China’s dockless bike sharing boom was born out of an idea that might sound, well, insane: Placing bikes freely on the streets and expecting nobody would steal them.
Ofo was one of the first startups to try it in 2014… and it worked. The company, founded by Peking University graduate Dai Wei, was at the forefront of a Chinese tech trend that swept the world. It spread from Peking University’s campus to Chinese cities and then beyond, inspiring startups in the US, EU, and Southeast Asia.
It also left a trail of bankruptcies.
It wasn’t an original idea. Bike sharing -- which, to be honest, is more like bike rental -- existed before. But what Ofo, Mobike and dozens of other rivals did was to free the bikes from dedicated docks, making them easy to find and pay for via an app.
Ofo soon found itself riding on a wave of investors eager to jump on the next big thing. At its heyday, the startup was worth more than US$2 billion, and counted the likes of Alibaba and its financial arm Ant Financial as investors.
(Abacus is a unit of the South China Morning Post, which is owned by Alibaba.)
As money poured in, Ofo’s ambitions grew. It wanted to reach over 200 cities by the end of 2017. Its credo back then was “rapid spread, yellow will cover the world.” (Ofo’s bikes are painted yellow.)
Ofo fever wasn’t just catching on with investors. State media hailed bike sharing as one of China’s new four great inventions. For an idea of what a big deal that was, China’s classic four inventions are paper, the compass, gunpowder and printing.
OK, it may have been a stretch to put bike sharing in that company, but you can see why they were excited. Bike sharing wasn’t just good for personal health and the environment. It tapped into China’s nostalgia for bicycles.
But that all changed very quickly. More competitors means more bikes. Suddenly, sidewalks were jammed full of them. And as competition squeezed smaller players out of the market, their bikes remained -- unable to be used, but not disposed of either.
Eventually big cities like Beijing saw millions of bikes lying on the streets -- whether usable or “zombie bikes” from collapsed companies. Bikes were stolen, vandalized, thrown into rivers by the thousands and sold into scrap metal. The iconic image of bike sharing went viral: Massive mounds of bikes, piled high, serving as graveyards for a bubble that had burst.
It wasn’t just in China, either: Enormous piles of unwanted bikes even made an appearance in the US, when Ofo pulled out of Dallas.
Suddenly Ofo’s ambition became a burden. The cost of spreading too far too fast, heavy subsidies to fight competition and massive bicycle maintenance costs became a lot to bear.
A new round of financing in March 2018 allowed Ofo to resist calls to merge with rival Mobike, which was bought by Meituan a month later. As problems mounted, CEO Dai Wei issued a bizarre rallying call, telling employees to keep “fighting till the end” -- likening Ofo’s situation to the WWII-themed movie The Darkest Hour.
By mid-2018, Ofo began withdrawing from over 50 cities around the world. It tried a series of new measures to bring in cash, like introducing short video ads in the app.
And then came the lawsuits.
By late 2018, Ofo’s suppliers, mostly bike manufacturers and logistics firms, started claiming millions in unpaid bills. Amid the disputes, Dai Wei rushed to remove himself as the firm’s legal representative in October 2018. Two months later he was put on a government blacklist for not fulfilling his payment obligations. A court in Tianjin froze about US$220,000 of the company’s assets in February 2019. Other courts would follow suit in the next months.
By then the plight of the bike sharing giant was well-known among its users, who began to demand their deposits of almost US$30 back. The company started extending the wait time for refunds, from 3 days to 15 days. Fed up, in December of 2018, hundreds of users gathered in front of Ofo’s headquarters to demand their deposits back.
“It’s not big money, but it makes me mad,” one Weibo user said. “It’s like having your money stolen.”
Instead, the company offered other solutions. Ofo urged its users to transfer their deposits to online lender PPmoney. Ofo even tested an in-app discount store where users could convert deposits to virtual coins to buy daily items like tissues or honey.
To many users, this seemed like a bad joke. Apparently, Ofo’s own Twitter account operators also thought it was a joke: This was what they tweeted on April Fools Day 2019. (The tweet has since been deleted.)
Once hailed as one of China’s great inventions and worth over US$2 billion at its peak, in June of 2019 Ofo reached a new low. A court in Tianjin ruled that Ofo was unable to pay its debt – saying it “has basically no assets”.