Ofo's founder announced the bankruptcy of the firm and millions of its users are calling for the return of their deposits. The fall of the firm will serve as a warning for China's tech investors who have risked millions of dollars into unreliable businesses like bike sharing, ride-hailing, and food delivery.
For the past two years, the bright yellow, orange, and blue shared bikes have flooded the sidewalks of China's major cities. The bike sharing business in China is dominated by rivals Ofo and Mobike which provides the two-wheeler vehicles in office buildings and subway exits.
Ofo gained its popularity because of its dock-less bicycles that can be picked up by scanning a QR code left anywhere. The Ofo bikes were once a symbol of coolness among urban youth as its number of users grew in Beijing campuses. The firm reached a valuation of $2 billion.
During the fame of the bike-sharing business, bicycles are found on almost every city street corner. The bikes are advertised by pop idols showing youngsters pedaling around the hippest areas of town. Other smaller firms also emerged but most of them also failed, leaving Ofo, Hellobike, and Mobike in dominance.
The fall of the bike sharing business left the bicycles in tragic conditions. The bikes are now seen on the streets in varying conditions. Bicycle cemeteries, bike blocked pavements, and angry service users showed the tragic fall of the business. Not long ago, Ofo tried to expand its services to the global market. The company invested billions and raised billions from investors like the Alibaba Group Holding Ltd and Didi Chuxing. The firms including Ofo struggled to turn bike-sharing bike popularity to profit. The company's survival is now at risk because of supplier debt and user demands for deposits.
Wu Shenghua, founder the 3Vbike, told Reuters that it now appears that bike sharing is the stupidest business in which the brightest brains of China all tried to get in. 3Vibke is also one the bike-sharing firms that declared bankruptcy.
According to Maxwell Zhou, founder of tech startup metaapp.cn and a former employee of Mobike in China said that bike-sharing is a tricky business because of the profit are eaten away by the competition. He also said that it is something that really needs to be part of a bigger business. He also added that it is similar to email since anybody could host emails and nobody could make any money.
