Russia’s Digital Sky Tech leads US$450m funding round for China bike-sharing start-up Ofo

Digital Sky Technologies, a Russian investment firm that invested in Facebook and Twitter, has led a US$450 million round of funding for the Beijing bicycle-sharing start-up Ofo despite the nascent “Uber-for-bikes” market in China still facing a string of challenges.

The investment marks the single largest fundraising round in China’s burgeoning bike-sharing industry and brings the valuation of the three-year-old company to more than US$1 billion.

Existing backers Didi Chuxing – often called “China’s Uber Technologies” – MatrixPartners China and Citic Private Equity also took part in the financing, Ofo said in a statement.

“We will keep leading the industry towards a rapid and sound development, providing a convenient short-distance transportation service to users across the world,” said Dai Wei, Ofo’s 26-year-old founder and chief executive, in a statement.

The funding comes less than 10 days after Ofo’s biggest rival Mobike announced it raised more than US$300 million in the last year, without disclosing its valuation. Headquartered in Beijing, Mobike’s backers include Tencent Holdings, Warburg Pincus and Sequoia Capital.

Without a clear business model yet, dozens of bicycle-sharing firms have mushroomed in China as venture capitalists bet on the app-enabled services to reignite the Chinese passion for bikes, which were the most used transport in China in the 1980s and early 1990s.

But the services are facing a string of challenges in China, ranging from vandalism to theft of bicycles, because service providers such as Ofo allow users to hail a bicycle using their smartphones and return them whenever and wherever they want, instead of at set locations.