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Chinese Bike-Sharing Startup Is Raising Up to $150 Million
Ofo Bicycle is aiming to achieve a valuation of around $1 billion
By KANE WU
Feb. 9, 2017 6:49 a.m. ET
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HONG KONG—Competition in China’s nascent bike-sharing market is getting fierce.
Startup Ofo Inc. is raising up to $150 million in fresh funds, aiming to achieve a valuation of around $1 billion, according to people familiar with the situation.
Ofo most recently raised $130 million last October from investors including Chinese homegrown ride-hailing champion Didi Chuxing Technology Co., smartphone maker Xiaomi Corp., and U.S. technology-focused hedge fund Coatue Management LLC. Russian billionaire Yuri Milner, an early Facebook Inc. backer, is also an investor in Ofo. It is unclear whether the same investors or new investors plan to put money into the new funding round.
Ofo spokesman Shi Shaochen said he had no knowledge of the fundraising and declined to comment further.
The cash-burning race of China’s ride-hailing apps subsided last year after China’s Didi acquired Uber Technologies Inc.’s China operations. Meanwhile, the battle for China’s bike-sharing market is just heating up.
A billion-dollar valuation would put Ofo on par with rival Beijing Mobike Technology Co., which closed a $215 million funding round led by Tencent Holdings Ltd., and Warburg Pincus LLC early January, at a valuation of around $1 billion, according to people familiar with the situation.
Mobike subsequently brought in Foxconn Technology Group as a strategic investor. The partnership will enable Mobike to almost double its annual smart-bike production capacity to 10 million bikes, Mobike said in late January. Mobike’s orange-colored smart bikes feature built-in GPS allowing riders to locate the bikes and unlock them via a smartphone app.
Founded by five Peking University students, Ofo brought its yellow bikes to university campuses before expanding to big city streets. It now has a total of one million bikes in 33 cities, according to Mr. Shi. By comparison, Mobike has services in 13 cities, according to Warburg Pincus, with more than 100,000 bikes each in Beijing, Shanghai, Guangzhou and Shenzhen.
Ofo users pay a 99 yuan deposit and one yuan per hour, with discount rates for students and teachers. Riders then get a combination code via an app to unlock the bikes.
The rollout of bike-sharing in China hasn’t been completely smooth. In crowded cities such as Guangzhou and Shanghai where parking spaces are limited, regulators have raised concerns that bike stations could add to congestion, though there are no rules against them currently.
Companies also face problems such as theft and vandalism and sometimes having to collect bikes left away from designated docking stations.
Despite these issues, bike-sharing has been catching on in China, with more than 20 startup apps emerging in the past year. Ofo and Mobike are the most popular of those, although estimates of market share vary.
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