In China’s internet warzone, there’s a road map for success: find a rich backer, get lots of money, burn it to buy market share.
The latest chapter of that playbook is being written by two young entrepreneurs in the bike rental business.
Ofo won about USD 100 million backing in September from investors including the venture fund backed by Xiaomi's founder Lei Jun and ride-hailing giant Didi Chuxing. The funding is said to have valued the startup at USD 500 million.
Mobike from a group including Tencent Holdings, the nation’s biggest social network company and, ironically, a long-term backer of Didi.
Bike-sharing is not new business. There are about 600 such operations globally, with a market that could grow by 20% a year to generate as much as USD 5.8 billion in revenue by 2020, according to consultancy Roland Berger.
What differentiates Ofo and Mobike is that users find and pay for bicycles via a smartphone app and then leave the vehicle wherever they want.
Ofo and Mobike will need more than discounts to win users, they need bikes.
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