Chinese bike-sharer Ofo lands US$700 million in new funding, led by Alibaba
The Beijing-based bike-sharing major Ofo has raised massive new funding from Alibaba, Hony Capital and Citic Private Equity
China’s top two technology titans are going head to head for dominance in the country’s bike-sharing market, as Alibaba Group Holding funds a major start-up that competes against another firm heavily backed by Tencent Holdings.
Beijing-based bike-sharing major Ofo announced on Thursday that it has raised US$700 million in its latest funding round, which was led by e-commerce giant Alibaba, Hony Capital and Citic Private Equity.
Ofo’s earlier investors include Chinese ride hailing giant Didi Chuxing and DST Global. Ant Financial Services Group, an affiliate of Alibaba that runs payment platform Alipay, is also investor in Ofo.
This marks the first time New York-listed Alibaba, which owns the South China Morning Post, has directly funded a bike-sharing venture.
The bike-sharing industry has quickly become one of the hottest areas of investment on the mainland, while changing the commuting habits of millions of Chinese.
Wang Xiaofeng, a senior analyst at Forrester Research, said both Alibaba and Tencent have been striving to build a digital mobile ecosystem that boasts a wide range of online-to-offline businesses.
“Investing in bike-sharing services will gain them access to data about consumers’ transportation behaviour, to complement the other online and offline data they already have,” Wang said.
Alibaba’s participation has come as the fund-raising competition intensifies between Ofo and its biggest rival, Tencent-backed Mobike.
Ofo’s US$700 million round is the largest known financing for a bike-sharing company, overtaking a US$600 million round by Mobike the previous month.
Three-year-old Ofo already has 6.5 million bikes in 150 cities and it is targeting to expand to 20 million bikes in 20 countries by the end of this year.
“We will further upgrade our service for better user experience,” said company founder and chief executive Dai Wei in a statement.
Apart from the capital injection, Alibaba is expected to collaborate with Ofo within its huge ecosystem, which stretches from online shopping to mobile payments and marketing to video streaming.
Tencent also offers plenty of support to Mobike, including quick access within its popular social media app WeChat.
“Ofo is the industry leader and we support its open platform strategy. We look forward to working closely with the Ofo team to unlock the full potential of the bike-sharing industry,” said Joe Tsai Chung-hsin, the executive vice-chairman at Alibaba.
Ofo is leading the bike-sharing services market on the mainland with a 65 per cent market share, compared with rival Mobike's 35 per cent share, according to a June report from analytics firm 7Park Data.
“Both companies practically give away their product for free to beat the competition and build market share," said Brian Chaitoff, director of insights at 7Park Data. "While Ofo currently leads in China, the competition is fierce and market share will change.”
“As in ride-sharing, we expect markets in the long-term to be winner-take-all. This is due, in part, to the benefits realised by riders of having one winner, such as greater access to bikes,” Chaitoff said.