An interesting report by TickPick, a ticket marketplace.
Report -> Music’s Influence on Sexual Behaviors
Fun to read..
Also, might be an example for statistics professor – the phrase “correlation does not imply causation” refers to the inability to legitimately deduce a cause-and-effect relationship between two variables solely on the basis of an observed association or correlation between them. (Wikipedia)
Beijing is the city in focus.
In April 2017, Beijing (北京市交通委) published a guideline (draft for consultation) to regulate shared bikes. [A usage survey conducted at that time in Beijing]
Beijing had around 700k shared bikes by April 2017, and more than 1.6 million by September 2017. (numbers are for registered bikes, not including non-registered)
The number of shared bikes reached its largest in September 2017 (2.35 million; then new deployments were suspended). Other cities also set the cap (Shanghai 1.5 million, Guangzhou 0.9 million, Nanjing 0.45 million).
The number declined to 1.91 million by August 2018, which was the second hard limit set by City of Beijing. (mobike 0.699, ofo 0.907, other 7 companies 0.3)
It was expected that the cap would continue to decline. From January to May 2019, only 1.2 million of the 1.91 million bikes are used at least once.
Other cities have downsized the number of shared bikes as well: main area in Chengdu 1.8 million -> 0.75 million; Shenzhen 0.89 -> 0.6 million
Beijing has a population of more than 21 million: so on average every shared bike will cover 11 people. (using 1.91 million here)
The legendary Mary Meeker (Bond Capital founder and former Kleiner Perkins general partner)
By and large, the financing activities paused (as described in part 2) in the bike-sharing space. And the $3 billion valuation for both mobike and ofo was not attractive. Capital markets were developing way ahead of the business.
What is more, the economic model was still in the “testing stage” (to put it nicely).
The most obvious way to end the war and to make the industry profitable was a merger between ofo and mobike.
The investors were familiar with the merger between Didi and Kuaidi in 2015, with Tencent-backed Didi’s name surviving.
Similar talks must have been held for several times, especially in the summer of 2017. But before a merger, there would probably be a winner.
Investors from both sides probably have been talked about this privately for long. In June 2017, a discussion between Xiaohu Zhu (GSR Ventures), ofo’s backer from Series A, and Pony Ma (Tencent), mobike’s lead investors for Series D&E, was leaked and posted on the internet.
They were trying to claim ofo and mobike as the No.1 bike-sharing company respectively.
Meanwhile, both CEOs were saying a merger was not possible (6/29).
The first public comments from investors on the merger might be in September 2017 when Xiaohu Zhu said a merger is the way to profitability.
Didi (with veto power) sent a team to ofo in July 2017, including an executive vice president.
In September 2017, ofo launched its mini-program on WeChat (said to be directed by Didi’s team), which made Ant Financial shocked and angry. (Ant Financial’s Alipay and WeChat’s WePay are the duopoly in mobile payment)
It was said that Ant Financial asked ofo to close its mini-program, then Ant Financial would provide additional financing.
Didi’s team lost their access at ofo in November 2017. And ofo’s mini-program became not available anymore.
At the end of 2017, ofo CEO had the last conversation with Xiaohu Zhu (GSR Ventures) about the merger. One month after the last attempt, Xiaohu Zhu sold his position to Ali, together with his veto power.
several things became clear:
Then…
Alibaba led a Series F of $866 million for ofo in March 2018.
Meituan acquired mobike for $2.7 billion in April 2018.
Alibaba led a round of nearly $700 million for Hellobike in April 2018.
In fact, Alibaba has bought out Didi’s controlling position from ofo and made Hellobike its main force in bike-sharing.
The duopoly fueled by capital was again overpowered by capital.
Read more on Hellobike (June 2018)
When most bike-sharing startups are facing difficulties on the capital market, the ones who had more prestigious backers seemed fine, namely ofo and mobike.
mobike raised $215 million Series D led by Tencent in January, with Ctrip and Huazhu joining as new investors; Foxconn and Temasek also came onboard later, adding at least another $85 million (the round aka “friends of Sequoia China and Hillhouse”)
ofo came with a $450 million Series D led by DST in March (the round aka “Didi’s investors”); in April, ofo also took some money from Ant Financial while collaborating in 0 deposits for users who have credit scores (Sesame scores) over 650.
This was the first time Ali officially invested in this field. I guess they felt the valuation was too high. While Tencent had mobike and Didi had ofo, Ali needed to find its unique angle and set its footprint in the space. Sesame scores is one of Ant Financial’s unique offering in the market place; yet ofo might be the first time users felt the tangible benefits of high Sesame scores.
Tencent had its unique angle as well: Mini-programs 小程序 in WeChat. mobike launched its mini-program in February 2017.
Meanwhile, Didi integrated ofo’s service into its app in April 2017.
(Besides, there are battles between payments, cloud computing, data and traffic)
The crazy financing has made ofo and mobike the clear winners at that time. I guess most investors believed that who had the most money would win the game.
ofo has Didi which is big, but mobike’s Tencent is one of the deepest pockets in China. When Ant Financial only provided a minority funding to ofo (as Didi was the biggest investor), some may felt that Ali was still not determined to join the race – then mobike would win.
mobike raised $600 million Series E in June, led by Tencent, valued at $2.4 billion pre-money.
Now, if ofo didn’t get Ali on board, it would almost certainly be outgrown, despite its entrance into 100 cities in May was one month earlier than mobike (June).
Not surprisingly, ofo came with $700 million Series E in July, led by Alibaba, valued at $2.3 billion pre-money.
Meanwhile, both companies were aiming to enter into 200 cities globally.
When mobike and ofo sucked up nearly all the resources in the space, other startups were falling rapidly (see the previous post).
However, the financing activities won’t help to eliminate many problems come with those station-free bikes.
to be continued…
At first, nearly all bike-sharing startups take deposits, usually ranging from ¥99 to ¥299.
The deposits are hard cash for startups; they are like life-time membership fees if the companies survive and users keep using the apps.
To put it another way, deposits are indefinite free borrowings.
Deposits and investors’ money are fundamentally different (in accounting), but both are actually (viewed as) cash sitting in the bank for startups.
Some may compare this model with gym memberships. When users pay upfront, gyms use the cash in expansion and operation.
Just invest (or borrow) and open one gym first, then one can use the membership fees collected to subsidize the opening of the second gym.. bike-sharing companies can use the deposits collected in one city to subsidize the expansion into the next city, to pay back any loans, to pay employees’ salaries…
Then comes the problems… for those startups that are not well-funded.
In June 2017, the first startup, Wukong Bicycle 悟空单车, announced to stop its operation.
Started in Chongqing, Wukong Bicycle has another layer of to collect operation cash – “operation partners” who would pay Wukong Bicycle an upfront fee to claim profits for a certain number of shared bikes. To be honest, “operation partners” are not treated as partners as Wukong can profit from selling bikes to them and management fees. Its “alternative fund raising” was a little concerning.
By the summer of 2017, more reports about the closure of bike-sharing companies ignited the concerns from users. When users were asking their deposits back, the real cash crunch came/intensified.
In November of 2017, it was reported that most of the bike-sharing startups have problems with their deposits. [60多家共享单车停运用户押金之痛难解 – 证券日报]
The largest of them (in 2017) was bluegogo 小蓝单车, which had raised ¥400 million. It started as a supplier for bike-sharing companies but then decided to enter the race. It had achieved a No.3 position in the space but things (financing) went south in June 2017.
As mentioned previously, it was acquired by Didi at the beginning of 2018.
Read more on 还原短命小蓝单车的365天 – 36氪 小蓝单车生死故事 – 36氪
Not a coincidence, an even broader problem in China emerged in 2017: P2P financing.
Meanwhile, the top-tier companies seemed to live well with millions of dollars raised on the capital markets.
Many required 0 deposits to entice users (and accelerated the failures of smaller players that reply on deposits).
to be continued..
The battle between 70+ bike-share startups (or the battle between their colors) could be traced back to the summer of 2014, when ofo (wikipedia) was started by students at the Peking University in Beijing.
ofo initially focused on bicycle tourism before deciding on bicycle sharing. At first, it was only doing campus bike sharing. In May 2015, the team appropriated the investment fund for purchasing new bicycles and enticing PKU students to partake in bicycle sharing. [PKU news] [¥9 million seed/angel]
Shared bikes became crazy in 2016. ofo took off in 2016 with ¥15 million Series A in January led by GSR Ventures 金沙江创投 and followed by Dongfang Hongdao 东方弘道, then Series A+ of ¥10 million in April and Series B of “tens of millions” USD led by Matrix China 经纬中国 in June.
Yet the fund raising didn’t stop there. ofo raised another $130 million led by Didi (C-1), Coatue (C-2), and funds affiliated with Xiaomi (C-2) in October 2016, officially marching into city businesses instead of focusing on universities.
Two major differences were separating ofo and its main competitor mobike at the beginning stage: 1) mobike focused on cities from day 1 while ofo was for universities at first 2) the locks
The first generation of ofo bikes has an unchanged passcode sent to users while mobike’s are unlocked by wireless communications between the phone, servers and the bike. mobike also uses GPS from the beginning.
Nowadays, shared bike companies are using similar product (lock) strategies for safety, management and data. [read more about smart lock technologies involved]
mobike raised its Series A of $3 million in October 2015 led by Joy Capital 愉悦资本, Series B of $10 million in August 2016 led by Panda Capital 熊猫资本, Series C of $100 million in September led by Warburg Pincus and Hillhouse Capital.
both ofo and mobike finished with their Series C with nine figures, while many other startups were just launching their services and raised their Series A, including bluegogo which would became the third largest service provider before went bankrupt and later acquired by Didi.
At that time, another startup Hellobike 哈罗单车 which would be threatening to the first-movers, was also just preparing to launch its bikes (started with 2nd/3rd tier cities) and just finished its Series A with GGV.
The frequency of fund raising is probably the most remarkable part of the history (to me).
I actually wish that something similar won’t be happening again…
Businesses, investors, users/citizens and regulators all need some time to really think over.
For bike-sharing startups, they were going to feel something different in 2017…
to be continued…
Two tea chains hot on the capital market in China – Hey Tea and Naixue Tea.
Valuation are said to be ¥8 billion (2019) and ¥6 billion (2018) respectively.
Each may have 200-250 stores. (Say Hey Tea 250 by end of 2018 and Naixue 200 by the end of 2018)
An average store say has a revenue run rate of 250k * 12 = ¥3 million / yr
Then revenue run rate is 750 million for Hey Tea and 600 million for Naixue.
With a revenue multiple at 10.0x, 600 * 10 = 6 billion for Naixue…
and 7.5 billion for Hey Tea…
Seems “good” in numbers… thanks to the support from Luckin Coffee..
Luckin has $4+ billion market cap and 20-25 revenue multiple (not run-rate)