Venture capital firms develop sweet spot for Chinese bike-sharing firms

Investment in sector soars in September as demand for ‘last-kilometre’ short trips rises in Chinese cities

PUBLISHED : Sunday, 09 October, 2016, 6:51pm
UPDATED : Sunday, 09 October, 2016, 10:24pm

Venture capitalists seem to have developed a sweet spot for China’s nascent bike-sharing market, with four Chinese startups raising funding of between 10 million yuan (HK$11.6 million) and US$100 million in September.

Much of the investment optimism in the sector stems from the huge untapped potential in the ‘last kilometre short trip’ market. With the country embarking on a massive urbanisation programme, travel demands for working professionals, especially the short distances between home and railway, bus stations is set to grow rapidly.

That the market is ripe for organised players is evident from the millions of unlicensed electric vehicles, which already offer these services in several Chinese cities.

Cronus, a bike maker listed on China’s new third board, is one of the bigger players that has taken a fancy for bike sharing. Deng Yonghao, the company’s chairman, said on Sunday that it would invest 100 million yuan to set up XiaoMing Danche, a bike-sharing application, according to tech website leiphone.com.

Two Chinese bike-sharing start-ups score US$200 million investment

A fortnight ago, Chinese bike-share startups Mobike and oFo had separately raised large investments for further expansion. On September 30, Mobike said it got US$100 million as Series C financing from investment companies like Sequoia Capital and Hillhouse Capital, according to Tencent Tech.

On September 26, China’s ride-sharing giant Didi Chuxing said it has invested tens of millions of US dollars in ofo, China’s largest bike-sharing platform, as part of a multi-layered partnership between the two parties in the urban mobility sector.

On September 28, Shanghai-based bicycle rental platform, YouBai, said it got over 10 million yuan in an angel round from several domestic investors and local state-owned enterprises, tech website 36kr.com reported.

Unlike the government supported public bike rental services, which have a more complicated registration process and requires bikes to be returned to stations, the startups are developing station-free concept for easier use, whereby users can locate a nearby bike through the app and the leave the bike on sidewalks or in parks after use.

Mobike started offering its services in Shanghai in April and expanded the same to Beijing last week, with its 13,000 indigenous bicycles. To take a ride, a user can use the smartphone to scan the QR code on the bike, unlock the smart lock and start a timer. The company charges 1 yuan for every 30 minutes of usage, along with a 299 yuan security deposit, which could be paid with popular mobile payment methods such as Alibaba’s Alipay and Tencent’s WeChat.

Alibaba owns the South China Morning Post.

Ofo was set up in April 2014 in the Peking University campus as a student start-up project. The Didi-backed firm has 70,000 bikes shared everyday among over 1.5 million users in 20 cities across China, with a daily rides of over 500,000 at campuses, making the company China’s largest and fastest-growing bike-sharing platform.

“The bike-sharing business is still in its early stages on the mainland, but may become the next big thing in tech and Internet investment. We are already seeing signs of this as investments have been pouring into the startups during the past couple months.” said Wang Chenxi, a senior analyst at Beijing-based consultancy Analysys

“None of the startups have any significant advantages that puts them above the others. All of them are looking for useful and innovative business models,”she said.

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