Micromobility The rise and fall of bike-sharing pioneer Ofo
In 2015, Ofo was at the forefront of a booming new sharing industry, and their hook was shared bright yellow bicycles. Today, the company that was once valued at US$2 billion is all but defunct. What happened to the bike-sharing pioneer Ofo?
A brilliant idea in 2014 was formed by five members of the Peking University cycling club. They would create a company named Ofo that made bicycles available to monthly subscribers for hourly use. But within a few short years, the company would go from a startup to a multi-billion-dollar business to insolvency. How did it happen?
Ofo's phenomenal rise to fame
Ofo's launch in June 2015 put 2,000 bikes on the streets of Beijing. By October, there were more than 20,000 subscribers. The concept was unique but straightforward. Yellow bicycles strategically placed around the city could be unlocked and rented by the hour through a subscriber's smartphone. The deposit was extremely reasonable, starting at under $15, and most trips would be pennies per hour. When the rider was done, they'd lock the bike up and go on their merry way.
The concept was to solve the so-called first and last-mile problem, a function the startup was undoubtedly able to fulfill with its fleet. And by 2016, Ofo expanded into other Chinese cities with a fleet of 85,000 bicycles. Everything appeared to be going very well.
$130 million was raised from Chinese tech firms Xiaomi and Didi Chuxing late in 2016 and from several other fintech firms in early 2017, and Ofo expanded outside China. By 2018, Ofo had expanded into the UK, Australia, United States, Singapore, and France. Cash injections from Alibaba affiliate Ant Financial and other high-profile VCs boosted the startup's value to over $2 billion.
This point would be Ofo's peak. In more than 20 countries and with a fleet of yellow bikes almost innumerable—certainly in the tens of millions. And then it collapsed.
The unceremonious fall of Ofo
In 2018, Ofo was competing with other bike-sharing providers such as Mobike, Xiaoming Bike, and HelloBike. More than 70 bike-sharing companies had emerged. Their product no longer unique, and their bikes littering the streets in cities around the globe, Ofo's bubble popped.
Financial struggles began, and Ofo was forced to close offices. Thousands upon thousands of bikes were piled high in twisted yellow mountains of metal and rubber. Their millions of users demanded their 'fully refundable' deposits back.
Mobike, on the other hand, has ridden Ofo's demise to success. While still generating losses for Meituan Dianping, their parent company, a rebrand as Meituan Bike, and a concerted effort to bolster their finances have helped by the missteps of their largest competitor.
How could Ofo's fate have been different?
Like many startups, Ofo's strategy was to enter the market with an unsustainable price point, capture the market, and either buy up or drive out their competitors, then raise their prices. Unfortunately, it didn't go as planned.
Rather than capture the market, China's love of riding on two wheels was capitalized upon by dozens of other startups at the same time. The bike-sharing industry became too large, too fast. Unable to outgrow their competition, Ofo was doomed to fail with their undervalued subscriptions.
Where is Ofo now?
Today, Ofo's app is now an eCommerce app. After subscribers demanded their deposits back, Ofo attempted to redirect the refunds to sales through their app by encouraging users to convert their deposit into a rebate toward popular items.
With bank accounts either empty or frozen and virtually no assets owned by the company, it's unlikely investors should ever expect their money back.
Bike-sharing is more than a great concept—it's excellent in practice as successful companies like Mobike prove. Ofo's demise could be the spark other bike-sharing providers need to provide excellent service and products in the future.