Beijing-based, bike-sharing startup Ofo has raised $866 million in new financing led by Alibaba Group to fuel its expensive competition with Mobike, which is backed by Tencent, one of Alibaba’s biggest rivals. Ofo and Mobike are the two largest bike-sharing companies in China.
Ofo claims that this is the largest amount raised in a round by a bike-sharing company so far. Other participants in the round, which consists of equity and debt financing, included Ant Financial (Alibaba Group’s financial affiliate), Haofeng Group, Tianhe Capital and Junli Capital. Alibaba Group also led Ofo’s $700 million Series E round last year, which was announced one month after Mobike disclosed that it had received a $600 million Series E led by Tencent.
In a press statement, Ofo founder and chief executive officer Dai Wei said “As the global leader in the bike-sharing sector, Ofo has been transitioning from a phase of rapid growth to a stage of high-quality development. Ofo will continue to put our customers first and lead the bike-sharing industry with technological innovation and efficient operations.”
Founded in 2014, Ofo, claims it now has a total of 200 million users, who generate 32 million transactions each day on its platform.
Both Ofo and Mobike have reached valuations of more than a billion dollars and, combined, hold over 90% of China’s bike-sharing market (and are also expanding into other countries). Each are reportedly suffering from cash issues, however, due largely to the high cost of sustaining their fierce rivalry with one another, as well as dozens of other bike-sharing startups that emerged over the past few years. But the market could not sustain so many competitors and China’s “bike-sharing bubble,” which at one point numbered about 60 startups, began collapsing last year.
Casualties included Bluegogo, whose operations were partly taken over by Didi, China’s largest ride-sharing company, after the startup ran out of cash at the end of last year. Didi’s presence in the bike-sharing market is another headache for Ofo and Mobike. Didi offers various bike-sharing services through its app from partners, including Ofo, but that doesn’t necessarily help them. As TechCrunch’s Jon Russell pointed out, that just means commuters use Didi’s app even more and don’t have to open or even bother installing any bike-sharing apps.
One solution would be for the two companies to merge, but Alibaba and Tencent are reportedly against the deal because each wants to gain control of China’s bike-sharing market.