Founded in 2014 as a university project, Ofo has managed to garner a long list of powerful backers. It raised another $866 million from investors led by Chinese e-commerce giant Alibaba in March, but didn’t disclose an updated valuation at the time.
Earlier this year, there were also reports of a joint buyout offer for Ofo offered by Alibaba affiliate Ant Financial and Chinese ride-sharing giant Didi Chuxing, which has invested $350 million in the startup to date. Alibaba didn’t respond to an emailed request for comment. Industry watchers expected Ofo to be acquired by its big ride-hailing backer, Didi Chuxing, the company that drove Uber out of China. But that never happened. Instead, Didi snapped up another bike-sharing company, Bluegogo. “When Didi suddenly bought Bluegogo and launched their own bike-sharing service, that was a red flag,” Towson said. “That’s like when your wife tells you she’s starting to date again.” A Didi spokeswoman declined to comment, referring instead to an earlier response sent to local economic journal Caijing. The company said at the time it had never considered acquiring Ofo, and would support its independent operation.
BEIJING — Brilliantly simple, emission-free solution to the problem of urban congestion? Or the maddening height of venture-backed technology hubris?
Dockless rented bicycles swept into Chinese cities two years ago. Their arrival inspired a wave of similar mobility experiments around the world, even as city dwellers in China bemoaned the sight of candy-colored bikes heaped in unholy piles on their sidewalks.
Now, one of China’s leading bike start-ups, Ofo, is facing serious financial problems. Its founder is on a government blacklist for unpaid bills. Millions of riders who placed deposits are demanding their money back. And the business model used by many of China’s tech firms — spend furiously to acquire new users, worry about profits later — is showing its limits.
The run of Ofo customers seeking refunds appears to have started last week. Doubts about the company’s financial health had swirled for months. Just this week, hundreds of irate users have been lining up outside Ofo’s Beijing headquarters to demand refunds of their deposits. Users had initially been asked to pay a 99 yuan ($14.3) deposit before unlocking Ofo bikes, and then the amount was later raised to 199 yuan ($29). They can request a refund through the Ofo app, but it stipulates a waiting period of 15 days. And some users have been complaining on social media that they can’t get their money back even after the waiting period expires, which they put down to rent Ofo’s bumblebee-yellow bikes. (The company’s Chinese nickname translates as “Little Yellow Bike.”)