that unicorns need to gather critical mass and then think of how to monetize it. My 2 cents is that it is complete rubbish. The start up needs to at least have a clear idea where the cash will be generated. Ie Wats app it is not difficult to monetize. Grab, it is clear where the value is. For bike share, it is hardware + software costs, even without any competitor, it has already being proven in 60s it is extremely difficult due to human behavior.

Wikipedia : The earliest well-known community bicycle program was started in the summer of 1965 by Luud Schimmelpennink in association with the group Provo in Amsterdam, the Netherlands.The group Provo painted fifty bicycles white and placed them unlocked in Amsterdam for everyone to use freely. This so-called White Bicycle Plan provided free bicycles that were supposed to be used for one trip and then left for someone else. Within a month, most of the bikes had been stolen and the rest were found in nearby canals.

Happened in 1965, repeated in 2017-2018.